Should I Keep Paying My Mortgage if My Home Was Destroyed in a Natural Disaster?

27 Sep Should I Keep Paying My Mortgage if My Home Was Destroyed in a Natural Disaster?

Natural disasters have recently destroyed countless homes and uprooted huge numbers of individuals and families. When the flood/hurricane/tornado/wildfire is over you focus on the destruction to your home, car, and business. You concentrate your concerns on whether or not you should rebuild, and on how to put your family’s life back together.

In upstate New York we have suffered through the wake of Hurricane Irene and Tropical Storm Lee. The Binghamton, NY area experienced the second “500 year flood” in five years. Entire neighborhoods and towns were under water. Tens of thousands were evacuated, and many returned to condemned homes.

In the wake of this destruction many face the dilemma of what to do about their mortgage payments and other debts. Usually, the credit industry puts out “public service announcements” reminding people in disaster areas to keep paying their mortgage, car payments and credit card debts or risk late payment fees, damaged credit scores and foreclosure.

But many people did not have or could not get flood insurance. So in the overall scheme of things, how high a priority should it be to stay current on the mortgage and debt payments? What help is available? And what steps can you take to relieve some of the pressure?

  1. Retrieve and organize your important papers such as deeds, wills, tax returns, bank
    statements and insurance policies.
  2. Complete and file insurance claims as soon as you can.
  3. Call your mortgage loan servicer. Make notes of your conversation and be sure to follow up with any documentation requests they make.
  4. Contact the credit reporting agencies and inform them that your house has been damaged by the disaster.
  5. Speak with a lawyer to learn about all of your options. After a natural disaster you should be able to get a free consultation with an experienced bankruptcy lawyer. It will give you more peace of mind to find out all of your options as soon after the disaster as you can arrange it.

You may be able to get help from your mortgage servicer. The Federal Housing Administration (FHA) often imposes a 90 day moratorium on foreclosures of FHA insured loans after a disaster.

Freddie Mac often “encourages” servicers of their mortgages that have been damaged in a disaster to postpone foreclosures and
evictions for up to one year, to waive penalties and late fees, and to suspend negative reporting to credit reporting bureaus.

Fannie Mae allows their servicers to suspend mortgage payments for up to three months, and sometimes allow longer term
reduced payments or modifications.

FEMA may be of help through their Disaster Housing Program if you have been forced out of your home as a result of the disaster
and through grants and low interest loans.

The Small Business Administration (SBA) also offers loans to homeowners to repair or replace damaged property.

It is bad enough to suffer through the physical damage of a natural disaster. But after it has passed, you will need help and advice.
A trained, experienced bankruptcy lawyer can help you sort out your options and put you back on the right financial path.

See Part 2: “How Does a Natural Disaster Affect Me if I am in a Bankruptcy?”

 

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Peter Orville is a bankruptcy lawyer in Binghamton, located in the Southern Tier of New York. He is a member and New York co-chair of the National Association of Consumer Bankruptcy Attorneys.
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