If your home has been struck by a natural disaster, you may be concerned about handling the expenses related to major repairs while also paying off your mortgage. You may have many options in this situation, especially if you have a Fannie Mae or Freddie Mac loan or a loan through the Federal Housing Administration or Veteran’s Affairs. Even if you do not have one of these types of loans, your lender or mortgage servicer may be sympathetic to your circumstances. These companies often provide loss mitigation options, such as loan modifications or forbearance agreements. Read more here about loan modifications, and read more here about forbearance agreements. Other alternatives may include agreeing with the lender to waive delays in making payments or refrain from reporting missed payments to credit bureaus.
Another source of assistance to homeowners affected by a natural disaster is the Federal Emergency Management Administration (FEMA). You can explore the FEMA website to learn about ways in which this government agency can help you finance repairs while keeping up with your mortgage payments.
Fannie Mae and Freddie Mac Loans
If your loan is owned by Fannie Mae or Freddie Mac, either of these entities likely will suspend a foreclosure sale for 90 days after a natural disaster. The area surrounding your home must be federally designated as a disaster area. Fannie Mae and Freddie Mac provide specific types of assistance, such as the Flex Modification program, to homeowners affected by exigent circumstances like natural disasters.
Federal Housing Administration Loans
A foreclosure on a mortgage insured by the Federal Housing Administration (FHA) may be suspended for 90 days or even more following a natural disaster. After some major hurricanes, for example, foreclosures on these mortgages were suspended for 180 days. The Department of Housing and Urban Development (HUD) imposes these moratoriums. You likely will qualify for a moratorium if you live in a federal disaster area, the disaster directly affected your property, and you have no other options to help you absorb the financial blow. A homeowner also may qualify for a moratorium when a natural disaster directly prevented them from making payments on their mortgage. Finally, they may qualify if a member of their household suffered harm or is missing because of the disaster.
In addition to the moratoriums imposed by HUD, the FHA offers a Disaster Standalone Partial Claim program. This allows a homeowner to create an interest-free second mortgage that accounts for up to 12 months of missed payments on an FHA loan. If you sell the home or refinance the mortgage, you would need to pay off this second mortgage. Certain technical requirements determine eligibility. This program was just started in 2018, so it may evolve further in the future.
Veteran’s Affairs Loans
Similar to FHA loans, a Veteran’s Affairs (VA) loan may be subject to a 90-day moratorium following a natural disaster. A VA loan may be modified more easily than some loans because of this agency’s policies. Homeowners with these loans also may find that their mortgage servicer is relatively responsive to a request for forbearance.