The option allows struggling borrowers to resume pre-disaster mortgage payments without payment shock
The Federal Housing Administration has introduced the Disaster Standalone Partial Claim option as it expands its mortgage relief to FHA-insured homeowners impacted by hurricanes Harvey, Irma, and Maria as well as California wildfires and subsequent flooding and mudslides.
Through the option, borrowers can resume their pre-disaster mortgage payments without payment shock. An interest-free second loan on the mortgage will cover up to 12 months of missed payments. The loan will be payable only upon a sale of the home or a refinance of the mortgage. Borrowers can also retain their existing low interest rate, loan term, and monthly mortgage payment. The option does not require a trial period or balloon payment.
"It's clear that FHA homeowners in these areas need more help to get back on their feet as they recover from these storms," Department of Housing and Urban Development Secretary Ben Carson said. "Today, we offer immediate relief to these borrowers which will allow them to resume their mortgage payments without crippling payment shock and fees while protecting our insurance fund in the process."
The FHA has instructed mortgage servicers to offer additional options to eligible disaster victims in Texas, Louisiana, Georgia, Florida, South Carolina, California, Puerto Rico, and the US Virgin Islands.
To be eligible for the partial claim option, the borrowers must live and work in a Presidentially Declared Major Disaster Area and should have become delinquent on their mortgage payments because of last year's disasters. Additionally, eligible borrowers are required to have initial mortgage forbearance periods that are ending, have been current on their mortgage payments at the date of the disaster, and have income equal to or more than their pre-disaster income.Related stories:
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