President Obama has declared 20 parishes in Louisiana to be Major Disaster Areas. The presidential declaration recognizes the obvious, grim reality of the tragedy in Louisiana, but more importantly enables flood victims in these parishes to apply for federal disaster assistance from the Federal Emergency Management Authority. A previous article on the Kean Miller Louisiana Law Blog addressed this issue.
While you may obtain financial assistance from FEMA, a federal declaration of disaster does not suspend the payment of your mortgage note, rent, car payments, student loan payments, credit card payments, or payments on open accounts. Many lenders and creditors are offering assistance to victims of the flood but there are five important general rules to bear in mind:
- The assistance is not automatic; you must apply for it. If you ignore and fail to pay a debt, you will probably not be able to avoid the consequences of the non-payment later by claiming inability to pay due to flooding.
- You should work directly with the lender or creditor on the debt in question. Avoid third-party intermediaries. You and your creditor share an interest in avoiding default on your obligation. Third parties do not share that interest. You need to be sure you know exactly what information the creditor gets from you, and exactly what the creditor is offering to you.
- Save all records associated with your request for assistance, including all correspondence, e-mails, forms and, if possible, a log of telephone conversations.
- Once you have applied for assistance, do not hesitate to follow up with the creditor on a recurring basis.
- You should be sure that you completely understand what your future obligation will be on the debt in question. For example, at the expiration of a grace period, will you owe a balloon payment to cover payments deferred? Will your payments increase in the future to cover temporary reductions? Will your deferred obligation include interest or fees incurred during the grace period? You should get, in writing, from your creditor a clear explanation of what you will owe, and when you have to pay what you owe, after the expiration of the relief period.
Both Freddie Mac and Fannie Mae have implemented disaster relief guidelines. You can determine if your loan is a FHLMC or FNMA loan by visiting the “look-up” pages on the Freddie Mac and Fannie Mae websites. To apply for relief, however, you must contact your loan servicer (the bank or other entity to which you make your mortgage payments). FHLMC and FNMA essentially direct the loan servicer to help you; the servicer will follow that directive. The specific assistance rendered will be decided by the loan servicer. The assistance may include forbearance (i.e., giving you additional time to catch up on late payments), reduction in your payments, and waiver or reduction of late fees, penalties. If the modification to your loan obligation is temporary, you must be sure you understand what your obligation will be upon the completion of that time (probably 12 months, or less). The loan servicer is obligated to tell you what you need to know. Your loan servicer is not required to provide you any specific relief; just because a neighbor received help of a certain kind does not mean you will receive the same help. Freddie Mac and Fannie Mae websites offer an overview of the types of assistance available.
The Federal Housing Administration (FHA) is a government agency which insures millions of home loans. On August 18, 2016, FHA directed the lenders who hold mortgage notes insured by FHA to help flood victims in the disaster areas:
HUD (U.S. Department of Housing & Urban Development) has instructed FHA lenders to use reasonable judgment in determining who is an “affected borrower.” Lenders are required to reevaluate each delinquent loan until reinstatement or foreclosure and to identify the cause of default. Contact your lender to let them know about your situation. Some of the actions that your lender may take are:
- During the term of a moratorium, your loan may not be referred to foreclosure if you were affected by a disaster.
- Your lender will evaluate you for any available loss mitigation assistance to help you retain your home.
- Your lender may enter into a forbearance plan, or execute a loan modification or a partial claim, if these actions will help retain and pay for your home.
- If saving your home is not feasible, lenders have some flexibility in using the pre-foreclosure sales program or may offer to accept a deed-in-lieu of foreclosure.
Even if your home loan is not owned by Freddie Mac or Fannie Mae, or insured by FHA, you should contact your lender to see if it offers disaster assistance. Regions Bank, for example, has announced its intention to assist its customers who were victims of the flood. You can check Regions’ Disaster Resource Center for details. JP Morgan Chase announced that it is “automatically waiving late fees for mortgage, credit card, business banking and auto loans as well as overdraft, ATM and monthly service fees on deposit accounts through August.” Other banks offering assistance include Whitney Bank and Iberia Bank.
You should assume that your lender or other creditor will offer you some type of assistance if you reside in the disaster area IF you contact the lender and qualify for the assistance. Lenders and other creditors may also offer assistance to individuals who work in the disaster area, even if they don’t live there. You will only find out the assistance available to you by contacting your lender.
Farmers may be entitled to targeted financial assistance through various disaster relief programs administered by the Farm Service Agency of the U.S. Department of Agriculture.
Vehicle lenders are stepping up to offer relief as well. Toyota Financial Services announced on August 16, 2016, that it is offering payment relief options to flood victims, including extensions and lease deferred payments. Although we have not found specific announcements from other major vehicle lenders, it is reasonable to assume that others offer disaster relief.
We have also found no specific announcements of assistance of credit card issuers, but if you anticipate difficulty in staying current on credit card obligations, contact the issuer and ask for disaster assistance.
The LSU College of Agriculture’s website offers an excellent compendium of disaster-related resources and links useful for any victim of flooding.
The Louisiana Office of Financial Institutions Website contains, among other resources, a list of agencies to contact for assistance. Any third party entity listed on the LOFI webpage can be trusted (notwithstanding my general warning against reliance upon third parties in obtaining disaster assistance).
Your lenders and creditors are generally not required by law to offer disaster assistance. But lenders and creditors want to help flood victims manage their obligations while they cope with the more immediate challenges of safety, food, shelter, electricity, and medical needs. There is no guarantee that you will receive assistance from a given creditor, but you may rest assured you will not receive assistance if you don’t apply for it.
 The Federal Home Loan Mortgage Corporation (“Freddie Mac”) and the Federal National Mortgage Association (“Fannie Mae”) are government-sponsored entities which together own or guarantee payment on approximately 60% of the home mortgage loans in the United States. There is a very good chance that your home mortgage note is owned by one of these “government-sponsored enterprises.” The entity to whom you actually pay your note is servicing the loan; it no longer owns the loan, if it ever did.