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Weathering the Storm

Weathering the Storm: How Natural Disasters Impact Housing, What Homeowners Can Do, and Financing Options for Recovery

 

Natural disasters often leave behind significant damage, especially to housing, affecting both individual homeowners and entire communities. From hurricanes and floods to wildfires and earthquakes, these events disrupt lives and create long-term challenges. With the increasing frequency and severity of these disasters, it’s crucial for homeowners to be prepared, protect their properties, and understand how to navigate recovery. This article will explore how natural disasters affect housing, the steps homeowners can take to manage the aftermath, and the mortgage loan programs available to help finance repairs.

The Impact of Natural Disasters on Housing and Communities

Recovering from a natural disaster is often a long, multi-phase process. In the first six months after a disaster, the focus is on survival—securing food, water, clothing, and temporary shelter. Some homeowners can return to their properties quickly, while others must rely on temporary housing. During this time, damage is assessed, and homeowners begin exploring their options, such as insurance claims and available resources.

Between six months to a year after the disaster, decisions about whether to stay and renovate or move elsewhere become more pressing. Communities gradually rebuild as home buyers re-enter the market, and existing homeowners evaluate their financial options, including home equity and liquid assets, to fund repairs. However, a shortage of contractors due to increased demand can delay recovery efforts.

Beyond the first year, some homeowners may have completed major repairs, while others are just beginning. Unfortunately, damaged homes may lead to foreclosures, increasing the number of distressed properties on the market. At the same time, new buyers might see opportunities to purchase and renovate these homes.

What to Do if Your Home is Damaged

If your home is damaged by a natural disaster, your first call should be to your insurance agent to determine what will be covered. Be sure to ask about coverage for additional living expenses, such as temporary housing and meals.

You should also contact your mortgage servicer—the company that handles your mortgage payments. Inform them about the damage and seek guidance on how to proceed.

Next, document all damage thoroughly with photographs, secure your property to prevent further harm, and register for disaster assistance with the Federal Emergency Management Agency (FEMA), even if you have insurance.

Here are some additional resources that may be helpful:

Insured Property Damage

If your property is insured, your agent will help you file a claim.

For homes with an existing mortgage, the insurance check is typically made payable to both the homeowner and the mortgage servicer. The servicer will release funds after confirming repairs have been completed, ensuring the money is used for its intended purpose.

If your home is paid off, the insurance company may send the check directly to you. However, they may initially withhold some funds, releasing them after the repairs are done. Be sure to clarify these details with your insurance company.

Some homeowners use this time to tackle additional home improvements they’ve been planning. If you need extra funds for upgrades, use the insurance claim to cover repairs first, then consider a renovation mortgage to finance any additional projects.

Uninsured Property Damage

If the damage to your home is not covered by insurance, it’s important to explore other options, starting with the resources listed above. Contact your mortgage servicer for advice and assistance as early as possible.

If you have significant home equity, you may be eligible for a refinance to fund repairs. However, some homeowners may face the difficult decision of whether to stay and repair the property or use their equity to sell and move on.

Mortgage Programs For Natural Disasters Victims

Federal and regional assistance, combined with insurance payouts, may still not be enough to cover the cost of repairs for some homeowners. In these cases, renovation mortgages can be valuable:

Another option is the FHA 203(h) loan, which is not a renovation loan but is designed to help homeowners in Presidentially-Declared Major Disaster Areas (“PDMDA”) with more lenient documentation requirements and a no down payment option. It assists those whose primary residence was destroyed or severely damaged.

Check FEMA’s list of specified affected counties and cities to see if your previous residence is or was located in a Presidentially-Declared Major Disaster Area, then click here to learn more about FHA 203(h) loans.

Conclusion

Natural disasters can cause significant housing damage, leaving homeowners with difficult decisions. Whether you’re navigating insurance claims or exploring financing options for repairs, it’s crucial to take proactive steps early on. With the right resources, mortgage programs, and community support, recovery is possible. Preparing for disasters ahead of time can help protect not only your home but your peace of mind.

 

Jennifer Goldsby, NMLS #591226

VP, Renovation Lending

Diamond Residential Mortgage Corporation NMLS #186805

Equal Housing Opportunity

 

Disclaimer: The postings here reflect my personal opinion. They do not necessarily represent the opinions of Diamond Residential Mortgage Corporation and its management.

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