Fannie Mae, Takes Steps to Help Homeowners Affected by Storms

WASHINGTON – We’ve all seen the pictures of the devastation left in the Gulf area in the wake of Hurricanes Katrina and Rita and read about the various relief efforts to help the victims and survivors of the storms. As part of its continuing relief effort, Fannie Mae on Oct. 18 announced new single-family underwriting flexibilities for disaster relief that will help hurricane-affected borrowers acquire new homes. Many homeowners in the impacted areas with destroyed or severely damaged homes are essentially in limbo as they work through satisfying their current obligations, settling insurance matters and other considerations, said Fannie Mae’s Ken Bacon, EVP of housing and community development. These steps, he added, will help more families get into new homes faster while the issues and questions regarding their previous properties are being settled. Under certain conditions, the new provisions will allow lenders to disregard obligations on previously owner-occupied homes when calculating a hurricane-impacted borrower’s debt-to-income ratio and allow lenders to base their decisions on a borrower’s credit history prior to the hurricanes. Among these new flexibilities: * when a borrower is purchasing a new home but still has an outstanding mortgage on a property located in a FEMA Disaster Area, the lender can exclude the mortgage payment on the previous residence from the qualifying ratio calculation provided: (1) the previous residence is either heavily damaged or destroyed and unlikely to be repaired; (2) the lender obtains a property inspection of the previous residence confirming its status; and (3) the borrower provides the lender with information indicating they are working with the servicer to appropriately address the prior mortgage obligation and agrees to apply any property insurance proceeds to the mortgage on the damaged house. * lenders can give primary consideration to the account and payment information. Any adverse or derogatory credit information that directly resulted from the effects of the hurricanes, including a foreclosure or deed-in-lieu of foreclosure, may be disregarded; * lenders may allow a borrower to apply funds received from the government (such as FEMA), insurers, charitable organizations and family for a down payment on new property. * lenders are granted additional options for verifying a borrower’s previous and current employment history. Lenders may also take into account anticipated future employment and income that is documented by an employment contract when qualifying an impacted borrower for a loan. Fannie Mae also announced it is implementing a dedicated loss mitigation and workout team on the ground in the impacted areas. The team will develop and implement strategies designed to help mitigate losses while helping individuals and communities with the greatest damage recover from the storms. As part of the loss mitigation efforts, Fannie Mae will reimburse servicers for property inspections (up to $30 per inspection) on mortgages secured by properties most likely to have incurred damage. Fannie Mae estimates it will spend about $1.5 million for the inspections. -