The government-sponsored enterprises (GSA), Fannie Mae and Freddie Mac, own or insure 60 to 70 percent of all the mortgages in the U.S. In the aftermath of super storm Sandy, the GSAs will help homeowners who lose their source of income or face a decline in home value as a result of the historic storm. The GSAs have instructed mortgage lenders that service their loans to provide assistance to home owners.
Assistance Offered Government Agencies
Tracy Mooney, a vice president for Freddie Mac, said the government-owned agency will permit some homeowners to suspend their monthly mortgage payment for up to 12 months. Fannie Mae will allow mortgage servicers to suspend or reduce monthly payments for up to 90 days. Eligible borrowers must have an inability to make mortgage payments because of the storm or suffer a decrease in value of their home.
In addition to deferring mortgage payments, Fannie and Freddie plan to offer borrowers other forms of assistance, such as waving late charges, deferring the foreclosure process for up to a year and not punishing borrowers by reporting late payments to credit agencies.
Fannie Mae’s senior vice president Leslie Peeler said, "We understand the disruption that a storm such as Sandy can have on people's lives, and we've made it easy for our servicers to offer relief to those who need it."
The Secretary of the Department of Housing and Urban Development John Donovan has approved a 90-day moratorium, which provides protection for borrowers who have home mortgages insured by the Federal Housing Administration (FHA).
A Fannie Mae spokesperson acknowledged the difficulty in calculating the number of borrowers who will take advantage of the relief initiatives. According to insurance risk researcher Eqecat, the economic damage from Sandy caused $50 billion in damages and another $20 billion in insurable claims losses.
In New Jersey alone, Fannie Mae and Freddie Mac insure over 893,000 home loans. The GSAs anticipated that 83,000 or 10% of the homeowners have mortgage in some stage of and will likely need some type of assistance. The Tri-state areas -- New York, New Jersey, and Connecticut, have been declared disaster zones. These states have 212,000 mortgages insured by FHA.
Small Business Administration for Homeowners and Renters
The Small Business Administration (SBA) has extended its help, in the form of loans, to home owners as well as renters. The SBA will provide homeowners up to $200,000 to repair or replace real property damage or destroyed in the natural disaster.
Renters and homeowners can receive up to $40,000 to repair or replace personal property damage or destroyed by Sandy.
Private Lenders Help
Homeowners who have private mortgages with lenders like Wells Fargo and J.P. Morgan Chase, and suffered damages, will be able to postpone their mortgage payments for up to 90 days. These borrowers will need to contact their lender to request assistance. Wells Fargo recommends that their customers contact the lender immediately to make arrangements. Borrowers can also obtain assistance with property insurance claims.
Home buyers who have real estate closings scheduled should contact their mortgage lenders. Most banks will probably require reappraisals on homes located in the declared disaster areas. Depending on the extent of damage to homes, the closing can be delayed or canceled.
Home buyers should call their mortgage lender to find out how they should proceed in the event the home they are purchasing suffered damage. Even if your home is not located in the impacted area, schedule a walk-through immediately and on the day of the closing to make sure that no storm-related damages occurred in the property.
FEMA Declared Disaster Zones
Home owners and renters in the following locations may be eligible for some type of assistance if impacted by the storm:
Bronx County, Kings County, Nassau County, New York County, Queens County, Richmond County and Suffolk County.
Atlantic County, Cape May County, Essex County, Hudson County, Middlesex County, Monmouth County, Ocean County and Union County.
Fairfield County, Mashantucket Pequot Indian Reservation, Middlesex County, New Haven County and New London County.
This list may grow as FEMA may declare other locations disaster zones.