With the waters of a 500-year flood overflowing across Iowa and other surrounding states, residents are doing whatever they can to protect their homes, belongings, and communities. Mercifully, they don't need to add foreclosure worries to that load. This week, government-sponsored housing enterprises Fannie Mae and Freddie Mac said they would provide mortgage relief to homeowners facing financial distress (and potential foreclosure) because of the flooding.
"Freddie Mac and the nation's mortgage servicers will work together to advance available mortgage relief to homeowners affected by these devastating floods," said Ingrid Beckles, Freddie Mac's vice president of servicing and asset management. "We are instructing our servicers to work with borrowers with Freddie Mac-owned mortgages to receive forbearance on their mortgage payments for up to one year."
Fannie Mae's approach is similar. It has directed its lenders to work with struggling borrowers by lowering or deferring their home loan payments for up to six months; lenders may also offer 18-month repayment plans for Fannie-owned loans. Finally, HUD has placed a 90-day moratorium on foreclosures for FHA-insured home loans in Iowa, Indiana, and Wisconsin.
Overall, the number of Midwesterners eligible for mortgage relief could be considerable. The federal government estimates that almost 11 million people in several states are at risk from the floods. In Iowa alone, almost 40,000 people have had to leave their homes because of the disaster, according to a report in the New York Times.
But with the nation already facing a housing crisis, no one wants to add any more properties to the ever-growing list of foreclosed homes. In fact, Freddie has specifically told its servicers to wave penalties or late payment fees for homeowners with flooded homes, stop doing foreclosures and evictions for as long as one year, and skip the reporting of mortgage loan forbearance or payment delinquencies for home-owning flood victims with Freddie Mac-owned loans.
Alison Rice is senior editor, online, at BUILDER magazine.