Up to 20,000 families with FHA-insured loans displaced by Hurricane Katrina and other disasters can have their mortgage payments covered for up to a year by the Department of Housing and Urban Development, HUD said today.
The agency’s $200 million initiative is designed to rebuild lives and communities, HUD said in a statement today.
To be eligible for this mortgage assistance, families must have homes that are repairable and located in a presidentially declared disaster area that is designated for individual assistance, according to HUD.
The assistance, dubbed the Mortgage Assistance Initiative, will be available not only to qualifying homeowners who are in default, HUD’s current practice, but will make advance mortgage payments on behalf of borrowers for up to 12 months.
“These families have been devastated. Not only are they living far from home right now, but many have lost their source of income,” said HUD Secretary Alphonso Jackson in a statement.
“We want to help end that hopeless feeling for them, by letting them come back home and concentrate on putting their lives in order without having to worry about making mortgage payments,” Jackson said.
This unprecedented mortgage relief will enable FHA borrowers in the impacted areas to retain home ownership as they concentrate on repairing their homes and finding jobs, HUD said.
In addition, it will assist FHA lenders and protect communities by encouraging homeowners not to abandon damaged properties, the agency said.
After the mortgage assistance period, the borrower will resume making normal mortgage payments. The payment on the borrower’s behalf will be secured by a second mortgage that carries no interest rate and is repaid to HUD upon payment-in-full of the first mortgage, the agency said.
Jackson said, “This is our way of reducing the insurmountable odds these families face and will give them the breathing room they need to rebuild their homes and their lives. It’s also an investment in the long-term stability of the their neighborhoods.”
This assistance is available to FHA homeowners who: Have a property that is damaged by the hurricanes but can be rebuilt given adequate time; have access to funds from insurance proceeds, loans or personal resources to complete the repairs; and, are currently employed or are very likely to return to work within a short period of time, HUD said.
FHA-insured families in disaster areas whose houses are not damaged, but have lost their source of income as a result of the hurricanes, will also be eligible for this mortgage relief, HUD said.
These borrowers must be able to demonstrate that their primary source of employment was located in an area designated for individual assistance, that they suffered a reduction in income that makes them unable to pay their mortgage and that they are likely to be reemployed within a reasonable period of time, the agency said.
These requirements will remain in effect for an 18-month period unless extended or rescinded by HUD. It is estimated that up to 20,000 families could benefit by this action, in which case the outlay by HUD would be approximately $200 million.
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