An estimated 360,000 single family mortgages in the Gulf Coast region were affected by Hurricanes Katrina and Rita, according the Mortgage Bankers Association. It left many to wonder not only if they would be responsible for the mortgage payments but also how they would meet those obligations without employment. Luckily, a number of financial institutions are extending mortgage relief provisions to borrowers facing hardship.
Freddie Mac and Fannie Mae
Freddie Mac and Fannie Mae, two housing agencies created by Congress to encourage home ownership, have ordered a 90-day relief period for borrowers. In what may be a first for the U.S. housing market, Freddie Mac has asked banks to return September mortgages as well as any October payments to borrowers as well.
The agency is also extending banks the discretion to suspend or reduce mortgage payments for a period of 12 months on a case-by-case basis. Banks will have until the December due date to come up with a new plan.
Mac is assisting recovery efforts by buying $300 million in mortgages for banks in stricken areas. The banks in the hardest-hit areas will then have cash and equity available to lend to home buyers and business owners returning to restore their communities.
Fannie Mae steps in
Fannie Mae has also stepped in, encouraging banks to lower mortgage payments for up to 18 months. Banks operating under Mae may also create longer payback plans. What Mae is asking is that banks refrain from foreclosing on hurricane victims given the especially difficult circumstances.
Other financial institutions lend a hand
Many financial institutions not under Mac and Mae's umbrellas have also jumped in to lend a financial hand. Some are suspending payments for up to three months. To determine whether you might qualify for some form of financial relief, contact your mortgage company to see what plans your lender is offering with regard to payments.
Doing your research
It's important for borrowers to note that some mortgage companies are continuing to collect payments on time. State civil codes justify this; mortgaged property typically consists of a building and related structures and the piece of land on which the building sits. The building may be gone but the land may still be there.
Most borrowers can make payments to their banks. While banks closed facilities in many affected areas, branches remain open where there is power and water. Re-payment plan rates will likely depend on how badly buildings and related structures were damaged and whether they were covered by flood insurance. Pollution by oil or hazardous waste may be a critical factor as well.
Homeowners with mortgages that are currently 30-90 days delinquent will likely be put on extended re-payment plans. Freddie Mac is only allowing banks to release up to $40,000 of the total insurance proceeds for repairs to these homeowners.
Certain areas may be safer from foreclosure than others. Banks do not want to foreclose on property in especially damaged areas such as New Orleans. Banks are asking the federal government to have the National Flood Insurance Program, which is run by the federal government, retroactively cover thousands of flood-damaged homes to encourage homeowners to return.
Where to go from here
Remember, it all depends on your situation. Banks may ask individuals who have secure jobs or regular payments coming in from their employers to pay back mortgages more quickly. Banks may also ask individuals living in communities with power, water, police, and schools to commit to stricter repayment plans. The safest bet is to check with your lender and determine your own situation.