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Twelve Tips for Homeowners After Natural Disasters

This article provides twelve tips for homeowners working to recover from a natural disaster.  The article updates a similar 2021 article with new information and insights, including significant new information about mortgage loss mitigation options now available.  This article frequently cites for more detail to NCLC’s Mortgage Servicing and Loan Modifications Chapter 12 Because of the urgent need for this information after natural disasters, Chapter 12 is free to the public and no subscription is required.  A login is not necessary to access the chapter, but to set up and save private annotations and bookmarks, to email subsections, and to receive updates on new information, it is recommended to create a free account here.

Tip One: Identify Sources of Assistance

A natural disaster can require a wide array of services for affected individuals—not only food and shelter, but also mental health and legal:

  • In many states, dialing “211” shortcuts one through a bewildering maze of health and human service agency phone numbers, allowing immediate referral or even connection to appropriate agencies and community organizations. 211 covers all fifty states, the District of Columbia, and Puerto Rico. To find out whether 211 services are offered in your area and to obtain more information, visit 211.org.
  • Local Voluntary Organizations Active in Disaster (VOAD) can be identified at https://www.nvoad.org/state-territory-voad/.
  • To find a FEMA Crisis Counseling Program, call the FEMA Helpline 1-800-621-FEMA (3362) or, for the hearing impaired, 1-800-462-7585.
  • Disaster Legal Services (DLS) may become available where the American Bar Association Young Lawyers Division in tandem with FEMA work together to provide and coordinate legal services in the affected area. Call the DLS national hotline at 1-888-743-5749 to find out if DLS is available in your state.
  • The ABA maintains a webpage for disaster legal assistance resources.
  • The Legal Services Corporation (LSC) Disaster Task Force maintains a helpful webpage with resources.
  • NCLC has a Disaster Relief & Consumer Protection web page with links to resources and information concerning housing & mortgages, bankruptcy, credit reports, student loans, debt, utilities, autos, older consumers, and insurance.

For more information, see NCLC’s Mortgage Servicing and Loan Modifications § 12.1.4.3. NCLC has also created a detailed flow chart for disaster relief.

Tip Two: Apply for FEMA Assistance When There Is a Presidential Disaster Declaration

When there is a Presidential disaster declaration, FEMA provides various forms of assistance: direct financial aid for repairs or displacement housing costs, temporary housing units like FEMA trailers, money for necessary expenses like replacement of personal property, childcare, medical and dental costs, funeral expenses, and other items. The Presidential disaster declaration specifies the scope of available assistance for a disaster and can be referenced to ascertain what types of assistance are available. See 44 C.F.R. § 206.110; NCLC’s Mortgage Servicing and Loan Modifications § 12.1.4.1.2.

Apply as soon as possible by either calling 800-621-FEMA (6632) (TTY: 800-462-7585) or submitting an online application at DisasterAssistance.gov. FEMA may set up Disaster Recovery Centers where people can apply in-person. It is important to apply, even if a person does not need immediate assistance. A FEMA application number is invaluable for applying for various forms of assistance in the future. See NCLC’s Mortgage Servicing and Loan Modifications § 12.1.4.1.3.

On September 2, 2021, FEMA amended its Individual Assistance Program and Policy Guide to loosen documentation requirements to verify home ownership and also home occupancy. This should be helpful for those with land installment contracts/contracts for deeds, where probate has not been done on an intestate estate, and other situations where home ownership is difficult to document.

One can create an online account on http://www.disasterassistance.gov to view all documents that FEMA sends to the individual, but it may include only the titles of documents that FEMA received from the individual. Also usually not included in an online account are FEMA inspection reports, photos, FEMA’s internal notes about your file, conversation notes, or other information. The full file can be obtained by mailing a request to FEMA - Individuals & Households Program, National Processing Service Center, P.O. Box 10055, Hyattsville, MD 20782-8055. Include the FEMA application number, identification of the disaster, Social Security number, and a current mailing address, among other information. For a sample letter, see NCLC’s Mortgage Servicing and Loan Modifications Appx. E.3.8.

Denial of an application for FEMA assistance can be appealed if within 60 days of an ineligibility determination, and appeals can be submitted by mail, fax, online at http://www.disasterassistance.gov, or in-person at a disaster relief center. See NCLC’s Mortgage Servicing and Loan Modifications § 12.1.4.1.5. Those receiving cash assistance may have to recertify eligibility for ongoing support by submitting receipts once every 3 months documenting disaster-related housing costs and a lack of adequate alternate housing, among other possible required proofs. Failure to recertify can lead to loss of ongoing assistance.

