Homeowners in the unfortunate circumstance of their property being damaged or destroyed due to a disaster might wonder about their financial obligations. So, do you still have to shell out money for your home if it was obliterated by a catastrophic event?
In the unfortunate event of living in a federally declared disaster area, such as those struck by wildfires in Los Angeles or hurricanes in North Carolina, you're still required to fulfill your mortgage obligations, despite your home's loss or destruction. However, relief programs can provide temporary relief from mortgage payments for up to a year, and sometimes even longer; the specifics depend on your circumstances.
Begin by contacting your mortgage servicer, listed on your mortgage statement. They'll inform you about your options, likely involving forbearance. Your servicer's capacity to provide relief is influenced by the entity backing your mortgage, be it a bank or a government agency like Fannie Mae, Freddie Mac, the FHA, VA, etc. If unsure, your servicer can help clarify.
Typically, with federal assistance, you're offered forbearance of around three to twelve months; during which your mortgage payments are either suspended or reduced. During this period, you won't face late fees or legal actions like foreclosure. For those affected by the Los Angeles wildfires, major banks like Bank of America, Citi, JPMorgan Chase, US Bank, and Wells Fargo, offer a 90-day mortgage moratorium for affected homeowners.
If you don't reach out to your servicer, some lenders like Fannie Mae will automatically offer forbearance for 90 days to borrowers residing in a federally declared disaster area. However, it's crucial to connect with your servicer to ensure you secure a longer forbearance arrangement.
After the forbearance period, you still owe prepaid interest and monthly payments. Your servicer may help you create a repayment plan, spreading out those payments over a more extended period. If your financial situation continues to be challenging, you might negotiate a loan modification which lowers your monthly payments and lengthens the loan term.
Free assistance in managing your mortgage and other disaster-related financial issues is available from organizations such as the Federal Emergency Management Agency (FEMA) and Operation HOPE, offering services like guidance on mortgage forbearance agreements and assistance with insurance claims.
Despite being affected by a disaster, you need to continue managing your business operations if they are separate from your home-based business. Requesting forbearance on your mortgage can also help alleviate financial stress, allowing you to focus more on your business survival. When communicating with your mortgage servicer, don't forget to discuss any consequences for your business-related financial obligations.
