Hurricane Harvey, a record-breaking category 4 storm, brought disaster when it hit Texas in August 2017. By the time the hurricane ended, more than 200,000 Texas homes were damaged. Just as many homeowners were questioning how they were going to pay on their mortgage.
Harvey versus Katrina: What can Texas homeowners expect?
In late August, Hurricane Harvey hit Texas hard — striking land three different times in as little as six days. Harvey had come to a head by September 1, 2017. In its aftermath, roughly one-third of Houston was underwater. Right after Harvey came Irma. Hurricane Irma too moved quickly and swept her way through the Caribbean, making a path straight to Florida where many homeowners will be affected in the same way. Our hearts go out to all homeowners hit by hurricanes, but seeing this first disaster take place in our home state of Texas was particularly humbling. Now is when our borrowers need us the most, and they need us to act quickly.
In these early stages, when homeowners are scrambling to file insurance claims and contact their mortgage lenders, it’s hard to estimate how vast Harvey’s devastation could be. Many lenders have looked to Hurricane Katrina’s damage in 2005 for answers. What we know is that there are over two times as many homes with mortgages and close to four times as many principal balances that are unpaid in the flooded portions of Houston and surrounding areas compared to flooded portions of Louisiana and Mississippi after Katrina.
Harvey upturned local economies, homes, and bank accounts.
Before they could even think about the severe damage to their homes — and the total loss, in many cases — Texas homeowners in flood zones were concerned about their safety. When the floodwaters receded, these homeowners began to consider how they were going to pay for repairs. Former priorities like bills and mortgage were not on their radar.
Comparing Harvey to Katrina gives mortgage lenders a clearer picture of how many affected borrowers are needing their help. More than 75,000 borrowers in Houston and surrounding areas may be unlikely to pay their home loans in the next two months. And over 45,000 borrowers in the same region could fall delinquent on their mortgages in the next four months.
“We are a trusted advisor who listens, then provides advice and loan products that meet the financial needs of our customers.” – Read Cornerstone Home Lending’s mission statement here.
One step at a time: 90-day grace available to some flooded homeowners
Shortly after Harvey hit, Fannie Mae, Freddie Mac, and the Federal Housing Administration, the organizations backing most mortgages, created a plan of forbearance to help affected homeowners. These three agencies oversee an estimated 400,000 home loans in the 18 counties impacted by Hurricane Harvey. For those in Houston and surrounding areas, forbearance will be available for a minimum of 90 days and could extend up to one year, depending on personal circumstance. A borrower who accepts a forbearance plan will not be required to make their monthly payment during the set time period. Payment penalty fees also won’t be accrued.
A forbearance plan is not offered by all mortgage lenders, however. Cornerstone Home Lending proudly extends forbearance to all of its borrowers.
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For borrowers affected by flooding, a forbearance plan will:
- Temporarily suspend home loan payments. This gives homeowners some extra time and leeway to deal with any obstacles that may affect their ability to pay mortgage on time because of a natural disaster.
- Suspend mortgage payment for three months at a minimum.
- Offer extra options at the conclusion of forbearance, when payment is due. A lender can help a borrower create a repayment plan or modify their home loan. A lender can also extend forbearance on a case-by-case basis.
For the thousands of borrowers caught in the crosshairs of Harvey, 90-day forbearance may prove critical in their ability to move forward. But as lenders are emphasizing to their borrowers, forbearance is only a provisional tool in disaster recovery. In the forbearance period lasting 90 days, mortgage interest still collects. Those eligible for a forbearance plan have three months of relief. In that time, no mortgage payments are owed. During the 90 days, late charges and credit reporting will also be suppressed. Unpaid home loan payments are then due once the forbearance plan has concluded. Lenders will send letters to their borrowers outlining the terms of their forbearance.
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Freddie Mac-guaranteed mortgages have been given extra relief. As of August 29, 2017, all evictions and foreclosures on homes with mortgages secured by Freddie Mac in approved Harvey disaster areas have been suspended. Freddie Mac also announced that they will continue to work with servicers during restoration to ensure borrowers will not be held responsible for any property inspection fees related to the hurricane.
How to help homeowners hit by Harvey: 6 ways lenders can take action
Homeowners struck by disaster are looking to their lenders during this time of crisis for a quick solution.
Mortgage companies providing forbearance can make the process easy by communicating quickly:
- Email affected borrowers right away. Provide short but detailed instructions on how borrowers should contact their loan officer or lender’s customer service department.
- Ask borrowers to request temporary forbearance where necessary. A borrower can tell their loan officer or customer service representative that their home has been damaged by Harvey and forbearance is needed.
Advise borrowers to send in paperwork promptly. Forbearance paperwork can be submitted directly to a customer service department or loan officer.
- Remind borrowers to check their mail at their forwarding address. An agreed-upon Forbearance Plan will be mailed back to the borrower after it has been accepted by a lender. Conventional and VA loans require no further action for forbearance. Borrowers with FHA loans need to return their forbearance paperwork within 15 days.
Offer FEMA contact details for additional disaster relief. Borrowers in need, and especially those without flood insurance, can reach out to FEMA for more help at 1-800-621-FEMA (3362) or DisasterAssistance.gov.
- Tell borrowers to call their insurance provider immediately to file a property damage claim. After a property inspection is done, an insurance company will supply a borrower with their total claim amount. A borrower can use this claim amount to order a claims package via InsuranceClaimCheck.com/mortgage or their lender’s loss department.
Borrowers will be leaning on their lenders in the months after Harvey. At any time and especially during times of crisis, we always ask our borrowers to contact us whenever problems arise. As a forbearance period comes to a close, we can assess a borrower’s financial state and circumstance to revisit their need for continued assistance. Depending on the borrower, this could include modifying a home loan or extending forbearance. We know our borrowers without flood insurance may need our help the most.
For educational purposes only. Please contact your qualified professional for specific guidance.
Sources are deemed reliable but not guaranteed.