Picking up the pieces after a major storm or hurricane can be extremely frustrating, incredibly confusing, and emotionally draining. There’s so much to think about—the welfare of your loved ones and friends, the status of your belongings, the condition of your property, and more. On top of that, you must also deal with the damage to your home, file insurance claim paperwork, and gather repair estimates as you begin the long and painful road to recovery.
Leading up to a major storm or hurricane, one of the biggest questions South Florida foreclosure attorneys hear from their clients is what they should do if and when their home is damaged and they’re unable to work or pay their mortgage in the aftermath.
The Good News
Most banks work with homeowners to provide relief in a variety of ways. Typically, this includes either a temporary forbearance or mortgage payment hold, special financing to rebuild a damaged home, or a temporary freeze on active foreclosures.
Many lenders also will provide a foreclosure moratorium, which generally kicks in for a period of about 90 days in areas where a federal disaster has been declared. A foreclosure moratorium is where a lender halts the commencement of foreclosure proceedings for newly defaulted loans or temporarily halts the progress of an active foreclosure lawsuit.
For homeowners whose loans are serviced through Fannie Mae or Freddie Mac, there are also federal relief programs you may be eligible for if you’re in a declared disaster area. These programs can also suspend the foreclosure process while you’re participating in the program and rebuilding.
The Not-So-Good News
Unfortunately, based on the past foreclosure fraud crisis, real estate lawyers and foreclosure attorneys have discovered that banks and lenders cannot always be trusted when it comes to fulfilling their promises of helping homeowners who have been impacted by a major storm or hurricane. Sadly, there are numerous examples of banks misleading or outright lying to homeowners in the wake of a hurricane—even when they have never missed a payment!
Likewise, the suspension of your mortgage payments does not mean those payments are forgiven. Not at all. In fact, even in cases where the federal government backs the forbearance, the deferred amount will still be owed—often with additional interest! And sometimes, homeowners will be required to repay the deferred payments in one lump sum at the end of the forbearance period!
5 Tips for Avoiding a Foreclosure Before and After a Major Storm or Hurricane
Keep these items in mind as you prepare for a major storm or hurricane.
- Safeguard the Property
Most mortgages have a provision that requires the homeowner to mitigate damages as much as possible. In other words, you can’t just let nature take its course. Before the storm hits, you must actively work to prevent as much damage to the property as possible by boarding up windows, turning off gas and electricity service to the home, and ridding the property of any items that could become projectiles during the storm. For more information about the federal government’s preservation and protection requirements for federally backed mortgages, download Fannie Mae’s “Florida Security Instrument (Form 3010)” and check out Section 7. The pertinent language states:
“Whether or not Borrower is residing in the Property, Borrower shall maintain the Property in order to prevent the Property from deteriorating or decreasing in value due to its condition. Unless it is determined pursuant to Section 5 that repair or restoration is not economically feasible, Borrower shall promptly repair the Property if damaged to avoid further deterioration or damage.”
- Review Your Mortgage Agreement
It may have been a while since you first bought your home or signed your mortgage agreement with the bank. There are a variety of conditions a bank must satisfy before filing a foreclosure in Florida. Some of these conditions are required by state and federal law, others are often contained in the mortgage agreement itself. Familiarizing yourself with your lending agreement and contacting an attorney about any language you may not understand is extremely helpful prior to a major disaster, especially if you are about to enter default or are on the cusps of a foreclosure action.
- Get in Touch With FEMA
If you or your property are adversely impacted by a storm and are in a federally declared disaster area, your first contact should be with the Federal Emergency Management Agency or FEMA, to get registered for disaster assistance. You can reach out online, in person at a disaster recovery center, or by phone at 800-621-3362.
- Start the Claims Process
Next, you’ll want to contact your homeowners insurance and (if you have it) your flood insurance companies to begin the claims process. Filing a claim can be a lengthy process, as can the investigation, and it might be a while before you or your lender receive reimbursement for repairs or see proceeds for remediation. Consequently, you’ll want to get this process started as soon as possible. See below for additional information regarding how insurance proceeds are handled.