Tip Three: Receive Payments Under Homeowners and Flood Insurance

Almost all insurance claims involve an inspector or appraiser visiting the property and preparing an inspection report. If the insurance company approves the claim and the homeowner has a mortgage, the funds likely will issue to the insured and their mortgage company—the homeowner will need to sign the check and send it to the mortgage servicer. How the servicer will release insurance payments for repairs vary by the mortgage investor and is described at Step Eight, infra.

If the disaster involves multiple forms of damage, sometimes the homeowners insurance company will claim coverage should be provided only under a separate flood insurance policy and the flood insurer will insist on coverage under the homeowner policy. Other issues involve whether coverage is under an individual’s condominium policy or the master policy for the condominium. Other disputes may revolve around policy exclusions and limits and the appraisal itself. Flood insurance has strict time limits for submitting claims, and generally will not cover all the homeowner’s damage.

Public adjusters work with insureds to help increase their claim award in exchange for a percentage of the recovered claim amount. Although there are reputable and ethical public adjusters, beware of storm-chasing scammers (often operating without a required license) that look for vulnerable people whose insurance funds they can siphon off.

For more on insurance issues, see NCLC’s Mortgage Servicing and Loan Modifications § 12.1.4.2.

Tip Four: Avoid Pitfalls When Dealing with Home Repair Contractors

Even reputable home repair contractors will often be slow in performing because of the large amount of other work they take on after a disaster and shortages in building materials. But be particularly wary of storm chasers that show up after a disaster and go door-to-door, create flyers, or otherwise aggressively market their services, often with professional-looking business websites or Facebook pages with phony customer reviews. 

These scammers obtain payments in advance, do little or no work, perhaps ask for additional payments, and disappear. Check that contractors are properly licensed but be aware that sophisticated storm chasers will often obtain proper licensing. At risk is not just insurance proceeds or other payments.  Non-payment to either reputable or even scam operators may result in a lien being placed on the home. For more on these issues, see NCLC’s Mortgage Servicing and Loan Modifications § 12.1.4.3.

Tip Five: Be Aware of Municipal Code Issues

Municipal code inspections may be a problem when the municipal code office is unavailable due to the disaster, when shoddy contractor work prevents issuance of a required inspection certificate for repairs to continue, or when a certificate of occupancy is needed for the homeowner to move back into the property. If a house had work done by a previous contractor that was not code compliant or the house is so old that it never complied with code, the costs and work required to make the home code-compliant may be extensive. In dealing with a contractor, a homeowner should also be sure that the written contract specifies who is responsible to pay for code inspection costs.

Municipal codes may also require elevation work to avoid future flooding. Those with coverage under the National Flood Insurance Program can obtain up to $30,000 for elevation or other hazard mitigation repairs if they submit a substantial damage determination letter from their municipality’s floodplain manager. There is a risk that the floodplain manager will require work costing more than the $30,000, but the manager’s determination can be appealed.

A homeowner needing repairs that violate municipal zoning regulations must apply for a zoning variance. Variance applications often require notice and a hearing before the municipal governing body; other residents may object to the variance. Ultimately, the variance application may be denied, and then the homeowner may encounter further costs for changing the scope of repair work.

For more on municipal code issues, see NCLC’s Mortgage Servicing and Loan Modifications § 12.1.4.4.

Tip Six: Apply for Available Local and State Grants

After a natural disaster, federal funds may flow to state and local governments to set up grant programs for affected consumers, including housing repair programs, rental assistance programs, personal property and appliance replacement funds, and other services. Watch out for continually updated and sometimes confusing guidelines for grant applications. Appeals of grant denials are possible. There is also a risk that grants improperly awarded can result in civil actions to recover the improper amount or even criminal actions. For more on these issues, see NCLC’s Mortgage Servicing and Loan Modifications § 12.1.4.5.

