By Attorney Brian Korte
The response from the nation’s lenders and from the Federal Housing Finance Agency to struggling homeowners who now are struggling in the aftermath of Hurricane Sandy is one more example of a “sounds good” program with no real ability to fix the problem.
Just over a week after Superstorm Sandy left millions without power and thousands in the hardest hit areas homeless, the U.S. Department of Housing and Urban Development announced it was granting a 90-day moratorium on foreclosures and forbearance on foreclosures of Federal Housing Administration (FHA)-insured home mortgages.
But, 90 days is little consolation to those who have been struggling to stay in their homes – a perfect example of “too little too late.” Unless the FHFA is willing to change the guidelines for the same individuals to get a new mortgage and unless it is now willing to include principal write-downs among the available options for modification, the 90-day reprieve is nothing more than a delay of the inevitable foreclosure to come.
It’s a safe bet, though, that Sandy will be a catalyst for a new round of foreclosures. Any time there’s a disaster, people whose finances are only marginally secure could be pushed into foreclosure. And there’s no remedy in the federal package for them.
There’s one great irony, though, in Sandy’s aftermath. For people whose homes were in foreclosure and who lost those homes entirely during Sandy, the storm may have provided them an unexpected way to recover. Those individuals now have an insurance claim for the loss of their homes, forcing insurance to pay off the mortgage regardless of whether the homeowner was looking at foreclosure.
While losing your home to a hurricane is always a devastating and emotional loss, from an economic standpoint, it might be the best thing that could have happened to some. No doubt insurance companies will fight over claims as is typical after every major disaster. Losing a home to a hurricane may not be the outcome any resident wanted, but for those who were struggling or already facing foreclosure, it gives them an out to start over.
Brian Korte is a bankruptcy and foreclosure defense attorney at Korte & Wortman in West Palm Beach, Florida.