HUD Assists Borrowers With Problem Drywall
Washington-FHA-insured families experiencing problems associated with problem drywall may be eligible for assistance to help them rehabilitate their properties, according to the Department of Housing and Urban Development.
FHA is reminding its approved lenders that they are to offer special forbearance for borrowers confronted with the sudden effects of damaging drywall products in their homes including the financial hardship associated with related home repairs.
"We're instructing our FHA mortgage lenders nationwide to extend temporary relief to allow these families time to remove problem damaging drywall and repair their homes," said FHA commissioner David Stevens.
"We want to remove additional pressures for these families as they find solutions to allow them to return to a safe, decent and sanitary home."
FHA Type 1 Special Forbearance provides relief that is not typically available under an informal forbearance or repayment plan. This relief can include suspension or reduction of payments for a period sufficient to allow the borrower to recover from the cause of default. It can also include a period during which the borrower is only required to make their regular monthly mortgage payment before beginning to repay the arrearage or a repayment period of at least six months.
HUD is instructing lenders that no late fees are to be assessed while the borrower is making timely payments under the terms of the special forbearance plan. The total arrearage for a Type 1 Special Forbearance cannot exceed 12 months of delinquent payments.
Lenders can review borrower applications and make a determination as to the most appropriate loss mitigation tool including loan modification, partial claim, or FHA HAMP. Any questions or clarification regarding the Type 1 Special Forbearance should be directed to the HUD National Servicing Center at 888-297-8685.
HUD's Community Development Block Grant program may also be a resource to help local communities combat the problem. Historically, CDBG has helped to support local efforts to rehabilitate homes through grants, loans, loan guarantees and other means. In addition, CDBG may also support the following activities: code enforcement, acquisition, clearance and remediation activities, and relocation.
All CDBG-assisted activities must meet one of the program's three national objectives: provide benefit to low- and moderate-income persons, eliminate slums or blighting conditions, or address an immediate threat to the health or welfare of the community.
The Consumer Product Safety Commission reports that more than 2,360 homeowners in 35 states and the District of Columbia (primarily in Florida, Louisiana and Virginia) have filed complaints of possible drywall-related problems including damage to electrical wiring, plumbing, utilities and a variety of health concerns.
The drywall emits sulfur gases. One of these, hydrogen sulfide, which corrodes copper, was found at higher levels in homes with the drywall. Copper sulfide corrosion damage has been found on wiring, pipes and household appliances in homes with the drywall. In addition, the Center for Disease Control and Prevention is examining possible health consequences related to this drywall.
CPSC, in partnership with the CDC, the Environmental Protection Agency, U.S. Customs and Border Protection and HUD is coordinating the federal government's response into which particular drywall products pose a risk to human safety and health and structural integrity.
Mortgage Contracting Services, with headquarters in Tampa, Fla., has been helping lenders and servicers mitigate the problem locally and nationally. As far as being able to service properties and maintain them, MCS has the ability to remediate drywall or do drywall inspections, said Elspeth Spransy, assistant vice president of vendor management.
Testing of drywall outer paper and the gypsum core has been found to release sulfur compounds.
"The problem can affect any property built after 2001. A lot of the drywall that we're dealing with or can deal with is from China and also from Germany," Ms. Spransy said. "Of course the coastal areas are heavily affected, but this can come up anywhere."
It's an evolving focus, she says, and many asset managers are simply preparing for it now. "For many companies the process and the issue are so new. We are ready and willing to help our clients resolve any issues."