Attorneys and others who assist homeowners struggling to make their mortgage payments after a major disaster need to understand the different programs and protections enacted for their support. This new section added to this treatise in response to recent major hurricanes and other disasters is placed here at the end of Chapter One to allow a wide audience access to these needed materials (online access to Chapter One is open to the public). In the future, the material will be moved into more appropriate locations within this treatise.
Most mortgage loans (three out of five) made in the United States are government-sponsored or government-insured102 and, as a result, the rules governing how homeowners with these mortgages will be treated after disasters are somewhat uniform:
- ● Fannie Mae and Freddie Mac provide some protections after natural disasters.103 Both authorize their servicers to permit a ninety-day suspension of foreclosure proceedings immediately after a natural or other disaster.104 Servicers are instructed to work closely with homeowners to develop workout or relief plans to cure the delinquency. Unfortunately, it appears that there is no absolute right to the forbearance. Typically, however, a homeowner will be offered a forbearance plan that temporarily reduces or suspends the monthly mortgage payment for at least ninety days. Sections 1.5.3 and 1.5.4, infra, provide more specifics.
- ● Government-insured mortgage agencies, such as FHA, VA and RHS, also provide protections against default and foreclosure for victims of disasters, although these protections may not be as clearly delineated as those provided by Fannie Mae and Freddie Mac. Sections 1.5.5, 1.5.6, 1.5.7, infra, cover the rules for these mortgages.
The remaining third of mortgage loans made in the United States are not provided by these government-related entities. Relief from foreclosure after non-payment resulting from a disaster for homeowners with these mortgages will be left to the discretion of the owners and servicers of these mortgages, subject to the rules for mortgage modifications issued by the Consumer Financial Protection Bureau (see § 126.96.36.199, below). However, federal, state, and local relief for all affected homeowners in a disaster area (see §§ 188.8.131.52 and 184.108.40.206, below) may be helpful.
It is also necessary to determine homeowners’ rights to use payments from their insurance companies for repairs or replacement of their homes. Different mortgage owners have varying rules for the distribution of insurance proceeds, often based on the default status of the mortgage before the disaster had occurred. Section 220.127.116.11, below, includes general rules for distribution of insurance proceeds. Additionally, separate subsections on insurance are included within the discussion of each mortgage owner’s disaster relief rules.
102 See Valuewalk, Fannie Mae: Who Owns the U.S. Mortgage Markets? (Mar. 7, 2016), available at https://valuewalk.com.
103 See Demshki, Understanding Fannie Mae and Freddic Mac (July 20, 2017), available at https://pennymacusa.com.
104 See generally Fannie Mae 2015 Single Family Servicing Guide D1-3-02, Providing Relief to Borrowers Who Are Affected by a Disaster (Nov. 12, 2014); Freddie Mac 2016 Single-Family Seller/Servicer Guide 8404.4, Delinquency management activities following a disaster (Mar. 2, 2016).