When facing a natural disaster, you prioritize keeping yourself and those you love safe. After the immediate danger passes, it’s time to assess the financial fallout, including damage to your property.
If a disaster has disrupted your entire area, causing widespread power outages and devastation, you may be unable to return to work immediately. That may be the case for many people impacted by Hurricanes Helene and Milton.
A Bank of America analysis reported by HousingWire found that large storms may impact as much as $96 billion in residential mortgage-backed securities. This includes mortgages in Florida, North Carolina, South Carolina and Georgia. Bank of America’s researchers used data from previous storms, which showed that delinquencies increased by 5% to 10% in the wake of previous large hurricanes but declined over time.
If you are facing the potential of missing a mortgage payment due to a natural disaster, your first step is to proactively contact your mortgage servicer. The mortgage servicer is the company you make your mortgage payments to. This company may not be the same as the original lender you worked with when you bought your home. If you have lost your mortgage documents, your mortgage servicer may be able to provide you with copies.
Understanding Forbearance
Your mortgage servicer may talk to you about forbearance. Forbearance is a process where your mortgage company allows you to either pause or make smaller payments until you get back on your feet. You will still owe the full value of your loan.
Your home does not need to be damaged to take advantage of this program. During the COVID-19 pandemic, an estimated 16% of mortgage holders used a forbearance program, with around half using it for three months or less. Forbearance can be a valuable tool to help you keep your home while you get back on your feet.
There are several types of forbearance. With payment deferral, you can pause payments and then restart them when you can. This will extend the duration of your loan. Another option is reinstatement, where you pay a single lump sum to get back on track with your current loan and amortization schedule. A repayment plan allows you to pay a little extra with each mortgage payment until the balance is made up. A fourth choice is modification, resulting in a new loan with a lower mortgage payment.
Your mortgage company will explain which programs are available. Keep in mind that there may be additional interest on the missed payments. The decision on which forbearance program is right for you depends on many factors, including your employment status, overall financial situation and the amount of time you feel you may need for forbearance.
If Freddie Mac owns your mortgage and you are in one of the designated major disaster areas, your mortgage company may be authorized to suspend payments for up to 12 months and waive penalties and fees. Fannie Mae also offers help for both renters and homeowners who may need assistance. You can call 1-855-HERE2HELP (1-855-437-3243) to speak with a HUD-approved housing counselor. You may also qualify for support from FEMA and you can apply through the FEMA website.
One unfortunate side effect of disasters is an increase in scams. People may reach out promising to help and requesting personal information. Be skeptical of unsolicited offers and ensure you are dealing with legitimate counselors at every step.
If you cannot make your mortgage payments, don’t panic. The best move is to reach out for help as quickly as possible to find out what assistance is available. Simply opting not to pay without contacting your mortgage company can hurt your credit score and could start a process known as mortgage default. Most lenders will offer a 15-day grace period for the first missed payment, but you could face preforeclosure if you miss multiple payments. Clear communication can save you time and money down the line.