Homeowners Affected By Disasters

Authored By: Lagniappe Law Lab

What Homeowners Can Do About Disasters

This information is related to issues that might affect homeowners after a disaster. 

What Homeowners Can Do About Disasters

Homeowners can prepare for a disaster and avoid issues after a disaster. First, homeowners can take an inventory of their home property to help file a claim to help cover losses. Homeowners should also keep a copy of this document in a safe place. After a disaster, a homeowner can use the inventory to help account for losses to their property. Next, homeowners should keep a copy of their homeowner's documents. This includes the title or the deed to the property. Homeowners may need these documents to show proof of ownership after a disaster.

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Homeowners can protect their property against the cost of disaster damages. Homeowners insurance is one of the best ways for homeowners to protect their losses. Depending on the type of insurance and coverage, a homeowner may get help to cover the losses. A disaster event can leave a homeowner with many repairs issues and other damages. A homeowner can file an insurance claim to get help to repair or replace property.

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The National Flood Insurance Program (NFIP) offers flood insurance to homeowners. The cost of any type of policy that a homeowner may get to cover flood damages may vary. Homeowners who live in a high-risk flood area must get flood insurance. Homeowners with a mortgage may also need to get flood insurance based on their lender. If you are a homeowner in a low-to-moderate risk area, you may be eligible for a Preferred Risk Policy. The Preferred Risk Policy has the same coverage as the standard policy at a cheaper rate.

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Homeowners who need help with damages to a home after a disaster may apply for FEMA help. FEMA helps homeowners when the losses and damages are not covered in whole or in part by insurance. FEMA cannot duplicate the money received from a homeowner from insurance coverage. FEMA provides housing help to those when there is a presidentially-declared disaster.

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The Small Business Administration (SBA) helps homeowners who live in a federally-declared disaster area. The SBA offers disaster help in the form of low-interest loans to homeowners who may need help. Homeowners can apply for money to repair or replace their homes.

Homeowners with a mortgage may have an opportunity to refinance all or part of it with the SBA. This can help when a homeowner does not have credit elsewhere and the homeowner has damages to the home. These damages are not covered by insurance either. Homeowners who qualify for SBA loans can apply for help. The loans carry lower interest rates for homeowners who need help.

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Issues for Homeowners After a Disaster

This information relates to various legal issues that homeowners might experience after a disaster. 

Issues for Homeowners After a Disaster

Disaster survivors may need to show proof of home ownership by title to get the relief money or benefits that allow them to rebuild their homes. Disaster survivors may face a lack of clear title issues to prove home ownership to access benefits or get relief money. A title may not be clear if the title to the property was not transferred by formal means after an owner dies. An unclear title can cause challenges to disaster recovery since many home repair programs require proof of ownership to qualify. 

Disaster survivors may need to transfer the title of a property to show proof of ownership. Transferring title ownership of property occurs most commonly during a sale of the property or after the death of a person. A title must be transferred by formal means to transfer clear ownership of the property.

Disaster survivors may need to trace the ownership of the property to clear the title and access home benefit programs. The way to establish a clear title is to search back through deeds and public records. Trace the chain of ownership and show that no one else lays a legal right or claim to the property. It is better to resolve title issues before a disaster happens so homeowners can access the full extent of recovery assistance available.

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During and after a disaster, homeowners must continue to pay their mortgage even if they are waiting for a payment on an insurance claim or if they are displaced from the home. Failure to make timely mortgage payments can lead to foreclosure on a home. Nonpayment can also be reported to credit agencies which can seriously affect credit history. A mortgage loan forbearance allows a homeowner to delay making payments for a time without creating an issue with default. Late charges may get waived and in some cases, negative credit reports are avoided. Interest may still continue to add up during the forbearance period and the remaining principal balance is not reduced. Eventually, the full principal and interest will have to be repaid. After a disaster, if loan forbearance is essential disaster survivors can ask their loan servicer for options to delay payments or ask for forbearance due to hardship circumstances. 

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Mortgage modifications, suspensions, or forbearance may be available to help homeowners. A homeowner should contact their lender if they have been affected by a disaster. Depending on who the lender is and the terms of the loans the homeowner may have different options to avoid foreclosure issues after a disaster. A loan servicer can defer mortgage payments, waive late fees, and not report the debt to credit bureaus. A homeowner must ask the loan servicer to grant forbearance.

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Disaster survivors who own a home and find out they cannot live in it after a disaster may call to suspend their utilities so that they are not paying for any unused services. This can help disaster survivors free up money in their budget for other expenses. Disaster survivors can call their utility company such as their electric company, or internet provider, and ask them to suspend the service. 

