FEMA Declared Disaster Area – Loan Application in Process

Because of the plethora of natural disasters across the country it occurred to me that there may be a lot of Buyers and Sellers whose purchase or sale or mortgage refinance has been delayed for reasons they simply do not understand.

This post is intended to be an overview of what additional inspections and verification a homeowner or seller can expect in the mortgage application process for a home in a declared disaster area.

How Do Lenders Define Disaster Areas?

A major disaster is defined as one that causes substantial damage to numerous homes or a disruption in the economy in a geographic area. Disasters include, but are not limited to: hurricanes, earthquakes, floods, landslides, tornadoes, wildfires, volcanic eruptions, civil unrest, and terrorist attacks.

When a major disaster occurs, the Federal Emergency Management Agency (FEMA), as well as state and local governments, may issue a Disaster Declaration, or state of emergency, for specific states, counties, cities, or localities that are impacted.

When such declarations are made,  Mortgage Lenders who sell Fannie mae, Freddie Mac, FHA USDA Rural Development and VA Loans  must follow specific procedures for all of these  loans, even when loan has already received an underwriting approval.

Given that out of 9 out of 10 loans funded in 2011 fell into one of those categories it is safe to say that ALL lenders will follow a similar set of rules with little variance.

Additional Verification may apply if any of the below circumstances are applicable

Loan Application in Process BEFORE the Disaster

Loan Applications Taken DURING or AFTER the
Incident Period Dates and Loan Has Not Closed

Re-Verification of Employment & Income