Fifteen year ago today I woke up on a weekend morning and, after starting the coffee machine, opened the thick curtains in our living room. The effect was strange. The light was not the same color as it was any other day. I looked our my living room window and saw that there was a lot of smoke in the sky at a distance. I thought that there was probably an industrial fire in the eastern part of San Francisco. That was not the case. The hills in Oakland were on fire and, by the end of the day, 3,000 homes were gone. I recall a TV news crew late that evening showing a long lens shot of the Oakland Hills with what seems like several hundred plumes of fire. These were places where the entire home was gone and the gas supply line was on fire. Very stark.
California (as well as Hawaii) is subject to earthquakes. Florida and the Gulf Coast have hurricanes. The middle of the country has tornadoes. Catastrophic loss of one's home is no a far fetched thing and it helps if folks understand what to do regarding their mortgage after a catastrophe.
If your home is severely damaged by fire, flood,landslide, earthquake or whatever you must not ignore your mortgage payments. If your home is damaged to the point where it cannot be occupied you must, of course, first contact your insurance carrier and file a claim. You need to get back on track to have your home repaired/rebuilt but understand that you still have an obligation to your mortgage holder. If you need "forbearance", that is, a few months break from payments you must discuss this possibility with them. Make your mortgage payments on time until you have a forbearance agreement in writing. If that does not come, you must continue to make your mortgage payments or you will rack up mortgage lates which will have a severe price at a later date. Do not believe for a second that sometime a few years from know you can say, "Sorry about those two mortgage lates - but my house burned down". People may understand, but that understanding will not be reflected on your credit report and a mortgage lender will, in all likelihood, report those as lates in the future.
If your house is totally destroyed it will be either rebuilt with funds provided by the insurance carrier in which case (to make things a bit simple) you keep your old mortgage just as if nothing happened but you must continue to make your mortgage payments. The fact that the house burned down does not affect the mortgage. If the house is a total loss and you are not going to rebuild, the insurance company will pay off the mortgage holder because they are named as the "loss payee" in your policy. You still must make the mortgage payments until it is paid off. Do not underestimate the damage to your credit that will occur as a result of mortgage "lates". If a "Notice of Default" is filed thing are worse. It is extremely difficult to undo the damage caused by a NOD. Mortgage lenders regard mortgage lates, NOD's and foreclosures as much more serious transgressions than credit card lates.
To take this to an extreme, even death does not take a holiday from mortgage holders. If a relative dies the impact on their credit may not matter but a foreclosure could still take place if the mortgage is not paid on time. If you are the executor of a decedent's estate or the beneficiary-to-be make sure that the mortgage is paid in a timely manner. In California, a non-judicial foreclosure can take as few as 111 days from start to finish.
This picture can be complicated by tenancies-in-common and other factors but the point is this: do not expect sympathy, defend your interests and make sure the darn mortgage is paid.
Dick Lepre
www.loanmine.com
Makes me wonder how New Orleans lenders dealt with the loss of 160,000 homes in the aftermath of Katrina.
Posted by: Ed Smith | October 20, 2006 at 01:25 PM