How Can Mortgage Professionals Best Serve Those Affected By Natural Disasters?

Natural disasters are known to wreak havoc on buildings and properties. Such widespread destruction, especially on homes and personal property, significantly impacts mortgage servicing. With the increase in wildfires, floods, and hurricanes incidences over the past 10 years, mortgage lenders have all the reasons to be concerned. As such, lenders and servicers offering loans in natural disaster-prone areas should establish clear strategies to protect investors and help borrowers affected by disasters.

Natural disasters affect the housing market in many ways. These disasters have lasting effects on borrowers and their properties. They also spoil the housing market, especially those looking to buy properties or refinance. For borrowers, natural disasters can damage the property and affects the borrower's ability to service the loan.

How Can Mortgage Lenders Help Borrowers?

Mortgage lenders should have a well-laid out contingency plan for natural disasters. A comprehensive contingency plan should highlight steps that borrowers or homeowners should take before, during, and after the disaster strikes. Lenders should know how to prepare for disasters. Communication is crucial during a disaster. Therefore, the plan should outline effective ways of reaching borrowers.

Lenders should maintain a good relationship with borrowers during the good and bad times. Therefore, immediately after the disaster, mortgage lenders should implement outreach plans to identify the impact of the disaster on borrowers. They should first assess the extent of the disaster to determine how borrowers have been affected. Lenders can then follow the laid down industry guidelines on the next steps.

The primary concern for lenders should be giving borrowers the much-needed relief. Borrowers should be worried about their family and self-care and not making the next mortgage payment. As such, lenders should have flexible mortgage forbearance plans and home retention programs.

What Options do Borrowers' Have?

Unfortunately, most homeowners don't know what to do if their property is damaged by floods, windstorms, and other natural disasters. As the homeowner, you should start by contacting your homeowner's insurance company and any other flood or earthquake insurance provider that applies to the situation at hand. You should then inform your mortgage servicer and notify the Federal Emergency Management Agency.

When a disaster strikes, homeowners/borrowers focus on their own and their family's well-being. This affects their ability to focus on work and other issues, such as making mortgage payments. Disasters often leave borrowers in a dilemma. Most don't know if they should spend their savings or reserves repairing the property or mortgage payments.

Besides, employers who don't have business disruption insurance may not be able to pay their workers, making it difficult for borrowers to make mortgage payments. These issues contribute to an increase in delinquency rates.

That said, if a disaster makes it impossible for you to make monthly mortgage payments, consider asking your lender for mortgage forbearance. Mortgage forbearance allows homeowners to stop making monthly payments for a specified period. The agreement may allow homeowners to stop making payments completely or require them to make partial payments for the agreed-upon time.

Most forbearance agreements last for six months with a possibility of another six-month extension. Note that while interests continue to accrue during this period, you won't be charged late fees, and lenders can't report you to credit bureaus. However, the lender will have to compensate for the missed payments after the forbearance period. Therefore, they may adjust your monthly payments or modify the loan.

Should Borrowers Continue Paying for Mortgage?

You should keep paying your mortgage loan if you can afford it. You should also continue making the payments until you have informed your mortgage servicer and reached an agreement with your homeowners' insurance company. However, you can take advantage of various relief options specifically designed for homeowners recovering from natural disasters.

Homeowners can generally qualify for Small Business Administration loans from Federal Aid. SBA offers loans to homeowners at favorable interests for repair and renovation of primarily residential areas. Homeowners can access up to $200,000 for renovation and restoration. SBAs also offer up to $40,000 to homeowners who lost personal property, such as furniture, appliances, clothing, and expensive equipment.

FEMA also offers grants that fill gaps left by SBA loans and insurance payouts. Currently, the maximum grants households can access for disasters are $37,900 for every household. You can use grants to cover basic expenses, including repairs to property damage that were not insured, temporary rent, and medical care resulting from the disaster.

Conclusion

The U.S is grappling with a sharp surge in natural disasters, ranging from active hurricanes, wildfires, floods, mudslides, and tornadoes. Disasters shake the dreams of homeowners, with most unable to make payments or rebuild their damaged homes. Therefore, though often overlooked, players in the mortgage industry should be proactive and formulate programs that help borrowers recover and remain resilient after disasters. Borrowers should also ensure that they work with restoration experts to remediate property damage.