Even as the Coast Guard was lifting stranded individuals off of roof tops in Mississippi
and Louisiana, the nation's two largest mortgage companies announced relief for
homeowners in the areas affected by Hurricane Katrina
Freddie Mac Chairman and CEO Richard Syron stated on Tuesday "Our goal
is to help families affected by Hurricane Katrina to keep their homes."
Freddie and Fannie's programs are multi-faceted and similar if not identical.
First, they have instructed their lenders and companies servicing their
loans to counsel borrowers on payment options that may be available
to them during the crisis. These include suspending mortgage payments for a
short period of time (three months in the case of Fannie Mae) or reducing payments
for a longer period of time (up to 18 months for Fannie Mae). In more severe
cases the servicers can create longer payback plans. Lenders are also encouraged
to waive late fees and penalties against borrowers with disaster damage.
The availability of these types of forbearance are to be determined by the
mortgage lenders doing business with Freddie and Fannie by considering uninsured
losses, extended unemployment, and extraordinary expenses related to the storms
that affect a homeowner's ability to make their mortgage payments.
Lenders and servicers are required to temporarily discontinue reporting delinquencies
to credit bureaus if they are aware that the borrower's delinquency is
attributed to hardships as a result of a natural disaster.
Perhaps even more important, both corporations have instructed their lenders
to expedite the release of insurance proceeds to help borrowers
secure materials and hire contractors. The availability of these improved procedures,
however, is based primarily on the status of the mortgage at the time of the
disaster and the extent of the damage but they "will enable lenders to work
more effectively and efficiently to address the needs of those borrowers who
may require assistance."
Pam Johnson, senior vice president and single family credit officer at Fannie
Mae stated "What matters most to hurricane victims in those first few
days after a storm hits is basic safety and survival, not concerns about making
their next mortgage payment. Fannie Mae has made changes to its insurance requirements
that will ease the process for lenders and, more importantly, provide homeowners
with much-needed relief."
It is unthinkable that the hundreds of thousands of people who are suffering
so horribly along the Gulf Coast are reading this. They are concerned with sheer
survival at this point. But when the immediate crisis is over please tell anyone
you know who has been affected by Katrina to contact the company that services
their mortgage to work out some contingencies to get their homes repaired or