[Wildfires, raging floods, tornadoes and hurricanes can obliterate your home, but not your mortgage. The hard reality is that even when you live in a federally declared disaster area, you still will owe the bank whatever is left on your loan, even though your house no longer exists or is uninhabitable.
However, there are disaster-related relief programs that can temporarily reduce or suspend your mortgage payment for up to a year and sometimes beyond, depending on your circumstance. The servicer is listed on your mortgage statement and is the first place you should call to learn about your options, which typically involve a form of forbearance.
Typically, with a federally backed loan, you’re likely to be offered forbearance of between three to 12 months, during which your mortgage payments will be suspended or reduced. During the forbearance period, you should not be subject to late fees or legal proceedings like foreclosure.
If you don’t call your servicer right away, Fannie Mae expects servicers of the loans it backs to automatically offer forbearance for 90 days if they haven’t heard from a borrower but know the person’s home is in a presidentially declared major disaster area. During that 90-day period, borrowers should make it a top priority to call their servicer to explain their situation and work out a longer forbearance arrangement.
You will still owe the money for the months your payments were suspended or reduced. But you won’t necessarily have to pay back those arrearages as a lump sum when your forbearance expires. You may be able to work out a new arrangement with your servicer to spread out those back payments over a longer period of time.
Rules governing mortgage relief for loans backed by Freddie Mac are similar. And that agency notes that even if your home survives after a disaster but your job doesn’t, you may still be able to get forbearance.
When your physical and financial life gets turned upside down by an external disaster, it can be hard to think straight. So if you need help dealing with your mortgage and other disaster-related financial issues, you can find free, experienced assistance. Individual lenders and mortgage backers may offer you the services of free housing counselors. And the Federal Emergency Management Agency (FEMA) and other disaster relief organizations may direct you to trusted partners in the arena.
One such group is Operation HOPE, which works out of the recovery centers set up by FEMA and the American Red Cross. It also offers services online and via mobile app. The person assisting you can act as an approved third-party representative to negotiate a mortgage forbearance arrangement with your servicer and help you fill out any necessary applications and get copies of destroyed documents.
Operation HOPE can also help you negotiate with other creditors and assist you with the complexities of securing insurance money. Historically, the organization finds that at least 40% of people they’ve worked with after a disaster are underinsured or not insured. If your homeowners’ insurance policy was dropped or lapsed just before the disaster, Operation HOPE may get on the phone with your old insurer to see if they can reinstate it retroactively or connect you with other resources to try help fill the gap.
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