In the light of recent extreme weather events striking U.S. states including Louisiana and California, the Federal Housing Administration (FHA) is reiterating to mortgage borrowers participating in FHA-sponsored programs certain relief measures and loss mitigation options which are available should they need assistance in light of natural disasters. This includes relief measures which are available to Home Equity Conversion Mortgage (HECM) program borrowers, according to a new informational notice released Friday by the agency.
Extreme weather conditions are not the only cause for these reminders, however, since the current state of hospitalizations across the country stemming from the COVID-19 pandemic have spurred additional action from the federal government, extending the presidentially-declared disaster area to the entire country due to the pandemic in addition to the weather events being experienced in specific parts of the nation.
Relief available to HECM borrowers
FHA reminds mortgagees and borrowers that those who are participating in the federally-sponsored reverse mortgage program who reside in Presidentially-declared Major Disaster Areas (PDMDAs) are eligible for loss mitigation options unique to their circumstances as HECM borrowers, according to FHA INFO #21-74 released on Friday.
“FHA-insured Home Equity Conversion Mortgages (HECM) secured by properties located in a PDMDA, that are due and payable for reasons other than the death of the last surviving borrower or the end of a Deferral Period due to the death of an eligible non-borrowing spouse, are subject to a 90-day extension of HECM foreclosure timelines,” the notice reads.
The available relief likely required some refreshing in certain people’s minds, since FHA explains that many of the cited relief measures were outlined in FHA INFO #18-40 which was released in September of 2018, which outlined the same provision. Additionally, FHA also provides guidance concerning how a foreclosure action may proceed for a HECM borrower who resides in a PDMDA, and qualifies for the relevant relief.
“In PDMDAs, FHA provides HECM mortgagees an automatic 90-day extension from the date of the PDMDA foreclosure extension expiration date to commence or recommence a foreclosure action,” the notice reads.
Some of the provisions in this extension were initially outlined in 2018 in response to the devastation of Hurricane Maria in 2017, which struck the U.S. territory of Puerto Rico and affected the housing stability of HECM borrowers who reside there. That relief was extended one additional time later that year.
In 2019 as parts of the Bahamas and Southeastern U.S. were bearing the brunt of Hurricane Dorian, the Consumer Financial Protection Bureau (CFPB) released a guide for HECM borrowers affected by natural disasters. That guide succinctly detailed some of the unique challenges that reverse mortgage borrowers may face when confronted with issues stemming from areas affected by major disasters.
“After a natural disaster, reverse mortgage borrowers may experience damage to their home, unexpected expenses, and a sudden loss of income,” said Cora Hume of the Office for Older Americans at CFPB in an announcement of the guide. “All these things may make it difficult for them to comply with the loan requirements, which could lead to foreclosure.”
As certain pandemic relief recedes, White House takes a different approach
Earlier this summer, the White House encountered a major blow to its plan for extending certain moratoria related to housing when the United States Supreme Court upheld a ban on evictions handed down by the Centers for Disease Control and Prevention (CDC). By now aligning behind the presidential authority related to natural disasters, the Biden administration may have additional leeway to extend certain relief provisions to people facing housing insecurity in light of the pandemic, including for renters and mortgage borrowers.
“A major disaster is declared when natural disasters or other events are of such severity that it is beyond the combined capabilities of state and local governments to respond,” FHA describes in Friday’s informational notice. “FHA recognizes the difficulty facing many borrowers across the country during a pandemic when also impacted by recent hurricanes, wildfires, and other extreme weather events. This guidance is intended to provide clarity to industry partners to assist borrowers impacted by these disasters.”
Even if it may present a new tactic, FHA is correct in pointing out that recent difficulties related to extreme weather events may exacerbate the situations being faced by affected borrowers that are concurrently dealing with economic problems related to the pandemic. Hurricane Ida accounts for the second strongest such storm to hit the state of Louisiana in its history, and while the major metro area of New Orleans appears to be recovering, recent indications show that it may be a longer road to recovery for more rural areas of the state based on reporting at the New York Times.
Additionally, dry weather in northern parts of California have raised concerns about the spread of wildfires in and around Sacramento. Combinations of high winds, low humidity and warm temperatures have led to the declaration of a “red flag warning” by the National Weather Service, which will remain in effect at least until Monday, September 13.
In previous California wildfires which occurred in late 2018, one reverse mortgage industry vendor stepped up to partner with a local church to mobilize support to provide financial relief to seniors who resided in the disaster area.