In the wake of a natural disaster, such as Hurricane Katrina or Superstorm Sandy, there are certain foreclosure protections available for homeowners. A few state laws provide foreclosure moratoriums for borrowers or you may qualify for relief if your loan is an FHA, Fannie Mae, Freddie Mac, or VA loan. Additionally, states often implement specific programs to help borrowers after a disaster. Loan servicers too may also offer relief to affected homeowners. Read on to learn out more about the types of foreclosure relief available if you have been the victim of a natural disaster.
In Mississippi, the governor can declare a natural disaster and impose a moratorium on foreclosures for up to two years. (Miss. Code Ann. § 89-1-301.) To qualify for the moratorium, the borrower must:
Once the moratorium ends, the foreclosure continues. At the end of the moratorium period, the borrower must pay all past-due amounts to stop the lender from pursuing a foreclosure at that time. To catch up on the past-due debt, borrowers may use:
The foreclosure moratorium law does not cover all loans. Mississippi’s moratorium law does not apply to mortgages held by the United States or any agency of the United States. (Miss. Code Ann. § 89-1-323.)
A foreclosure delay (known as a "continuance") is available for agricultural and other properties in Iowa under certain circumstances.
An agricultural borrower in Iowa can apply for a foreclosure continuance, not to exceed two years, if:
Borrowers in Iowa can also apply for a foreclosure continuance if the governor declares a state of economic emergency. This type of continuance is available to:
The governor must state in the declaration the types of real estate eligible for the moratorium continuance, which will last one to two years depending on the type of property. (Iowa Code § 654.15.)
Iowa law deems property that is unoccupied due to a natural disaster as “occupied” for purposes of certain legal protections. Iowa law states that where current occupancy is required for particular borrower protections and benefits (such as protection from a deficiency judgment), the property is considered occupied when the owner leaves because of a natural disaster (Iowa Code § 654.1A).
Example. In Iowa, the lender cannot get a deficiency judgment when the lender elects to foreclose without redemption and the mortgaged property is:
So, if a homeowner moved out of the property because of a job change, it would no longer be considered a "residence" and the homeowner would not qualify for protection from a deficiency judgment. However, if the homeowner moved out because of a natural disaster,the property would be considered occupied and the deficiency protection would apply.
While Louisiana does not have a specific state law providing a foreclosure moratorium after a natural disaster, in the past, the state has stepped in to assist borrowers when natural disasters have occurred. For instance, Louisiana used federal Community Development Block Grant disaster funds to assist homeowners whose homes suffered wind or flood damage in hurricanes Katrina and Rita in 2005. Eligible homeowners received a one-time grant payment up to $150,000 for damage to the home that was not covered by property insurance, Federal Emergency Management Agency (FEMA) grants, or other federal/state/local government programs. In exchange for the grants, borrowers were required to agree that:
Mississippi also instituted a similar program following the 2005 hurricane season. There, lenders managed the grant distribution process and were allowed to reduce the amounts homeowners received by any past-due payments or taxes owed.
The U.S. Department of Housing and Urban Development (HUD) provides a 90-day moratorium on foreclosures of FHA-insured home mortgages following natural disasters, so long as the property is:
This time period may be extended if:
If your property wasn't damaged by the disaster, but it did affect your financial viability, you might qualify for a moratorium if you can provide evidence that demonstrates the disaster’s negative financial impact on you.
To find out if your loan is FHA insured, call your loan servicer and ask if your loan is a FHA loan.
Fannie Mae and Freddie Mac implement a 90-day foreclosure sale suspension immediately following a natural disaster if the property is within a federally designated disaster area.
To find out if Fannie Mae owns your loan, go to http://knowyouroptions.com and click on “Loan Lookup” in the upper-right corner. To find out if Freddie Mac owns your loan, go to https://ww3.freddiemac.com/corporate.
During times of natural disasters, the VA encourages loan holders and servicers to:
Mortgage lenders and servicers may also provide relief from foreclosure by offering flexible loss mitigation options to borrowers following a natural disaster. Possible relief options include:
Additionally, FEMA offers financial assistance so individuals and families whose property has been damaged or destroyed as a result of a federally declared disaster can make their mortgage payments or repair the home. Go to www.fema.gov for more information.