My County Just Got Declared a Disaster Area. Does That Stop My Foreclosure?

No, not this one, and the reason is a paperwork distinction most coverage of this storm skipped. There are two different kinds of federal declaration, and only one of them pauses an FHA foreclosure. Florida got the one that doesn’t.

What’s the Difference Between an Emergency Declaration and a Disaster Declaration?

FEMA announced on October 9 that an emergency declaration was approved for Florida over Hurricane Isaias, covering 27 counties. An emergency declaration authorizes FEMA to send equipment and resources and to fund emergency protective measures at 75 percent. It doesn’t carry the weight a lot of people assume it does.

I wrote about the mechanism underneath this a few days ago, before the storm even had a name: HUD pauses FHA foreclosures automatically for 90 days, but only starting on the date of a Presidentially Declared Major Disaster Area declaration. That’s a bigger, separate step from an emergency declaration, and Florida doesn’t have one for Isaias. FEMA’s own press index on October 10 shows major disaster declarations approved the same week for Hawaii and Utah. Florida’s Isaias item is still sitting at emergency.

Fannie Mae’s bar is higher still. A servicer can grant an initial three month forbearance without a full conversation with the homeowner first, but only if the property sits in a FEMA declared disaster area that also carries an Individual Assistance designation. Florida’s current declaration doesn’t carry that designation, so that shortcut is off too.

Does My County Being on the List Change Anything?

Only if you’re in Baker County. That’s the only one of my seven counties on FEMA’s list of 27. Duval, Clay, Nassau, St. Johns, Putnam and Flagler aren’t on it. Florida’s own state of emergency is a separate order from the Governor’s office, covering a not-quite-identical set of counties, so check your own county against the actual order rather than against a headline.

What’s Still Open to You?

Nothing about your loan changed with yesterday’s news. The ordinary forbearance request was always available, regardless of any federal declaration, and it runs through a phone call to your servicer: the date of the damage, what it did to your income or your house, and the hardship options that apply to your specific loan. FHA loans carry protections a conventional loan doesn’t, and most people can’t say offhand which type they have. That’s something a servicer can answer in one call.

In other news, Freddie Mac sold off $428 million in delinquent loans this week, in four pools covering 1,968 loans.

My Mortgage Got Sold to a Company I’ve Never Heard Of. Do I Lose the Deal I Made?

No. These were loans already 15 to 21 months behind on average, and about 51 percent of that balance belonged to loans that had already been modified once and fell behind again afterward. Freddie Mac requires whoever buys a pool like this to honor the terms of any existing loss mitigation agreement. A modification, a repayment plan, a trial payment plan, none of it evaporates because the loan changed hands. The current servicers named in the release are Select Portfolio Servicing, Shellpoint, Selene Finance and Rushmore Servicing, and settlement on the sale is expected in December.

What Changes When the Letter Arrives?

The agreement already in place stays in place. What’s worth holding onto is your own proof of what’s already been paid and a copy of any agreement you signed, since the name on the account is about to change. Freddie Mac’s release says purchasers have to complete any loss mitigation action already in motion, not restart it. A servicing transfer notice is the separate document that actually tells you who to call once the sale settles. That notice is the one that changes anything, not the news of the sale itself.

Jacksonville, Florida is my market, and distressed property is the bulk of what crosses my desk. Questions about your own situation are always welcome.

JimArmstrong904@gmail.com, or (904) 671-4161 if a call’s easier.

Jim Armstrong, REALTOR® · Momentum Realty · SFR® (Short Sales and Foreclosure Resource) certified. This is general information, not legal, tax, or financial advice.

Momentum Realty is not associated with the government, and our service is not approved by the government or your lender.