- Contact Your Lender
Once you’re registered with FEMA and have begun the claims process, you’ll need to speak with your lender about a forbearance, whether it’s to temporarily suspend a foreclosure action or defer your mortgage payments. A forbearance generally lasts up to six months and can be renewed for another six months, depending on the lender. While interest will continue to accrue, you’ll be absolved of late fees and won’t have to worry about the lender reporting you to credit bureaus.
- Keep Records
When dealing with your lender, always keep detailed and accurate records of your phone calls and correspondence. Any correspondence between you and your lender should be well-documented in terms of who you’ve spoken with, the date and time you spoke with them, and the subject matter of the conversation. Any written documentation sent to the bank should be signed, dated, and copied for future reference. If there is any type of agreement given to the homeowner from the bank, it should be reviewed by an attorney before it is signed and sent back, especially if it has to do with escrow, taxes, or insurance issues.
- Don’t Fall for Mortgage Scams
Unfortunately, there are unscrupulous entities out there who routinely take advantage of hurricane and storm victims in South Florida by tricking them into paying for mortgage relief that will never come. Beware of callers claiming to be an agent of the government or a representative of your lender and who is looking for upfront fees to give you a loan or provide a service.
How to Deal with Insurance Payments to Cover Damage Claims
Most mortgage agreements have a provision in them stating that in the event of an insurance claim for major damage after a natural disaster like a hurricane, the check should be made to the homeowner and to the lender. In the event of an insurance payment or claim, the money is to paid to the mortgage company or lender. Again, download Fannie Mae’s Florida Security Instrument for clarity on this issue. The applicable language can be found in Section 5:
… In the event of loss, Borrower shall give prompt notice to the insurance carrier and Lender. Lender may make proof of loss if not made promptly by Borrower. Unless Lender and Borrower otherwise agree in writing, any insurance proceeds, whether or not the underlying insurance was required by Lender, shall be applied to restoration or repair of the Property, if the restoration or repair is economically feasible and Lender’s security is not lessened. During such repair and restoration period, Lender shall have the right to hold such insurance proceeds until Lender has had an opportunity to inspect such Property to ensure the work has been completed to Lender’s satisfaction, provided that such inspection shall be undertaken promptly. Lender may disburse proceeds for the repairs and restoration in a single payment or in a series of progress payments as the work is completed. Unless an agreement is made in writing or Applicable Law requires interest to be paid on such insurance proceeds, Lender shall not be required to pay Borrower any interest or earnings on such proceeds. Fees for public adjusters, or other third parties, retained by Borrower shall not be paid out of the insurance proceeds and shall be the sole obligation of Borrower. If the restoration or repair is not economically feasible or Lender’s security would be lessened, the insurance proceeds shall be applied to the sums secured by this Security Instrument, whether or not then due, with the excess, if any, paid to Borrower…
What to Do Now
If you follow these steps and fulfill your obligations according to the terms of your mortgage agreement, you should be able to get the relief necessary to forbear your payments while you rebuild and repair.
Besides a forbearance and disaster assistance through FEMA, there are also other legitmate programs that might be available to assist you with your payments following a natural disaster like a major storm or hurricane. Check out Fannie Mae’s article on the subject, Disaster Recovery Help for Homeowners.
If you’re experiencing difficulty with your lender or you believe the bank is not treating you fairly after a major storm or hurricane, a good piece of advice is to reach out to a knowledgeable, experienced foreclosure attorney like Larry Tolchinsky. Larry has with homeowners experiencing foreclosure for more than two decades and can help you get the relief you need following a natural disaster.
Do You Have a Question?
Please fill out the “Talk With Us” form above to ask a question, or give Larry a call at 954-458-8655. Larry will get back to you promptly if he thinks he can help you with your foreclosure proceeding. Ask now.
