Severely delinquent borrowers in hurricane-affected areas with mortgages insured by the Federal Housing Administration have been given more time to resolve past due loans.
FHA-approved lenders have been instructed by the Department of Housing and Urban Development to provide additional foreclosure relief to FHA-insured borrowers who live or work in those areas hardest hit by Hurricane Katrina and Hurricane Rita, according to an announcement Wednesday.
"The relief affects all pending foreclosures of FHA-insured properties in the Presidentially declared disaster areas designated by the Federal Emergency Management Agency as eligible for individual assistance," HUD said. "Additionally, it prohibits lenders from initiating new foreclosures."
The latest moratorium is effective through February 28, 2006, according to the announcement.
HUD said a current foreclosure moratorium for FHA borrowers who were victims of Hurricane Wilma will remain effective until January 22.
HUD has already expanded the maximum FHA loan-to-value to 100% for hurricane victims.
Assuming a 100% of loss severity rate on loans associated with 11 counties in Gulf Coast states that remained "seriously flooded" as of Sept. 7, FHA estimates losses from Hurricane Katrina could reach $770 million over fiscal years 2006 and 2007, according to a fiscal year 2005 actuarial review of the agency by independent auditors.