Homeowners who file a claim also go through the process of having an inspector visit the property and prepare a home inspection report of all the damages. If the insurance company approves the claim and the homeowner has a mortgage, the funds likely will issue to the insured and their mortgage company - the homeowner must sign the check and send it to the mortgage servicer. How the servicer will release insurance payments for repairs vary by the mortgage provider and their rules. 

Mortgage loans typically require homeowners to get both homeowners and flood insurance and any insurance payments following a disaster are made out to both the homeowner and the mortgagee. Rules differ as to the conditions where a mortgagee will release the mortgage payments to the homeowner. This affects how quickly the homeowner can pay contractors and others for needed repairs. 

If a home is destroyed or must involve a major construction, a new mortgage is often necessary, but required insurance for the new mortgage may be unaffordable or unavailable. FHA provides an important option in this situation providing FHA mortgages with certain eligibility requirements. 

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A disaster can cause an increase in the number of mortgage scams and options from scammers including repayment and modifications for a mortgage. Learn how to identify a scam and what to do to avoid a scam.

Many homeowners who turn to a loan modification or foreclosure companies may find out that they have been scammed. Disaster survivors may find themselves involved in mortgage assistance relief scams. These scams target homeowners with the promise to save them from foreclosure, get them a reverse mortgage, or lower their mortgage payments - in exchange for an advance or monthly fee. Many homeowners never get the relief they are promised. Some scammers find borrowers from publicly-available sources; while some lure distressed borrowers. Disaster survivors can protect themselves from mortgage fraud by staying aware of scams and other fraudulent tactics. Do not transfer the title of the property, make mortgage payments to someone other than the lender, or stop making mortgage payments altogether. These are ways to put your financial investment in your home at risk. 

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Knowing whether there may be a foreclosure moratorium following a disaster helps homeowners who are facing increased financial pressures. FHA provides that foreclosures and other legal proceedings may be suspended for up to ninety days if there is a federally declared disaster.

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Disaster survivors who own a home that needs repairs may deal with the following issues related to repairs and contractors after a disaster: 

  • Lack of preferred contractors - Because of a disaster contractors can be in high demand since everyone wants to fix damages as fast as possible. The most skilled contractors may be at the top of everyone’s list to call. Often preferred partners or other contractors may not be available.
  • Sudden price increases and spikes in demand - Because of a disaster, there may be a spike in the demand for construction materials, labor, and other equipment. This may create issues when a contractor budgets for certain expenses in construction and the estimate is below the final cost of the construction.
  • Inflated repair timelines - Because of a disaster, there may be increased issues and logistics with construction. Disaster conditions may include flooding in roadways, downed power lines, and raging storms. This increases the difficulty of getting materials and other supplies. Over time, repair issues may also get worse which can result in greater damage due to the disaster impact.
  • Hiring contractors and avoiding contractor fraud - Disaster survivors may encounter the need to hire contractors to help fix repairs due to a disaster. While looking for a contractor, disaster survivors must be aware of unqualified contractors and other scams. Learn what you need to know to hire a home repair contractor to avoid problems.
  • Dealing with incomplete or inadequate construction work - Disaster survivors can avoid issues with incomplete or inadequate construction work by understanding how to look out for issues with contractors. With increased demand, rushed repair timelines, and more severe damage due to the disaster, disaster survivors must be aware of the risks of inadequate construction work. Disaster survivors can learn how to work with a contractor and sign contracts for repair work to reduce their risks.

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Homeowners who need to hire a contractor need to be aware of the risk of fraudulent contractors. Homeowners can take the following steps to help decrease the risk of fraud happening while trying to repair a home after a disaster. A homeowner can: 

  • Ask for copies of the contractors' general liability and worker's compensation insurance. 
  • Check the contractor's identification and references. 
  • Avoid paying more than the minimum in advance. 
  • Deal with reputable people in your community. 
  • Call local law enforcement and the Better Business Bureau if you suspect a con or fraudulent activity. 

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them.

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Homeowners who are repairing their property and homes after a disaster may face problems with municipal code inspections. Problems may include issues where the code office is unavailable due to the disaster, when bad contractor work prevents the issuance of a required inspection certificate for repairs to continue, or when a certificate of occupancy is needed for a homeowner to move back into the property. If a house had issues with a previous contractor that was not code-compliant or the house never complied with the code, the costs, and work required to make the house code-compliant could be extensive. Homeowners who deal with contractors should be sure to specify who is responsible for code inspection costs in a written contract. 

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Last Review and Update: Oct 04, 2022
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