By Alan J. Berteau
President Obama has declared 20 parishes in Louisiana to be Major Disaster Areas. The presidential declaration recognizes the obvious, grim reality of the tragedy in Louisiana, but more importantly enables flood victims in these parishes to apply for federal disaster assistance from the Federal Emergency Management Authority. A previous article on the Kean Miller Louisiana Law Blog addressed this issue.
While you may obtain financial assistance from FEMA, a federal declaration of disaster does not suspend the payment of your mortgage note, rent, car payments, student loan payments, credit card payments, or payments on open accounts. Many lenders and creditors are offering assistance to victims of the flood but there are five important general rules to bear in mind:
- The assistance is not automatic; you must apply for it. If you ignore and fail to pay a debt, you will probably not be able to avoid the consequences of the non-payment later by claiming inability to pay due to flooding.
- You should work directly with the lender or creditor on the debt in question. Avoid third-party intermediaries. You and your creditor share an interest in avoiding default on your obligation. Third parties do not share that interest. You need to be sure you know exactly what information the creditor gets from you, and exactly what the creditor is offering to you.
- Save all records associated with your request for assistance, including all correspondence, e-mails, forms and, if possible, a log of telephone conversations.
- Once you have applied for assistance, do not hesitate to follow up with the creditor on a recurring basis.
- You should be sure that you completely understand what your future obligation will be on the debt in question. For example, at the expiration of a grace period, will you owe a balloon payment to cover payments deferred? Will your payments increase in the future to cover temporary reductions? Will your deferred obligation include interest or fees incurred during the grace period? You should get, in writing, from your creditor a clear explanation of what you will owe, and when you have to pay what you owe, after the expiration of the relief period.
The specific assistance rendered will be decided by the loan servicer. The assistance may include forbearance (i.e., giving you additional time to catch up on late payments), reduction in your payments, and waiver or reduction of late fees, penalties. If the modification to your loan obligation is temporary, you must be sure you understand what your obligation will be upon the completion of that time (probably 12 months, or less). The loan servicer is obligated to tell you what you need to know. Your loan servicer is not required to provide you any specific relief; just because a neighbor received help of a certain kind does not mean you will receive the same help. Freddie Mac and Fannie Mae websites offer an overview of the types of assistance available.
The Federal Housing Administration (FHA) is a government agency which insures millions of home loans. On August 18, 2016, FHA directed the lenders who hold mortgage notes insured by FHA to help flood victims in the disaster areas:
HUD (U.S. Department of Housing &
Urban Development) has instructed FHA lenders to use reasonable judgment
in determining who is an “affected borrower.” Lenders are required to
reevaluate each delinquent loan until reinstatement or foreclosure and
to identify the cause of default. Contact your lender to let them know
about your situation. Some of the actions that your lender may take are:
- During the term of a moratorium, your loan may not be referred to foreclosure if you were affected by a disaster.
- Your lender will evaluate you for any available loss mitigation assistance to help you retain your home.
- Your lender may enter into a forbearance plan, or execute a loan modification or a partial claim, if these actions will help retain and pay for your home.
- If saving your home is not feasible, lenders have some flexibility in using the pre-foreclosure sales program or may offer to accept a deed-in-lieu of foreclosure.
You should assume that your lender or other creditor will offer you some type of assistance if you reside in the disaster area IF you contact the lender and qualify for the assistance. Lenders and other creditors may also offer assistance to individuals who work in the disaster area, even if they don’t live there. You will only find out the assistance available to you by contacting your lender.
Farmers may be entitled to targeted financial assistance through various disaster relief programs administered by the Farm Service Agency of the U.S. Department of Agriculture.
Vehicle lenders are stepping up to offer relief as well. Toyota Financial Services announced on August 16, 2016, that it is offering payment relief options to flood victims, including extensions and lease deferred payments. Although we have not found specific announcements from other major vehicle lenders, it is reasonable to assume that others offer disaster relief.
We have also found no specific announcements of assistance of credit card issuers, but if you anticipate difficulty in staying current on credit card obligations, contact the issuer and ask for disaster assistance.
The LSU College of Agriculture’s website offers an excellent compendium of disaster-related resources and links useful for any victim of flooding.
The Louisiana Office of Financial Institutions Website contains, among other resources, a list of agencies to contact for assistance. Any third party entity listed on the LOFI webpage can be trusted (notwithstanding my general warning against reliance upon third parties in obtaining disaster assistance).
Your lenders and creditors are generally not required by law to offer disaster assistance. But lenders and creditors want to help flood victims manage their obligations while they cope with the more immediate challenges of safety, food, shelter, electricity, and medical needs. There is no guarantee that you will receive assistance from a given creditor, but you may rest assured you will not receive assistance if you don’t apply for it.
_________________________________________________________
[1] The Federal Home Loan Mortgage Corporation (“Freddie Mac”) and the Federal National Mortgage Association (“Fannie Mae”) are government-sponsored entities which together own or guarantee payment on approximately 60% of the home mortgage loans in the United States. There is a very good chance that your home mortgage note is owned by one of these “government-sponsored enterprises.” The entity to whom you actually pay your note is servicing the loan; it no longer owns the loan, if it ever did.
======================
Limited Sales Tax Relief Available To Louisiana Flood Victims Without Flood Insurance
By Steven Boutwell on August 18, 2016
By Jason R. Brown
If you are one of the many South Louisiana residents directly affected by recent flooding but did not have flood insurance protection for your home and/or assets, be aware that the law provides some limited relief in the form of sales tax refunds. Under Louisiana law (La. R.S. 47:315.1), residents living in an area determined by the president of the United States to warrant federal assistance can seek a refund of state sales taxes paid on destroyed household items such as furniture, appliances, electronic equipment, etc. Refunds are not limited to homeowners. Apartment and other homestead renters are equally eligible. Eligibility is limited, however, to the actual owner of the property who paid the state sales tax and no refunds are allowed on property for which the purchaser received reimbursement (whether through insurance or other means, including, potentially, assistance from FEMA).
The Louisiana Department of Revenue has issued standard forms for making natural disaster refund claims. The forms – R-1362 (Claim for Refund); R-1362D (Schedule of Tangible Personal Property Destroyed by a Natural Disaster); and R-1362S (Calculation of States Sales Tax Refund) – must be submitted on or before December 31, 2019. Form R-1362 must be notarized and form R-1362i should be referenced for instructions on how to complete the three required forms and what documentation must be attached to verify a claim.
Purchases of automobiles/trucks, boats/boat trailers, water/snow skis or similar recreational items generally used away from home are not eligible. Nor are items that were installed or became component parts of the residence (i.e., lighting and bathroom fixtures, water heaters, hot tubs/spas and wall-to-wall carpeting). Finally, be aware that eligibility is limited to taxes paid on the destroyed property’s original purchase, not its replacement.
As of today, the President of the United States has declared Acadia, Ascension, East Baton Rouge, East Feliciana, Evangeline, Iberia, Iberville, Jefferson Davis, Lafayette, Livingston, Pointe Coupee, St. Helena, St. Landry, St. Martin, St. Tammany, Tangipahoa, Vermillion, Washington and West Feliciana Parishes federal disaster areas. More are expected in the coming days. Residents who live in one of these parishes, but did not have flood insurance should consider seeking natural disaster refunds on their destroyed household items purchases.
