After Hurricane Harvey hit Houston over the weekend, seeking shelter and focusing on surviving the days ahead are all of the victims’ top priorities. Other responsibilities would have to wait. In the wake of the catastrophe, Fannie Mae, Freddie Mac, and the FHA announce mortgage extensions to Harvey-affected borrowers in Houston.
Since these agencies back up the majority of the mortgages in the area, they will allow forbearance for at least 90 days and would possibly extend further up to a year in some cases. There will be no penalty fees that would be charged in this period but interest would still accrue.Click to See the Latest Mortgage Rates»
MOVING FORWARD FROM THE DEVASTATION
It is still hard to determine what homeowners would see once the flood subsides. But judging from the gravity of the situation, they would likely expect the worst. It’s not easy to predict what would happen with these homes and their mortgages at this moment since the waters are still high and rain still continues to pour despite the storm being downgraded to a tropical depression.
But reports according to Black Knight Financial Services say that if the outcome hurricane to the affected areas turns out to be the same, there could be about 75,000 borrowers in Houston that are predicted to become unable to pay their mortgage in the next two months and 45,000 borrowers could end up having delinquencies in the next four months.
In addition, these mortgage extensions announcement is just a “band-aid” solution. There are so much more that needs to be dealt with.
FATE OF MORTGAGES DEPENDS ON POLICY
According to Ben Graboske, the senior vice president of data and analytics at Black Knight Financial: “It all comes down to your policy. FEMA has caps and limits and Houston is not in a traditional flood plan.”
It means that determining what happens to their existing home loans would depend on the borrower’s insurance policy. He added that “It will come down to whatever individual premium and policy coverage included. That could be about 25 percent of what a house replacement cost is.”
But since the hurricane’s damage to their homes are not yet assessed properly, no one knows what these borrowers would. Damaged homes would have to categorize the cause first before defining how their insurances will come into play.
Dave Stevens, the Mortgage Bankers Association’s’ CEO, even addressed how difficult it is to assess all situations at this point. He said: “This is an unprecedented crisis in the region as it relates to housing. We are not even at the point where we can evaluate the total costs, walkaways, insurance coverage, homes uninsured, jobs lost, not being able to make your mortgage payments…”
THE BOTTOM LINE
In the end, one thing is for sure: finding out what happens next for homeowners across Houston would be a long road to walk on. These mortgage extensions is just one of the many steps that they will face in the coming days in terms of the fate of their houses and their mortgages.
Until then, recovering from the storm remains a priority. Organizations continue to extend their help to those who are affected.Click to See the Latest Mortgage Rates»