After a natural disaster like Hurricane Sandy, victims are understandably desperate to receive relief funds, but they're often ill-informed about the best way to get them. Survivors too often look to insurance first and -- if those funds are insufficient--FEMA second...and last.
But there are a number of alternative tools homeowners can add to their disaster recovery arsenals. So if you've suffered from Sandy and need to offset the costs of clean-up and repairs, your strategy should begin with getting knowledgeable about which grant and loan programs will work for you.
We're here to help. These are the best avenues for the victims of disasters to get the financing to start getting their lives back to normal:
Alternatives To Disaster Relief: Hurricane Sandy And Beyond
Hurricane Sandy Victims: Disaster Relief Programs You May Not Know About
Victims should contact FEMA Federal Disaster Assistance at (800) 621-FEMA or online at www.fema.gov/apply-assistance. Be prepared to provide all of your contact information, appropriate financial and insurance policy numbers, and a description of the state of your property after the disaster. A FEMA contractor should visit your property within a few days of your initial request for inspection; try to be present for that visit. If you are eligible for assistance, FEMA will send a housing assistance check within a week to 10 days.
After you've received the maximum amount you are eligible for in FEMA grants, you may be able to apply for a loan from the Small Business Association. Its low-interest disaster loans provide homeowners, renters and businesses with a way to offset repair costs. The loans aren't available to repair second homes -- those aren't necessities, so they aren't covered by disaster assistance grant programs. There's a loophole, though. If you have used the second home as a rental property and can verify rent charged on previous income tax returns, you may be eligible for a low-interest, extended schedule payment loan from the SBA.
This FHA program insures mortgages from qualified lenders to natural disaster victims who have suffered home damage or loss. The program centers on providing mortgage insurance so that victims don't default on their current mortgages. Victims can then use these insured mortgages to help finance the rehabilitation of their home or the purchase of a new one. With this type of insurance, no down payment on the mortgage is required: the borrower is eligible for 100% financing.
The borrower must pay closing costs and prepaid expenses, or the seller can do so, subject to a 6 % limitation on seller concessions. Borrowers will also have to pay an up-front insurance premium for the FHA mortgage insurance and monthly premiums.
The FHA offers this program for the "rehabilitation and repair of single family properties." With most mortgage financing plans, the lender will not release the mortgage proceeds unless the state of the property provides enough loan security. In the case of necessary renovations, the lender would normally stipulate that the improvements be made before green-lighting the long-term mortgage. But loans for hefty repairs, especially those after a hurricane, are costly and come coupled with high interest rates and short amortization periods.
In this case, the victim can get a mortgage loan, at a long-term fixed (or adjustable) rate, to finance the repairs with the mortgage amount based on the projected value of the property once the restorations and improvements have been completed (with consideration of the contracting work).
In the wake of disasters, government-sponsored mortgage backers Freddie Mac, Fannie Mae and the FHA will cut borrowers some slack if their homes were damaged. Lenders that service mortgages backed by the agencies are allowed to give 90 days forbearance to borrowers, removing any penalty for letting a few mortgage payments go by the wayside. To ensure additional protection for victims, the three mortgage backers may also suspend foreclosure and eviction proceedings and waive late fees.