Federal, State Rules For Sandy Victims Pile Up

The government is exercising its duty to assist during natural disasters. Source: Think Stock

Certain federal- and state-level regulatory measures are bound to affect how mortgage lender-servicers do business in the Northeast where damage from Hurricane Sandy will take years to repair.

Guidance from the Federal Housing Administration aims to help families with FHA-insured mortgages struggling to repair or rebuild their homes after major disasters like Hurricane Sandy.

It reinforces the agency’s foreclosure relief policy and requires lenders “to release insurance proceeds to borrowers rather than to apply those payouts to bring delinquent mortgages current.” According to acting FHA commissioner Carol Galante, the guidance along with consumer-friendly advice offered to these homeowners has the dualpurpose of giving Hurricane Sandy delinquent borrowers “more time to get back on their feet” and make sure lenders do not misuse insurance payouts.

Measures are both short term and long term.

Other FHA guidance allows for a 90-day moratorium of foreclosures on properties located in the presidentially declared disaster areas and requires mortgage servicers to consider a full range of benefits for the affected borrowers, such as mortgage modifications, partial claims, use of FHA’s HAMP or other refinance options, or a waiver of late charges.

In addition, the guidance requires lenders to release homeowners’ insurance proceeds to the borrower instead of retaining these proceeds to compensate for missed payments.

Fannie Mae and Freddie Mac have temporarily suspended foreclosure sales and evictions on foreclosed single-family and two-to-four unit properties in areas designated for individual assistance by FEMA due to Hurricane Sandy through Feb. 1, 2013.

SVP of servicing and REO at Freddie Mac, Tracy Mooney, explained recently that the GSE has instructed its foreclosure attorneys to suspend pending eviction lockouts on foreclosed homes during the holiday season and through February 2013 in order to provide a measure of certainty to families living in eligible Hurricane Sandy areas.

One way the Department of Housing and Urban Development is responding to increased demand for rental housing in the areas affected by Hurricane Sandy is by giving public housing agencies “greater flexibility in calculating” rental payment assistance.

Since displaced families in need of alternative housing have fueled demand for affordable rental housing in already tight rental markets, HUD said, going forward it will allow local housing agencies to increase a payment standard up to 120% of the published “fair market rent.”

HUD’s annual fair market rents that determine how much subsidy low-income families are eligible for through HUD’s Housing Choice Voucher Program currently are at up to 110% of an area’s FMR as typically families pay 30% of their adjusted monthly income.

A 120% FMR option in areas where prices for a two-bedroom unit start at about $1,200, under HUD’s voucher program the local housing authority can increase the monthly maximum payment from over $1,300 at 110% to about $1,440 when applying a 120% FMR.

The Federal Emergency Management Agency’s housing portal helps consolidate rental resources from HUD, Department of Agriculture, Department of Veterans Affairs, private organizations and the public.Measures include “more relaxed federal regulations” in Hurricane Sandy-impacted areas” that help rehabilitate or rent vacant single-family units.

The measure will help increase the supply of affordable housing available to these families, HUD said.

Similarly, after meeting with top insurance company executives this week, New York State Gov. Andrew Cuomo signed new regulation “to expedite the payment of claims for New Yorkers affected by Hurricane Sandy.” Its stated goal is to “put more adjusters in the field to help homeowners.“

The new regulation shortens the timeframe in which insurers must send an adjuster to inspect a claim by requiring insurance companies to start investigating claims in six business days after the claim is made to the insurer, down from 15 business days under the current rule, which does not apply to Hurricane Sandy areas.

To protect the health and safety of homeowners, it allows claimants to immediately start repairing heating systems, hot water systems, electrical connections, or exterior windows, doors, and walls that are detrimental to retain heat, in accordance with “policies issued under the national flood insurance program.”

In addition, www.nyinsure.ny.gov, a new online report card system that details the performance of mortgage insurers and other firms operating in the disaster area. has been set up “to hold insurance companies accountable.”

New regulation issued by the New York State Department of Financial Services is expected to cut by more than half the amount of time insurers have to send adjusters to homes and businesses to inspect claims, which in return helps consumers receive their payments sooner.

DFS will publish report cards assessing the performance of insurance companies through claim payment monitoring reports that will be posted online. DFS plans to monitor over 20 companies including Nationwide, Liberty Mutual, Hartford, FM Global and Allstate, State Farm.

The report cards will allow New Yorkers to monitor their performance.

Grading criteria include number of claims and dollar amount of claims, average time for an adjuster to inspect, number of claims closed with and without payment, amount of claims paid, total number of consumer complaints, and number of complaints as a percentage of number of claims.

Cuomo also signed an executive order that expedites the issuance of temporary licenses for qualified out-of-state public insurance adjusters interested in assisting New York consumers get their claim settlements faster so they can start rebuilding their homes and businesses.

Currently more than 16,800 out-of-state adjusters have received temporary licenses to work on behalf of insurance companies—doubling the number of public adjusters currently negotiating claim settlements on behalf of consumers.

To qualify, out-of-state public adjusters must have a valid insurance license that has not been revoked in the last 10 years, do not have a criminal record or have not been accused of fraud or unethical conduct in the U.S. in the last 10 years.

Furthermore, the governor and DFS superintendent Benjamin Lawsky, who deem the performance of insurance companies as incredibly important, continued a moratorium barring insurance companies from cancelling or terminating homeowners’ and small business owners’ insurance policies in storm-stricken areas “for any reason, including nonpayment of premiums,” at least through mid-December.

The executive order and moratorium were issued for residents and business owners in Bronx, Kings, Nassau, New York, Orange, Queens, Richmond, Rockland, Suffolk and Westchester counties.

Another executive order extends the time the superintendent may deny applications by licensed mortgage bankers or registered mortgage brokers to open branch offices in the areas affected by Sandy and temporarily suspends community development investment requirements.