This week the FHA expanded expanded mortgage relief for victims of hurricanes, wildfires and mudslides for people holding FHA-insured loans in Texas, Louisiana, Georgia, Florida, South Carolina, California, Puerto Rico and the U.S. Virgin Islands, allowing them to remain in their homes while reducing losses that would otherwise negatively impact FHA’s Mutual Mortgage Insurance Fund. This change is mainly due to the unusually high number of natural disasters that occurred in 2017, which put a larger number of homeowners at financial risk due to their inability to pay their mortgages in the wake of the disasters.
The FHA “Disaster Standalone Partial Claim” option is designed to help struggling borrowers resume their pre-disaster mortgage payments without payment shock, covering up to 12-months of missed mortgage payments via an interest-free second loan on the mortgage. The loan is payable only when the borrower sells the home or refinances their mortgage, requires no trial period or balloon payment, and permits borrowers to keep their existing low interest rate and loan term as well as their existing monthly mortgage payment.
This program streamlines income documentation and other requirements to expedite relief to homeowners struggling to pay their mortgages while recovering from last year’s disasters. “It’s clear that FHA homeowners in these areas need more help to get back on their feet as they recover from these storms,” said HUD Secretary Ben Carson in a recent statement. “Today, we offer immediate relief to these borrowers which will allow them to resume their mortgage payments without crippling payment shock and fees while protecting our insurance fund in the process.”
If you’re wondering who is eligible for this relief, the new partial claim option is available to certain borrowers who live and work in Presidentially Declared Major Disaster Areas mentioned above and who became delinquent on their mortgage payments because of last year’s disasters, and whose initial mortgage forbearance periods are ending.
Other requirements include borrowers being current on their mortgage payments at the date of the disaster, income being equal to or more than their pre-disaster income, and it is available to owner-occupants only. But even those who do not meet these requirements may be eligible for a loan modification under the FHA-HAMP option.
If you are behind in your mortgage payments due to being affected by a natural disaster, please speak with your lender as soon as possible and ask them about the FHA’s Disaster Standalone Partial Claim.