What Happens to Your Mortgage If Your Home is Damaged in a Wildfire
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Access to affordable credit helps me pay my employees, but I don't really need it. Inflation is killing me. But who cares? Big retailers are making record profits. That's why we support the Durbin Marshall credit card bill. See? Banks and credit unions help small businesses make payroll. This bill would cut the vital resources they need. While increasing megastore profits. They deserve it, don't they? Tell Congress, stop the Durbin Marshall money grab for corporate megastores. Paid for by the Electronic Payments Coalition.
Here's your Money Briefing for Tuesday, January 21st. I'm Mariana Aspuru for The Wall Street Journal. The historic wildfires across Los Angeles have left at least 25 people dead, displaced thousands of residents, and destroyed more than 12,000 structures across multiple areas of the city. So what happens to the mortgage on a home that's been damaged in a fire?
borrowers are still ultimately on the hook for a loan and any missed payments. So they have to pay them whether now or later. And I know it can seem like it might not make sense to keep paying a mortgage on a house that, for example, burned down, especially if you lost your job because of a natural disaster.
Wall Street Journal reporter Gina Hebe joins me to discuss what options homeowners have after the break.
Access to affordable credit helps me pay my employees, but I don't really need it. The inflation is killing me. But who cares? Big retailers are making record profits. That's why we support the Durbin Marshall credit card bill. See? Banks and credit unions help small businesses make payroll. This bill would cut the vital resources they need. While increasing megastore profits. They deserve it, don't they? Tell Congress, stop the Durbin Marshall money grab for corporate megastores. Paid for by the Electronic Payments Coalition.
Borrowers whose homes burned in recent fires across Southern California are still on the hook for their mortgage. Wall Street Journal reporter Gina Hebe joins me. Gina, what options do homeowners have if they're impacted by natural disasters like the wildfires out in California?
So homeowners do have options.
What immediate mortgage consequences do homeowners face after Los Angeles wildfires?
A lot of mortgages in this country are backed by Fannie Mae and Freddie Mac. And those loans are required to offer forbearance in the case of natural disasters. And there are similar loans through the Federal Housing Administration and the Department of Veteran Affairs, where it's a similar case. And borrowers can request forbearance, which pauses the loan for a period of time, usually in three- or six-month increments.
And forbearance is something we hear a lot with student loans, too. Is this kind of pause different from other types of pauses you put on payments?
It does pause the payments without late fees or other penalties, and foreclosures during this time are generally suspended. So it's supposed to be very borrower-friendly. It depends who your lender is, what kind of loan it is. Certain banks like J.P. Morgan and Bank of America have also proposed said that they would offer different forbearance programs, depending on customer to customer. But as far as the maximum amount of time, it just depends what program you are using or what type of loan you have.
What are the pros and cons of entering into forbearance for a property damaged by a natural disaster?
Forbearance is not the same thing as forgiveness. As I mentioned, borrowers are still ultimately on the hook for a loan and any missed payments.
Are borrowers still legally responsible for mortgage payments if their home burned down?
So they have to pay them whether now or later. And I know it can seem like it might not make sense to keep paying a mortgage on a house that, for example, burned down. especially if you lost your job because of a natural disaster. But it generally does make sense to keep paying them because without forbearance, you can become delinquent, which can really hurt your credit score.
What happens when forbearance ends, whether it's three or six months?
depending on what kind of position the borrower is in, they can either, if they are in the position to restart payments, there are a number of different pathways they can take.
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