What to do if Your Home Is Affected by a Natural Disaster

October 5, 2019

Do you know what to do if your home is damaged or otherwise affected by a natural disaster such as Hurricane Dorian or Hurricane Florence?

There are important steps to take in the aftermath of the disaster that can help you avoid going into credit-damaging situations with late or missed mortgage payments.

Those who have FHA mortgages should know that the basic policy of the FHA and HUD in natural disasters is that participating lenders should consider loan moratoriums, flexible loan modification plans, and other foreclosure avoidance measures.

The HUD official site instructs participating FHA lenders that some options are only available to those who live in federally declared disaster areas, so the first thing to do is to check with the Federal Emergency Management Agency (FEMA) to see if your area has had such a declaration. 

In some cases a declaration may occur immediately following the initial damage of a hurricane, fire, flood, or other natural disaster. In other cases such declarations may be delayed. FHA borrowers, regardless of the state of the declaration (announced or not) should make contact with their loan officers quickly to determine next steps including loan forbearance, loan modification, insurance claims, renovation or replacement of a damaged home, etc.

FHA loan options for those who do live in areas declared a federal natural disaster area or Presidentially Declared Major Disaster Area (PDMDA) include foreclosure moratoriums, many of which are NOT automatic and must be arranged with the participation of your loan officer.

The HUD official site reminds borrowers, “You may be eligible for FHA Disaster Relief if you are one of the affected borrowers as described below” to include:

1. Those who have primary residences “within the geographic boundaries” of a Presidentially-declared disaster area. In such cases, you are automatically covered by a 90-day foreclosure moratorium but do not assume that moratorium will automatically extend beyond the first 90 days. Make contact with your lender to make future arrangements;
2. Those who live in a household “of someone who is deceased, missing or injured directly due to the disaster” qualify for a moratorium under FHA home loan rules.
3. If your basic ability to pay your FHA mortgage loan “was directly or substantially affected by a disaster,” you may qualify for an FHA home loan moratorium.

The HUD official site warns homeowners (who need the assistance of the lender and/or the FHA in the disaster recovery phase) not to assume the lender knows they are an “affected borrower”. Your lender will likely need supporting documentation, photographs, estimates, or other paperwork to help determine if you meet the requirements to receive further assistance.

Remember that under FHA loan rules, once you are identified as an affected borrower in the wake of a disaster in a federally-declared disaster area, any foreclosure action against you should stop, where applicable. Not all borrowers will be affected by this, but it’s key to know the rules, just in case.

Contact the lender or the FHA (at their toll-free number 1-800 CALL FHA).

Learn what your options are for further relief both from the FHA and HUD and via other sources such as the Small Business Administration which may be able to assist certain homeowners in times of disaster.

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