HUD offers a 90-day foreclosure moratorium for struggling homeowners living in hard-hit counties who have mortgages insured by the Federal Housing Administration (FHA). Through several financing options, FHA can also help disaster victims who have lost their homes and are facing the daunting task of rebuilding or buying another home. To accelerate the pace of recovery, HUD also provides regulatory relief through suspensions or waivers of the Department’s normal requirements.
Disaster Relief Options for FHA Homeowners
Much of the mortgage industry and the United States Department of Housing and Urban Development are committed to assisting borrowers whose lives and livelihoods are thrown into turmoil by a disaster. If you can't pay your mortgage because of the disaster, your lender may be able to help you. If you are at risk of losing your home because of the disaster, your lender may stop or delay initiation of foreclosure for 90 days. Lenders may also waive late fees for borrowers who may become delinquent on their loans as a result of the disaster.
If you have a conventional mortgage, you are strongly encouraged to contact your lender for further information, and to see if you are eligible for relief.
How Can This FHA Disaster Relief Help Me?
HUD has instructed FHA lenders to use reasonable judgment in determining who is an "affected borrower." 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. Some of the actions that your lender may take are:
- During the term of a moratorium, your loan may not be referred to foreclosure if you were affected by a disaster.
- Your lender will evaluate you for any available loss mitigation assistance to help you retain your home.
- Your lender may enter into a forbearance plan, or execute a loan modification or a partial claim, if these actions will help retain and pay for your home.
- If saving your home is not feasible, lenders have some flexibility in using the pre-foreclosure sales program or may offer to accept a deed-in-lieu of foreclosure.
Are You Eligible for a Foreclosure Moratorium?
You may be eligible for FHA Disaster Relief if you are one of the affected borrowers as described below. You must be in one of three basic groups in order to qualify for a moratorium on foreclosure:
- If you or your family live within the geographic boundaries of a Presidentially-declared disaster area, you are automatically covered by a 90-day foreclosure moratorium.
- If you are a household member of someone who is deceased, missing or injured directly due to the disaster, you qualify for a moratorium.
- If your financial ability to pay your mortgage debt was directly or substantially affected by a disaster, you qualify for a moratorium.
Take Action to Qualify for Foreclosure Relief
A Foreclosure Moratorium applies only to borrowers who are delinquent on their FHA loan. If you are current on your loan payments, then you should continue to make them.
FHA lenders will automatically stop all foreclosure actions against families with delinquent loans on homes within the boundaries of a Presidentially-declared disaster area.
It is very important that you notify your lender to be sure that they realize you are an affected borrower. Your lender may request supporting documentation and use it to determine if you meet the relief criteria. Once identified as an affected borrower, foreclosure action may be stopped for the duration of the moratorium period.
If your home was damaged in the disaster or you will not be able to make your monthly loan payment(s) because your finances were adversely affected, contact your lender immediately to request assistance.
Borrowers who were injured or whose income relied on individuals who were injured or died in the disaster will be asked for documentation such as medical records or death certificates, if available. Your lender will ask you for financial information to help evaluate what assistance can be provided to you to reinstate your loan.
If Your FHA Loan Was Current before the Disaster but Now You Can't Make Your Next Month's Payment
FHA’s Foreclosure Moratorium only applies to borrowers in default. If you are current, you should continue to make your mortgage payment whenever possible. If, however, you are unable to pay your loan as a result of the disaster, your lender may waive any late fees normally charged and let you know about other options. Also, if you foresee ongoing problems in making your mortgage payments resulting from changes in your financial status, you should contact your lender immediately and continue to Section V below.
If Your Lender is Unable to Assist You
HUD is confident that your mortgage lender will make every attempt possible to assist you. If you are not satisfied after discussing possible relief actions with your lender, please call a HUD-approved counseling agency toll free at (800) 569-4287 or contact HUD's National Servicing Center.
Mortgage Insurance for Disaster Victims Section 203(h)
The Section 203(h) program allows the Federal Housing Administration (FHA) to insure mortgages made by qualified lenders to victims of a major disaster who have lost their homes and are in the process of rebuilding or buying another home. Section 203(h) makes it easier for them to get mortgages and become homeowners or re-establish themselves as homeowners.
Type of Assistance:
This program provides mortgage insurance to protect lenders against the risk of default on mortgages to qualified disaster victims. Individuals are eligible for this program if their homes are located in an area that was designated by the President as a disaster area and if their homes were destroyed or damaged to such an extent that reconstruction or replacement is necessary. Insured mortgages may be used to finance the purchase or reconstruction of a one-family home that will be the principal residence of the homeowner. Like the basic FHA mortgage insurance program it resembles (Section 203(b) Mortgage Insurance for One to Four Family Homes), Section 203(h) offers features that make recovery from a disaster easier for homeowners:
- No downpayment is required. The borrower is eligible for 100 percent financing. Closing costs and prepaid expenses must be paid by the borrower in cash or paid through premium pricing or by the seller, subject to a 6 percent limitation on seller concessions.
- FHA mortgage insurance is not free. Mortgagees collect from the borrowers an up-front insurance premium (which may be financed) at the time of purchase, as well as monthly premiums that are not financed, but instead are added to the regular mortgage payment.
- HUD sets limits on the amount that may be insured. To make sure that its programs serve low and moderate income people, FHA sets limits on the dollar value of the mortgage. The current FHA mortgage limit can be viewed online. These figures vary over time and by place, depending on the cost of living and other factors (higher limits also exist for two to four family properties).
Eligible Participants: FHA approved lending institutions, such as banks, mortgage companies, and savings and loan associations, are eligible for Section 203(h) insurance.
Eligible Customers: Anyone whose home has been destroyed or severely damaged in a Presidentially declared disaster area is eligible to apply for mortgage insurance under this program.
The borrower's application for mortgage insurance must be submitted to the lender within one year of the President's declaration of the disaster. Applications are made through an FHA approved lending institution, who make their requests through a provision known as "Direct Endorsement," which authorizes them to consider applications without submitting paperwork to HUD. Mortgage insurance processing and administration for this and other FHA single family mortgage insurance products are handled through HUD's Homeownership Centers.
For More Information:
Contact the FHA Resource Center. Homeowners can also visit HUD's website for a searchable listing of approved FHA lenders nationwide. Homeowners are encouraged to also contact a HUD-approved housing counseling agency, for assistance with disaster related issues or call toll-free at: (800) 569-4287.