If Your Home Was Affected by a Natural Disaster
If you have an FHA home loan and your home was damaged by what some insurance companies used to define as “acts of God,” there are some essential steps to take to protect yourself and avoid going into loan default or even foreclosure as you recover from the natural disaster.
The advice below is specifically for FHA mortgages. If you have a VA or conventional loan, contact your loan officer and be sure to ask whether any of the assistance below might also be open to you.
Step One: Evaluate Your Current Circumstances
Your home may be damaged, but if you are current on your mortgage, keep making payments until you discuss your situation with the lender.
Don’t assume you do not owe your regularly scheduled payment even if the house is uninhabitable. Call your lender to discuss how to handle the payments going forward.
Do you anticipate having problems making your mortgage payments due to the disaster? Contact your lender immediately and consider the issues below to inform your conversation with the loan officer.
Step Two: Contact Your Participating FHA Lender
The FHA and HUD issue specific advice about how to proceed with an FHA mortgage after a disaster. HUD says lenders approved for the FHA loan program must use “reasonable judgment” when deciding which borrowers are affected by a disaster.
HUD.gov states, “Lenders are required to reevaluate each delinquent loan until reinstatement or foreclosure and to identify the cause of default. Contact your lender to let them know about your situation” with regard to a disaster. You will be glad you did, as some of the following options below may be open to you:
- A foreclosure moratorium may apply during the disaster recovery phase. HUD.gov advises, “During the term of a moratorium, your loan may not be referred to foreclosure if you were affected by a disaster.”
- The participating lender “will evaluate you for any available loss mitigation assistance to help you retain your home.”
- Your lender may ask you to consider a loan forbearance plan, loan modification, or a partial claim, “if these actions will help retain and pay for your home.”
- In some cases saving the property is not possible. Lenders may ask you to consider a pre-foreclosure sales program or a deed-in-lieu of foreclosure, depending on circumstances.
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