The Federal Housing Administration (FHA) has provided additional relief to victims of the natural disasters that hit the nation in 2017. On Thursday, FHA announced expanded mortgage relief to FHA-insured homeowners who live or work in areas impacted by the Hurricanes Harvey, Irma, and Maria as well as those affected by the California wildfires and subsequent flooding and mudslides.
The bureau is instructing mortgage servicers to offer additional options to eligible disaster victims in Texas, Louisiana, Georgia, Florida, South Carolina, California, Puerto Rico, and the U.S. Virgin Islands. These steps would allow victims to remain in their homes while reducing losses that would otherwise negatively impact FHA’s Mutual Mortgage Fund, the bureau said in a statement.
“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. “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.”
According to the FHA, the expanded loss mitigation will also streamline income documentation and other requirements to expedite relief to homeowners struggling to pay their mortgage while recovering from the disasters.
As part of this plan, FHA is introducing a new “Disaster Standalone Partial Claim” option to help struggling borrowers resume their pre-disaster mortgage payments without payment shock. This option covers up to 12 months of missed mortgage payments via an interest-free second loan on the mortgage, payable only when the borrower sells the home or refinances their mortgage.
It requires no trial period or balloon payment and allows borrowers to keep their existing low-interest rate and loan term as well as their existing monthly mortgage payment.
Apart from being disaster victims, borrowers would have to be current on their mortgage payments at the date of the disaster; have income that is equal to or more than their pre-disaster income and have lived in an owner-occupied property to be eligible for this relief, the FHA said.