FAQ: Natural Disaster Protocols

Written By: Bonnie Wilt-Hild

What measures should lenders take prior to loan closing or endorsement when a property is located within a FEMA designated disaster area?

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1. Recommended Protocols for properties located in FEMA Designated Natural Disaster Areas

-- Pre-closing or Pre- Endorsement Measures - Complete Interior/Exterior Inspection w/Photos
-- Damage Noted/ Damage Estimate - Yes
-- Damage Threshold Escrow Recommendations - Habitable and meets MPR/MPS w/ damages less than $5,000 repair escrow recommended
-- Close Loan - Yes
-- Inspection Protocols - Post Repair Inspection Release of escrow funds
-- Endorse Loan - Yes (document inspection, repair and release of escrow in case binder)

2. Recommended Protocols for properties located in FEMA Designated Natural Disaster Areas

-- Pre-closing or Pre- Endorsement Measures - Complete Interior/Exterior Inspection w/Photos
-- Damage Noted/ Damage Estimate - Yes
-- Damage Threshold Escrow Recommendations - Damage in excess of $5,000 repair escrow recommended
-- Close Loan - No
-- Inspection Protocols - Post Repair Inspection Release of escrow funds
-- Endorse Loan - Yes (document inspection, repair and release of escrow in case binder)

3. Recommended Protocols for properties located in FEMA Designated Natural Disaster Areas

-- Pre-closing or Pre- Endorsement Measures - Complete Interior/Exterior Inspection w/Photos
-- Damage Noted/ Damage Estimate - No
-- Damage Threshold Escrow Recommendations - None
-- Close Loan - Yes
-- Inspection Protocols - None
-- Endorse Loan - Yes

A. Inspection should be conducted by appraiser who performed original report or, if damage includes structural or other complex issues, a technically qualified 3rd party.

B. If inspection not conducted by original appraiser, inspector should have copy of original appraisal complete with photos and exhibits.

C. If home or site damaged, an itemized list of damages with repair estimates should be retained in case binder.

D. Repair estimates over $5,000 and/or repairs involving structural or other specialized repairs must be made by technically qualified 3rd party.

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E. Technically qualified 3rd parties should have expertise for the component being inspected (structural engineer, electrician, plumber, roofer, licensed home improvement or building contractor, etc.)

F. Damage should be repaired prior to endorsement, even in cases of insurable losses.

G. If required by local jurisdiction, copies of building permits, inspection results and, if applicable, certificate of occupancy must be retained in case binder.


About The Author

Bonnie Wilt-Hild - As an NAMP® staff writer, Bonnie currently serves as a senior instructor for FHA Online University (www.FHA-Classes.org) as well maintains a full-time mortgage underwriting position as the Senior FHA DE Underwriter for a major lending institution. With over 25+ years of senior-level FHA/VA Government underwriting experience, Bonnie is considered the "Queen of FHA Loans". If you're interested in becoming a writer for NAMP®, please email us at: contact@mortgageprocessor.org.



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