Mortgage Insurance

Mortgage Insurance for Disaster Victims Section 203(h)

The Section 203 (h) program allows the Federal Housing Administration (FHA) to insure mortgages made by qualified lenders to victims of a major disaster, who have lost their homes and are in the process of rebuilding or buying another home.  Through Section 203 (h), the Federal Government helps victims in presidentially designated disaster areas affected by floods, earthquakes or super typhoons to recover by making it easier for them to get mortgages and become homeowners. 

This program provides mortgages insurance to protect lenders against the risk of default on mortgages to qualified disaster victims.  In order for Individuals to be eligible for this program, their homes should be located in areas that were designated by the President as a disaster area and their homes were destroyed or damaged to such an extent that reconstruction or replacement is necessary.  Insured mortgages may be used to finance the purchase or reconstruction of a one-family home that will be the principal residence of the homeowner. 

Section 203 (h) offers many advantages that make the recovery from a disaster easier for homeowners.  The borrower is eligible for 100 percent financing.  Mortgages collect from the borrowers an up-front insurance premium at the time of the purchased, as well as monthly premiums that are not financed, but instead are added to the regular mortgage payment.  To make sure that its programs serve low and moderate income people, FHA sets limits on the dollar value of the mortgage.  The current FHA mortgage limit can be viewed online.  The figures may vary over time and by place, depending on the cost of living and other factors.

The borrower’s application for mortgage insurance must be submitted to the lender within one year of the president’s declaration of the disaster.  Application are made through an FHA approved lending institution, who make their requests through a provision known as “Direct Endorsement,”  which authorizes them to consider application without submitting paperwork to HUD.

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