What Happens to Your Mortgage If Your Home is Damaged in a Wildfire
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Here's your Money Briefing for Tuesday, January 21st. I'm Mariana Aspuru for The Wall Street Journal. The historic wildfires across Los Angeles have left at least 25 people dead, displaced thousands of residents, and destroyed more than 12,000 structures across multiple areas of the city. So what happens to the mortgage on a home that's been damaged in a fire?

Borrowers are still ultimately on the hook for a loan and any missed payments. So they have to pay them whether now or later. And I know it can seem like it might not make sense to keep paying a mortgage on a house that, for example, burned down, especially if you lost your job because of a natural disaster. Wall Street Journal reporter Gina Hebe joins me to discuss what options homeowners have after the break. ♪

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By American Express. Borrowers whose homes burned in recent fires across Southern California are still on the hook for their mortgage. Wall Street Journal reporter Gina Hebe joins me.

Gina, what options do homeowners have if they're impacted by natural disasters like the wildfires out in California? So homeowners do have options. A lot of mortgages in this country are backed by Fannie Mae and Freddie Mac. And those loans are required to offer forbearance in the case of natural disasters. And there are similar loans through the Federal Housing Administration and the Department of Veteran Affairs where it's a similar case.

And borrowers can request forbearance, which pauses the loan for a period of time, usually in three or six month increments.

And forbearance is something we hear a lot with student loans, too. Is this kind of pause different from other types of pauses you put on payments? It does pause the payments without late fees or other penalties. And foreclosures during this time are generally suspended. So it's supposed to be very borrower friendly. It depends who your lender is, what kind of loan it is. Certain banks like J.P. Morgan...

And Bank of America have also said that they would offer different forbearance programs, you know, depending on customer to customer. But, you know, as far as the maximum amount of time, it just depends what program you are using or what type of loan you have.

What are the pros and cons of entering into forbearance for a property damaged by a natural disaster? Forbearance is not the same thing as forgiveness. As I mentioned, borrowers are still ultimately on the hook for a loan and any mispayments. So they have to pay them whether now or later. And I know it can seem like it might not make sense to keep paying a mortgage on a house that, for example, burned down, especially if you lost your job because of a natural disaster.

But it generally does make sense to keep paying them because without forbearance, you can become delinquent, which can really hurt your credit score. What happens when forbearance ends, whether it's three or six months? Depending on what kind of position the borrower is in, they can either, if they are in the position to restart payments, there are a number of different pathways they can take. If they're not ready yet, then they can request an extended forbearance with

their lender. But if they are ready to restart the loan, there are a couple of different ways to do it. They can split up the missed payments and add them on top of their monthly payment and spread it out in that way. They can also tack on those missed payments to the end of the mortgage and continue to pay normally.

This discussion is centered around the news of the fires in Los Angeles. What resources or protections are available to California residents? So lawyers do say that California is much more friendly toward borrowers than some other states. It does have a set of laws that are specifically meant to protect homeowners who face foreclosure. One example of a consumer protection law is called non-recourse, which means that some mortgages in California are

only allow the lender to go after the property in the case of foreclosure rather than other assets that the borrower has. Homeowners can also check if they are eligible for property tax relief in the case that they lose their home or it's damaged.

What are the first steps that a borrower can take to check in on how they can navigate this? Borrowers, if they find that they can't make payments, the first step is to go to the servicer or the lender on the mortgage and ask what different options are available, whether it is forbearance or other adjustments to the loan, such as requesting a different interest rate adjustment or something like that. That's WSJ reporter Gina Hebe. And that's it for your Money Briefing.

This episode is produced by Jess Jupiter with supervising producer Melanie Roy. I'm Arianna Aspuru for The Wall Street Journal. Thanks for listening.