FHA 203(h) Loans Help Disaster Victims Get Zero-Down Mortgages

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Before looking at the assistance it offers, let's look at the problems it attempts to solve. The media focused on Hurricane Frances in Florida, which hit only a few weeks after Hurricane Charley and Tropical Storm Bonnie, and now they are looking at Hurricane Ivan. But hurricanes aren't the only problems that HUD has to deal with. In January, a magnitude 6.5 earthquake in Paso Robles, California, was the year's first disaster, followed by the normal, annual cycle of hurricanes, tornadoes, floods, landslides and forest fires, as well as rain, snow, and ice storms. These disasters ranged from New York to Oregon, from Kansas to American Samoa, and from Illinois to the Federated States of Micronesia.

Victims of these disasters can apply for a HUD 203(h) mortgage. The program allows victims of federally declared disasters whose homes were destroyed or " substantially damaged" to apply for a government-backed, zero-down-payment mortgage. They can also roll all loan fees and costs into the mortgage, eliminating out-of-pocket expenses. And, they can start the mortgage process even before all of the insurance paperwork and settlements are processed.

These loans can be used to buy or build a new home as well; meaning renters who have lost their apartments can apply for the same loan. Normally, all the renters have to do is show they can make their monthly mortgage payments. Since these payments are usually comparable to monthly rental payments, renters have an opportunity to become homeowners without saving a down payment.

The federal government helps thousands of people every year through this mortgage program. While there have been 40 disasters so far this year, there were 55 in 2003, 48 in 2002, and 44 each in 2001 and 2000. Disaster mortgage loans can be used only in a federally declared disaster, and only in those counties included in the disaster declaration. Some disasters never get that far. They may be declared a disaster at the municipal or county level, and even at the state level, but not at the federal level. Only the president can declare a disaster " national." When he does, that declaration applies only to the counties included in the federal declaration. So, if your home was severely damaged or destroyed, but you are not in one of the declared counties, you would not qualify for the program.

To get a list of federally declared disasters and the counties that are covered in that declaration, go to . Once there, scroll down to the map of the U.S. that shows " Active Disasters & Emergencies." Click there to get the list of this year's disasters and their disaster numbers. Frances is disaster 1545. Hurricane Charley and Tropical Storm Bonnie are 1539. In between, declared disasters include a hurricane in South Carolina; severe storms, tornados, tropical storms, and flooding in Virginia and Indiana; high surf, high winds, a typhoon, and flooding in the Northern Mariana Islands; and fires in Nevada. When you find the disaster that has affected you, a friend, or a family member—click on " Designated Counties" to see which were included in the declaration.

Even though disasters are over quickly, picking up the pieces can go on for years. That is why disaster victims have one full year after the declaration to apply for a 203(h) mortgage. FEMA (Federal Emergency Management Agency) also has mortgage and renters' assistance programs to cover monthly payments for disaster victims. Since so many disaster victims also lose their jobs due to damage or destruction in their work place, FEMA can prevent a lender from starting a foreclosure, or carrying one out, on property hit by a declared disaster for 90 days after the disaster. This is usually enough time for people to start sorting out their lives and their jobs, and to start rebuilding.

The most common " evidence" of damage is the " tag" FEMA inspectors put on a house. FEMA inspectors check all buildings hit by the disaster and use three different colored tags they actually attach to the building. If a building is not tagged, it means there was no damage. A green tag means slight damage, yellow is for moderate damage and red tags go on buildings FEMA says are either completely or extensively damaged. Red-tagged buildings are considered uninhabitable. People cannot move back into them, and must find other housing, but there are FEMA programs to help them relocate. You and your insurance company have the right to appeal the " tag" put on your home.

Ironically, one of the biggest problems many people have getting a 203(h) loan is finding a lender who is familiar with them. If you can't find one, call your local HUD office, or the FHA consumer hotline at 1(800) 767-4483 to find a lender.

No one really knows when and where the next disaster will strike, or how much damage it will do. All any of us can do is pay attention to what is going on around us, take all warnings seriously, be prepared, and know that once a disaster is over, there will be help picking up the pieces—even if that means picking up and finding a new home.