Written By: Stacey Sprain, OpEd Writer
Lately the news has been filled with images of flood-ravaged areas like Nashville and Kentucky, of tornado damage and destruction in the central plains, and of other natural disaster areas throughout the U.S. Therefore, I thought it appropriate to start coverage on Disaster Policies for the agencies. Each week, I will cover and explain the disaster policy requirements for each of the main lending agencies.
When the President declares a disaster, lenders and servicers must check with the Federal Emergency Management Agency (FEMA) to obtain the specific counties and corresponding declaration dates. In addition, lenders and servicers should check with FEMA for any amendments. This information can be found on the Internet athttp://www.fema.gov/news/disasters.fema or by calling the local FEMA office.
Most lenders have their own specific policy requirements on re-inspections of collateral property and appraisal or valuation form requirements. Be sure to check your lender’s guidelines in order to fully comply with their specifications.
VA Policy Regarding Natural Disasters-For Lenders
1. Loan Closed Prior to Disaster Area Declaration: Any loan closed prior to the date of the declared disaster is eligible for VA Guaranty without regard to the disaster.
2. Property Appraised Prior to Disaster but Not Yet Closed: Two certification statements must be submitted with the loan guaranty request. One must be signed by the Lender and the other by the veteran borrower(s).
This is to affirm that the property which is security for VA loan number _________________ has been inspected to ensure that it was either not damaged in the recently declared disaster or has been restored to its pre-disaster condition or better.
___________________________ ___________________ ` ________________
Authorized Lender Signature Title Date
I have inspected the property located at ____________________________________ and find its condition now to be acceptable to me. I understand that I will not be charged for any disaster-related expenses and now wish to close the loan.
Veteran Signature Date
3. VA Loan Summary Sheet
The “Remarks” section of VA Form 26-0286, VA Loan Summary Sheet must be annotated “Lender and Veteran Disaster Certifications Enclosed.” Additionally, if local law requires the property to be inspected and approved by the local building inspection authority, a copy of the appropriate local report(s) must be provided. Neither VA nor the veteran purchaser shall bear the expense of any disaster-related inspection or repairs.
4. Decline in Value.
If there is an indication that the property, despite repairs, will be worth less at the time of loan closing than it was at the time of appraisal, then the lender must have the VA fee appraiser update the original value estimate. The payment of the appraiser’s fee for that service will be a contractual matter between the buyer and seller. If the property value has decreased, the loan amount must be reduced accordingly.
5. Employment/Income Certification.
The lender should ascertain prior to closing that the veteran’s employment and income have not changed since the loan application. If at the time of closing the veteran is no longer employed or family income has been reduced, this information should be reported to VA or the automatic underwriter, as appropriate, for evaluation prior to closing the loan.
VA Policy Regarding Natural Disasters-For Homeowners
For VA homeowners whose home is damaged or destroyed by a natural disaster, it can be a frightening and stressful time. VA provides the following guidance for VA homeowners:
1. Contact Your Mortgage Company
Contact your lender as soon as possible regarding your loss. You are not excused from making your regular monthly loan payments even if your home is not habitable. You should discuss forbearance or possible extension or modification of your loan if you are unable to make your payments on time. You should also have your lender explain procedures regarding insurance loss checks and repairs to your property, payment to contractors, etc.
2. Contact Your Insurance Company or Agent
File insurance loss claims as soon as possible. However, do not make a hasty settlement on insurance. When the property is damaged but repairable, attempt to get the engineer’s office of your local government to make an inspection forstructural damage. If possible, get at least two estimates from licensed contractors for cost of repairs or rebuilding. Insurance checks for personal property and living expenses should be made payable to you only. Checks for damage to your home should be made payable to you and your mortgage company.
3. Contact FEMA (Federal Emergency Management Agency)
You begin the disaster application process by calling FEMA’s toll free number 1-800-621-FEMA (3362), or 1-800-462-7585 (TTY) for the hearing and speech impaired. In order to receive the maximum assistance, you must register with FEMA before their deadline expires. You cannot obtain assistance for uninsured losses or damages to your home from the Small Business Administration (SBA) or any other disaster recovery agency if you have not registered with FEMA. More information can be found at the FEMA website, http://www.fema.gov/. Be sure to check every source for maximum assistance including the SBA. Do not pay your loan in full before checking with SBA on a loan for the uninsured portion of your loss. Low interest loans, cash grants, and housing assistance may be available from agencies associated with the disaster recovery effort.
4. Check Other Sources for Help
Veterans should contact local offices of the American Legion, Veterans of Foreign Wars, Disabled American Veterans (DAV), or other veteran’s organizations to see if special assistance may be available, even to non-members of the organization.
5. Change your Address
If you are receiving a monthly benefit check from VA or another source, and you will not be able to receive mail at your regular address, notify your local post office and VA Regional Office of your change of address. For information on VA benefits other than home loans, call 1-800-827-1000.
About The Author
Stacey Sprain - As an op-ed writer, Ms. Stacey Sprain is currently a NAMP® Certified Ambassador Loan Processor (NAMP®-CALP). With over 15+ years of mortgage banking experience, Stacey is also a Quality Control Manager for a major mortgage lending institution.