Hurricane Katrina Victims Get Relief From Fannie and Freddie

Even as the Coast Guard was lifting stranded individuals off of roof tops in Mississippi and Louisiana, the nation's two largest mortgage companies announced relief for homeowners in the areas affected by Hurricane Katrina.

Freddie Mac Chairman and CEO Richard Syron stated on Tuesday "Our goal is to help families affected by Hurricane Katrina to keep their homes."

Freddie and Fannie's programs are multi-faceted and similar if not identical. First, they have instructed their lenders and companies servicing their loans to counsel borrowers on payment options that may be available to them during the crisis. These include suspending mortgage payments for a short period of time (three months in the case of Fannie Mae) or reducing payments for a longer period of time (up to 18 months for Fannie Mae). In more severe cases the servicers can create longer payback plans. Lenders are also encouraged to waive late fees and penalties against borrowers with disaster damage.

The availability of these types of forbearance are to be determined by the mortgage lenders doing business with Freddie and Fannie by considering uninsured losses, extended unemployment, and extraordinary expenses related to the storms that affect a homeowner's ability to make their mortgage payments.

Lenders and servicers are required to temporarily discontinue reporting delinquencies to credit bureaus if they are aware that the borrower's delinquency is attributed to hardships as a result of a natural disaster.

Perhaps even more important, both corporations have instructed their lenders to expedite the release of insurance proceeds to help borrowers secure materials and hire contractors. The availability of these improved procedures, however, is based primarily on the status of the mortgage at the time of the disaster and the extent of the damage but they "will enable lenders to work more effectively and efficiently to address the needs of those borrowers who may require assistance."

Pam Johnson, senior vice president and single family credit officer at Fannie Mae stated "What matters most to hurricane victims in those first few days after a storm hits is basic safety and survival, not concerns about making their next mortgage payment. Fannie Mae has made changes to its insurance requirements that will ease the process for lenders and, more importantly, provide homeowners with much-needed relief."

It is unthinkable that the hundreds of thousands of people who are suffering so horribly along the Gulf Coast are reading this. They are concerned with sheer survival at this point. But when the immediate crisis is over please tell anyone you know who has been affected by Katrina to contact the company that services their mortgage to work out some contingencies to get their homes repaired or replaced.