Foreclosures, which are often followed by evictions, have been one of the most devastating consequences of the housing market crash. Natural disasters can make the foreclosure process even more trying for affected families. Fortunately, lenders sometimes halt foreclosures after natural disasters.
In the wake of Superstorm Sandy, Fannie Mae and Freddie Mac have ordered the suspension of foreclosure activities in parts of New York and nearby states that have been affected by the disaster. All foreclosure auctions will be stopped for 90 days. Those who have already been foreclosed on but still reside in their homes will have a 90-day delay on eviction activities.
The decision affects 34 counties across the region that have been declared disaster areas. In those counties, approximately 125,000 homes were going through the foreclosure process.
Freddie Mac also forecasts that some homeowners will default on their mortgages and move away rather than attempt repairs on their storm-damaged homes. Mortgage specialists are concerned that the delay in foreclosure time will affect the recovery of the housing market in the region. Properties in foreclosure could depress local markets, and lengthening the foreclosure time could cause more distressed properties to flood the market.
The moratorium, which affects Connecticut and New Jersey as well as New York, is expected to further burden lenders who were already facing a significant backlog of foreclosures. Homeowners who are concerned about foreclosure should be aware of their legal rights, including any government-mandated relief programs available. Regions affected by Sandy may be eligible for special help.
Many would agree that flooding the market with distressed properties is a small price to pay if it means people not being turned out to the streets with winter coming.
Source: CNN Money, “Foreclosure mess for states hit by Sandy,” Les Christie, Nov. 16, 2012