Homeowners impacted by the BP oil spill are getting mortgage relief from Fannie Mae and Freddie Mac, the two largest mortgage owners. In general terms, the loan relief offered by the two companies follows the emergency policies both have had in place following such disasters as hurricanes Katrina, Rita and Wilma.
In the usual case, disaster relief from mortgage investors falls into six possible categories:
- Suspend mortgage payments for several months.
- Reduce the payments for several months.
- Waive penalties and late fees against borrowers with disaster-damaged homes.
- Quickly releasing insurance money to help borrowers repair homes.
- Create longer loan modification plans in severe situations.
- Temporarily discontinue reporting delinquencies caused by the storm to credit reporting agencies.
While these are the forms of relief which Fannie Mae and Freddie Mac will be offering, relief is not automatic. You must apply to your loan servicer — the company that collects the monthly mortgage payment — for assistance. Also, generally, you must live in or near the spill zone, which generally means homeowners in Louisiana, Mississippi, Texas, Florida and Alabama.
Under the Freddie Mac forbearance program, mortgage servicers can suspend mortgage payments for up to three months or reduce payments for up to six months. Servicers may recommend to Freddie Mac forbearance for up to twelve months in situations which are especially difficult and drawn out..
In addition, Freddie Mac says servicers “must not accrue or collect late charges from the borrower during a short-term forbearance or any subsequent repayment plan period if the borrower is paying according to the forbearance agreement.”
[pullquote]Mortgage relief is not automatic[/pullquote]. Freddie Mac has the servicer determine what relief is due to borrowers on a case-by-case basis. For this reason it is important to contact your servicer immediately to seek what programs are in place, what relief is available and what steps must be taken to gain forbearance.
Fannie Mae says “servicers may immediately suspend or reduce mortgage payments for borrowers whose properties or income are negatively impacted by the Gulf oil spill.” Notice the term “may” — there is no “must” in the policy.
Under its “Special Relief Measures” policy, Fannie Mae servicers “may suspend or reduce a borrower’s payments for up to 90 days while the servicer determines the nature and extent of the impact the disaster is having on the condition of the property or on the borrower’s financial condition. At the conclusion of that assessment, servicers have additional flexibilities to evaluate the appropriate loss mitigation alternative based on a case-by-case determination, including an additional three months of forbearance, a loan modification or other customized solution.”
As with Freddie Mac, relief is not automatic. You must contact your servicer if you have been impacted by the BP oil spill.
Most borrowers do not know who owns their loan, in part because loans are frequently bought and sold. If your loan is not owned by Fannie Mae or Freddie, or if you do not know who owns your loan, contact your servicer anyway. Other loan owners may also have forbearance programs in place.
As an example, CitiMortgage has “announced a foreclosure suspension program for CitiMortgage-owned mortgages in coastal areas hard-hit by the oil spill in the Gulf of Mexico. The aim of this program is to allow distressed homeowners to remain in their homes during these uncertain times as the Gulf communities respond to the oil spill and its economic repercussions. During the three-month suspension, effective June 17 through September 17, 2010, borrowers with first mortgage loans owned by CitiMortgage and who meet certain other criteria will not be subject to foreclosure sales or foreclosure notifications. While CitiMortgage does not own all of the loans it services, the company hopes to help as many borrowers as possible with this initiative.”