Hurricane Relief Mortgage Forbearance Policies
The Louisiana Recovery Authority estimates last summer's devastating Gulf Coast hurricanes created major damage to over 300,000 homes and inflicted lesser damage to almost 900,000 additional homes and rental units. As homeowners begin to assess the damage and determine their options, the bank regulatory agencies are encouraging lenders to work with borrowers affected by the storms. The agencies recognize that a great deal of uncertainty exists for many borrowers and will take time to work through each individual situation. In a release dated November 30, 2005 http://www.ffiec.gov/press/
pr113005.htm the agencies provided the following additional guidance:
- Granting additional deferral periods for some borrowers in accordance with sound risk management practices (beyond the deferral periods provided by many lenders immediately after the storms) may be appropriate given that the timing and amount of insurance payments, disaster payments, and other assistance may still be unknown.
- The agencies encourage institutions to provide flexible repayment terms at the end of the deferral period, such that lump sum payments of all deferred interest and principal do not become due immediately when payments resume.
- In cases where principal and interest have been temporarily deferred, at the end of the deferral period the lender should accord the account the same payment status it had before the deferral period began. In such circumstances, loans that were current before Katrina would be current when the deferral ends and loans that were past due prior to the storm would be past due the same number of days they were past due when the deferral was made.
The agencies also encouraged institutions to continue efforts to contact their customers. They stressed the importance of borrowers displaced by the storm contacting their lending institution, if they had not already done so. In order to broaden the reach of this message with borrowers, the agencies also developed a public service campaign with radio spots and newspaper advertisements to be run in the Gulf Coast region as well as other communities across the country with large number of evacuees. These messages provide a toll free number to the Federal Deposit Insurance Corporation that will help get borrowers in touch with their lending institution.