With higher-than-average rains predicted for the rest of the summer, officials at Fannie Mae and Freddie Mac are asking mortgage servicers to extend the "utmost compassion" to homeowners who have been stricken by the massive flooding in the Midwest.
The two enterprises recently announced special provisions within their guidelines that allow customers to extend mortgage payment relief on a case-by-case basis to homeowners whose loans have been sold through them and who have been affected by the flooding. These provisions include:
* working with borrowers to determine what impact the flooding will have on their ability to make mortgage payments;
* offering specific relief (such as temporary indulgence, special forebearance and loan modifications) to borrowers whose incomes are so disrupted that meeting their full monthly payment on time is difficult;
* refraining from reporting late payments to credit bureaus; and
* waiving late payments charges.
Thousands of homes and businesses have been destroyed, and mortgage bankers are worried the severe losses in property and livelihoods will hurt homeowners' ability to keep their homes. Lenders didn't find much encouragement in the latest Red Cross estimates that said more than 22,000 homes had been flooded in seven states - tripling totals from just a week ago.
Thousands more destroyed homes are cited to be reported and the federal emergency management agency estimates that only about 17% of those homes are insured against flooding.
Virtually identical guidelines outlined by Fannie and Freddie call for servicers to weigh each affected mortgage based on its individual circumstances.
"Servicers will assess the individual borrower circumstances to determine if there's a hardship that only some sort of forebearance on the mortgage payment would relieve," said Albert LeQuang, Freddie Mac national policy administrator. "Then the servicers make a number of determinations, such as whether the borrower had flood insurance and what, if anything, the borrower gets from the Federal Emergency Management Agency. Then the servicer will decide if some help is needed."
Countrywide Funding Corp., one of the largest independent mortgage banking firms, expects the flood damage in the Midwest to be at least as bad as that caused by Hurricane Andrew last year.
"We'll try to isolate loans in those target areas," said Jane Ivey, Countrywide vice president and assistant division manager in loan servicing. And then, if we don't have a release from a Fannie, Freddie or any other large investor, we contact them and ask if there are any specific options they'd like us to make available to customers," she said. "It's prudent for us to get our customers through these periods.