Tip Seven: Determine the Mortgage Loan Investor—An Essential Step in Dealing with Mortgage Payments and Insurance Proceeds

Homeowners affected by a natural disaster may have difficulty keeping up mortgage payments, and typically will need the mortgage owner’s permission for release of any insurance payments. Homeowner rights concerning these issues vary depending on the mortgage loan’s investor. Most loans are federally backed, and in general it is these loans that offer homeowners explicit rights in a natural disaster. It is important to identify which of these five investors is involved with a mortgage loan:

  • Fannie Mae loans are identified using the Fannie Mae look-up tool.
  • Freddie Mac loans are identified using the Freddie Mac look-up tool.
  • Federal Housing Agency (FHA) insurance for a mortgage loan is usually identified on loan documents, mortgage statements, or closing documents.
  • Department of Veterans Affairs (VA) guaranty for a mortgage loan is usually clear from the text of the mortgage and note.
  • U.S. Department of Agriculture, Rural Housing Service (USDA) clearly identifies itself as the lender for USDA Direct Loans, and the USDA services these loans through its national servicer.
  • USDA Guaranteed Loans are more difficult to identify, as there generally is no specific loan language. Review the HUD-1 Settlement Statement and attachments to the note.

Another approach is to send the mortgage loan servicer a Request for Information (RFI) under RESPA asking for the investor’s identity. See NCLC’s Mortgage Servicing and Loan Modifications §§ 3.3.3, 3.8.2.10.

Loans involving other investors typically will not have clear and publicly available rules for loan modifications and disaster relief. Contact the servicer and ask for help, and where loan servicers are not helpful, consider escalating the case within the loan servicer and also contact elected officials.

The USDA has a special website dealing with disaster assistance which is helpful in dealing with a USDA Direct Loan or USDA Guaranteed Loan.

Tip Eight: Seek Release of Insurance Proceeds and Issues with New Insurance

Mortgage loans typically require the homeowner to obtain homeowners and possibly flood insurance, and any insurance payments following a natural disaster will be made out to both the homeowner and the mortgagee. Rules differ as to the conditions where a mortgagee will release the mortgage payments to the homeowner. This will be an obvious concern affecting how quickly the homeowner can pay contractors and others for needed repairs.

If a home is destroyed or must involve a major construction, a new mortgage is often necessary, but required insurance for the new mortgage may be unaffordable or unavailable. As described below, FHA provides an important option in this situation.

Tip Nine: Determine Any Applicable Foreclosure Moratorium and Eviction Suspension

Knowing that foreclosure or eviction is not imminent can take a lot of pressure off the homeowner. All five federally related investors have policies on foreclosure moratoriums or eviction suspensions following a natural disaster, but policies differ:

Tip Ten: Consider Loan Payment Forbearance

A mortgage loan forbearance permits the homeowner to delay making payments for a time without creating a default. Late charges may be waived, and in some cases negative credit reports avoided. But interest will continue to accrue during the forbearance period and the remaining principal balance is not reduced. The full principal and interest will eventually have to be repaid. Nevertheless, after a disaster, loan forbearance may be essential:

If the homeowner does obtain a forbearance during which no payments are due, ask the servicer, during those months when no payment is due, not to report to a consumer reporting agency any negative information.  Remind them that the industry's own guidance for standardized reporting recommends not reporting negative information during a forbearance when payments are not due.

Tip Eleven: Apply for Loss Mitigation After Forbearance

A forbearance is not a permanent solution to the homeowner’s repayment problems, but instead puts them off to a time when hopefully the old level of mortgage payments become affordable again. But the homeowner is also liable for the skipped payments and additional accrued interest. Just as essential as a homeowner’s forbearance rights immediately following a disaster are the homeowner’s options when exiting a forbearance:

Tip Twelve: Prepare Clients for the Next Natural Disaster

Clients should be prepared for the next disaster:

  • Take photos of property (personal belongings; house from the outside to show pre-disaster foundation alignment & awnings/roof/siding condition; car; important documents like driver’s license & birth certificate). When there is an active disaster, clients should prioritize preserving and taking with them any photos of vital documents and records, if practicable, and seek safety immediately.
  • Clients should email photos to themselves so that they are always accessible by computer or smart phone in case the original photos are lost.
  • Make sure that driver’s license is updated to the proper primary residence address.
  • Clients should sign up for alerts from the state and 211 resource centers to receive updates about available relief programs and health and safety guidance for a future natural disaster.
  • Clients should be aware of rights under the federal food relief program during a disaster (DSNAP), Disaster Unemployment Insurance, food banks, other immediate need resources. In addition, they should be familiar with 211 and VOADs that can assist with the required information needed in a disaster (as described at Step One, supra).