The Federal Housing Administration (FHA) is the world’s largest mortgage insurer, insuring more than 34 million properties in its history.
So, the government group knows a thing or two about insurance and insurance claims. To that end, it’s published a series of guidelines aimed at mortgage lender, and meant to help U.S. homeowners affected by natural disasters such as this year’s Hurricane Sandy.
The rules are meant to help and protect FHA-insured homeowners in FEMA disaster zones.
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FHA : No Foreclosures After Natural Disasters
In its mortgagee letter aptly-titled “Guidance for FHA-Approved Mortgagees Originating and Servicing Mortgages in Presidentially-Declared Major Disaster Areas”, the FHA offers a handful of guidelines to mortgage lenders and servicers.
The first — and most powerful — guidance is a 90-day foreclosure moratorium on properties within a federally-declared disaster area. This applies to foreclosures-in-process and foreclosures not yet initiated.
Related, the Federal Housing Administration recommends that mortgage servicers consider waiving late charges for homeowners affected by natural disasters.
Post-Disaster Funding Rules For FHA Mortgages
The 7-page memo also lays out the following :
- Lenders must use escrow accounts for taxes and insurance only. Funds may not be drawn from escrow to account for “missed mortgage payments”
- Lenders must perform on-site inspections of all affected homes. Homes with no documented damage may close as-is.
- Lenders must not rescind the funding of a Federal Housing Administration loan due to damage, prior to the loan’s endorsement
The Federal Housing Administration also recommends that loan servicers give delinquent borrowers ample time to recover from the effects of a natural disasters, and to ensure that borrowers of FHA-backed loans are treated fairly.
See Today’s FHA Mortgage Rates
The FHA offers home loans with just 3.5% downpayment and FHA mortgage rates are often lower than comparable conventional ones. If you’re buying a home and plan to make a limited downpayment, take a look at FHA mortgage rates.