In a time where the COVID-19 pandemic has caused financially-strapped homeowners to put mortgages and other loans into forbearance, what will happen when they’ll need it because of a natural disaster?
Case in point, it’s hurricane season.
Last year, the National Oceanic and Atmospheric Administration said there were at least 14 events – including hurricanes, tornadoes, hailstorms, floods, earthquakes and wildfires – that resulted in losses exceeding $1 billion in the U.S.
The 2020 CoreLogic Storm Surge Report revealed that today, nearly 7.4 million single- and multifamily homes with more than $1.8 trillion in combined reconstruction cost value are at risk of storm surge and possible mandatory evacuation – during a precarious time when the country continues to face the challenges of a global pandemic.
Last year, when wildfires ripped through California and hurricanes slammed the Texas coast, a study from Simple Dollar showed that 47% of Americans purchased home or rental insurance, while 31% didn’t even know if they had home or rental insurance.
By the week ending June 26, there were 4.68 million homeowners with forbearance plans, meaning their mortgage payments are temporarily suspended, up 79,000 from the prior week, according to Black Knight. The total represents 8.8% of all active mortgages, up from 8.7% the week before, the report said.
So what are homeowners left to do when they already have a mortgage in forbearance from COVID-19?
According to a Freddie Mac spokesperson, the company’s borrowers are able to extend forbearances again.
“Under the CARES Act, a borrower affected by COVID-19 is eligible for up to 12 months of forbearance,” the spokesperson said. “Under our servicing guidelines, a borrower who completes a forbearance period, brings their loan current, and then experiences a subsequent disaster-related hardship may be eligible for up to another 12 months of forbearance.”
In terms of impacting credit and future loan payments, Freddie Mac said it advises borrowers to contact their servicers to discuss ways to bring their account current, including a potential mortgage modification. Certain borrowers may also be eligible for a payment deferral.