HUD to Help Hurricane Victims on FHA Loan Defaults
Up to 20,000 households with FHA mortgages displaced by Hurricane Katrina, Rita or Wilma in parts of Alabama, Florida, Louisiana, Mississippi or Texas that have been declared eligible for assistance by the Federal Emergency Management Agency can get out from under the burden of making mortgage payments under the Mortgage Assistance Initiative announced by Housing and Urban Development Secretary Alphonso Jackson last week.
“These families have been devastated,” said Jackson. “Not only are they living far from home right now, but many have lost their source of income. We want to help end that hopeless feeling for them, by letting them come back home and concentrate on putting their lives in order without having to worry about making mortgage payments.”
Eligible families can receive the amount of money they need to cover monthly mortgage payments that are currently in default and future payments until they are able to resume paying their loans in full. The total amount of mortgage assistance cannot exceed the equivalent of 12 months worth of principal, interest, taxes and insurance.
The assistance will be secured by a second mortgage that carries no interest rate, and no repayment will be required until the first mortgage has been paid in full.
The assistance is available to FHA borrowers who:
- Own a home that has been damaged by the hurricanes but can be rebuilt
- Have access to funds from insurance proceeds, loans or personal resources to complete the repairs
- Are currently employed or expect to return to work within a short period of time
FHA-insured families in disaster areas whose houses have not been damaged, but who have lost their income as a result of the hurricanes, are also eligible to receive the mortgage relief. They must be able to demonstrate that their primary source of employment was located in a devastated area, that they are unable to repay their mortgage as the result of a reduction in income and that they are likely to be reemployed within a reasonable period of time.
The mortgage assistance funds cannot be used for property repairs. However, these HUD programs do provide assistance for rebuilding efforts:
- 203(h) provides FHA-insured mortgages for victims of a major disaster in designated areas who are in the process of rebuilding or buying another home. The program provides 100% financing to enable home owners or renters to purchase a home anywhere in the country.
- The Standard 203k loan program allows borrowers to obtain a single loan for both the purchase and rehabilitation of a property that needs extensive repair. The loan can be used to buy a new home, or to refinance a current loan, even if the original loan is not FHA-insured.
- The Streamlined 203k loan is specifically designated for properties that require only limited repairs costing between $5,000 and $15,000. Under the program, the home owner can add that amount to the existing mortgage.
HUD has estimated that the cost of the Mortgage Assistance Initiative could run as high as $200 million.
HUD is asking lenders to contact as many families as possible that may be eligible for the special mortgage assistance.
FHA home buyers can also contact their lenders or HUD’s National Servicing Center at 888-297-8685.