Mortgage relief is available for flood victims

Homeowners hit hard by last month's flooding can get quick relief if they're facing foreclosure or struggling to make house payments.

But few -- including some Federal Emergency Management Agency representatives in town -- know about the federal policy that allows it.

"It's a really good program, but nobody's telling people about it," said Mark Heinzman, a spokesman for Vesel Law Firm in St. Paul, which specializes in foreclosure defense.

Homeowners in a federal disaster area whose homes are damaged and those who are unable to make their mortgage payments because of the disaster are eligible for relief under the U.S. Department of Housing and Urban Development's Making Home Affordable Program.

Under a little-known disaster relief provision in the program, homeowners are entitled to a 90-day halt in foreclosure proceedings against them. Even those who are not in foreclosure but are hard-pressed to make their mortgage payments are entitled to reduced payments for at least 90 days.

And lenders are bound to oblige.

It doesn't matter what kind of mortgage it is, and house payments are typically slashed 75 percent to help homeowners get back on their feet, Heinzman said.

The help applies to all those affected by the flooding in 13 northern Minnesota counties that were declared a federal disaster areas on July 6.

"Anybody who has a foreclosure coming up, if they get into this program, it should stop the foreclosure in its tracks," Heinzman said. "Those who will get behind in their payments, even those who were behind in their payments before the storm, should be protected."

But to get it, homeowners must seek it from their lender.

"This is something people have to act on," said April Brown with the HUD's public affairs office in Washington.

But don't just act -- act quickly, Heinzman said.

"Take advantage of the program while it's there," he said. "Banks will never initiate it. The homeowner has got to initiate it."

Local banks contacted hadn't had customers seeking the help under the federal program.

"We really haven't seen much action in that regard. No one has sought it," said John Lewis, mortgage lender for Western Bank, which has three locations in Duluth.

While Western Bank has had customers in to fund basement repairs, none have had significant damage, he said.

Information lacking

FEMA representatives aren't telling flood victims about the federal policy that could quickly stop a foreclosure or lower their house payments.

"We're not giving them that information," said Dick Gifford, a spokesman for the FEMA team in the Northland. "We're doing preliminary damage assessments for individual homeowners. We're collecting information on the damages that occurred with the flooding. We're still in that process."

Marquita Hynes, FEMA public information officer, admitted she hadn't heard of the program.

But, she said, the individual damage assessments being done in the Northland are the first step in the process to get a federal "individual assistance" disaster declaration. The current disaster area designation is for public assistance to repair infrastructure damage, Hynes explained.

If there is a presidential declaration for individual disaster assistance, disaster recovery centers will be set up that will have HUD representatives available to share information about the Making Home Affordable Program, she said.

At Lutheran Social Service in Duluth, staff members are studying up on the program, said senior director Susan Aulie.

"We're doing research to make sure we're aware of all the provisions in regards to disaster areas," she said. "This is the first flood disaster-declared area that has impacted our service. It's why we're not totally up to speed. We will be getting that information to help people through."

So far, Lutheran Social Service hasn't seen any clients affected by the flood, whether it's damage to their home or business or reducing their income, Aulie said. But she expects they will.

"Initially, when these kinds of things hit, folks are focused on cleanup, on how to get the mold out of their basement," she said. "The financial stuff will hit a little bit later."

Heinzman said most banks and lenders are not aware of the federal policy. And those that are aware don't want people to know about it, preferring foreclosure. So he expects some homeowners will have difficulty getting the help they're entitled to.

"When any lender goes ahead and ignores this program, that's when a family has a real strong case against a lender," he said. "Key is everybody has to get out there, and they've got to apply."

He suggests homeowners start by contacting their lender's loss mitigation department.

Tess Rice, general counsel for the Minnesota Bankers Association, said large bank chains encourage their individual banks to work with their customers.

While community banks that initiate mortgages generally don't keep them, she said community banks that are holding second mortgages are going to work with their customers.

"They're not going to be foreclosing on people affected," she said. "It's not what they do. They rely on community relationships. Bankers I know work with their customers because they need them to come back."