Thursday, December 6, 2012

Post-disaster relief: Suspensions of mortgage payments

Image credit: gobankingrates.com


Post-disaster federal assistance may not be enough to cover USD50 billion in losses from the inter-state havoc wrought by hurricane Sandy. Restructuring does not involve only infrastructure, but also financial obligations entered into by homeowners in the northeastern area of the United States as they pick up from the rubble caused by flood, fire, and winds.

The housing bubble that refuses to re-inflate itself had already engendered an army of defaulting borrowers. The subprime mortgage crisis was another disaster that provoked Federal response, no less than from the Federal Reserve headed by Ben Bernanke, which thereon prohibited extending higher-priced loans to borrowers with insufficient ability to pay.

Image credit: etown.edu


It’s safe to assume that the actions of lending institutions post-crisis err on the side of strengthening credit lines. A disaster like hurricane Sandy, however, was an unforeseen blow to what may have otherwise been good loans. Borrowers who at another point may have had clean loan records need to take on extra financing schemes for rebuilding and repairs. That should take money away from some pre-existing loans. While mortgage brokers like USA Mortgage, Network Capital Funding Corporation, and America's Home Loans, have made refinancing schemes accessible to their clients, exceptional cases such as disasters call for more generous balms to the brunt of loan payments.

In this news item, Fannie Mae and Freddie Mac announced that it would provide assistance to borrowers affected by hurricane Sandy. It sounds like a bailout but that’s hardly the case --- these aren’t defaulting borrowers and they are merely granted respite through loan extensions. In any case, Fannie and Freddie have wisely eased up loan repayments by opening the avenues for help. A phone call from affected borrowers will qualify them for post-disaster loan relief.

Image credit: networkcapital.net


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