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A couple’s devastating experience with a landslide has raised questions about mortgage responsibilities following significant natural disasters. As reported, the couple lost their multimillion-dollar home but continues to face pressure from their bank to fulfill mortgage obligations.
In recent years, the frequency of severe storms has surged. For instance, the National Oceanic and Atmospheric Administration noted that 2023 experienced 20 named storms in the Atlantic, compared to a historical average of 14 per hurricane season. Prior years have also seen fluctuating numbers, with 14 storms in 2022, 21 in 2021, and an alarming 30 in 2020.
However, hurricanes and tropical storms are just part of the natural disaster landscape affecting the U.S. Nearly 44% of the country is at risk for landslides, according to the U.S. Geological Survey, further illustrating the diverse threats to homes and properties across the nation.
Impact of Mortgage Obligations
The question arises: if a home is completely destroyed by a landslide, what happens to the mortgage? The stark reality is that homeowners remain liable for their mortgage repayments regardless of the home’s condition. Whether the property is still standing or habitable, the mortgage remains an active obligation.
Many homeowners might consider defaulting on their mortgage in a catastrophic event, especially when the home no longer exists. However, this choice can lead to foreclosure, which severely impacts credit scores and future borrowing capabilities. Foreclosures can remain on credit reports for up to seven years, complicating future rental or mortgage applications.
Additionally, obligations such as homeowners association fees still apply even if the home has been destroyed, raising further concerns about potential foreclosure from these organizations as well.
The Role of Homeowners Insurance
Homeowners insurance typically covers certain types of damage, but many natural disasters including floods and landslides are often excluded from standard policies. Flood protection generally requires a separate rider, while coverage for earth movements, including landslides, is frequently not included.
In some cases, homeowners may secure a difference in conditions (DIC) policy that could provide coverage for these specific disasters. If such a policy is in place, the insurer may assist in replacing a home that’s been destroyed due to a landslide. Conversely, if homeowners lack the necessary coverage, they may be left without financial recourse.
Resources for Affected Homeowners
If homeowners find themselves in this unfortunate situation without insurance coverage, several options may alleviate the financial burden. One possibility is negotiating with the mortgage lender to place the loan in forbearance, allowing temporary suspension of payments while avoiding delinquency. This can offer crucial time to devise a plan for moving forward.
Homeowners may also explore government assistance avenues. The Federal Emergency Management Agency (FEMA) offers support to affected households, which can include temporary housing assistance or funding to transition to new living arrangements. It’s advisable to apply for aid to assess eligibility, and even if FEMA assistance isn’t available, state agencies may provide alternative relief options.
Final Thoughts
This situation underscores the importance of understanding both insurance coverage and mortgage obligations in the wake of natural disasters. Homeowners are encouraged to evaluate their policies and consider additional protections against less common but impactful events like landslides.
Note: The content provided in this article is for informational purposes only and should not be construed as professional advice.
Source
finance.yahoo.com