Implications for Purchasers and Homeowners in the wake of Hurricane Sandy

Many people whom were in the midst of purchasing a home in the hurricane’s path on October 29th are facing minor hurdles in their mortgage process as a result, particularly if the home was already appraised.

FEMA has declared much of coastal Connecticut, New York and New Jersey as disaster areas. For homes in most of the Northeast, and much of the mid-Atlantic as well, many lenders are requiring the property to be re-inspected to ensure it is still a functional and livable. This can, and likely will, cause minor delays to new home closings. For homes that were damaged, it will surely also mean some renegotiation to terms.

Help for homeowners with damaged homes

For those current homeowners in the hard-hit areas, Fannie Mae and Freddie Mac have announced enhancements to their disaster relief guidelines. It has already been policy to grant up to 90 days forbearance (temporary suspension or reduction to monthly loan obligation) after a natural disaster to affected homeowners. New guidelines released on November 9th encourage mortgage servicers to offer the following enriched assistance:

• Forbearance of mortgage payments for up to 12 months with no reporting to credit bureaus
• Waive late fees and payment charges
• Provide loan modifications to eligible homeowners once they are able to start making payments again
• Suspend or delay initiated foreclosure proceedings for up to 12 months

Additionally, Fannie Mae and Freddie Mac have both urged loan servicers to expedite the release of insurance proceeds for claims made on storm damaged homes.