The direct issues created by wild fires like the destruction of property and dislocation of residents in the region are obvious. There are several other problems that can arise. A few of these other issues can make closing a real estate transaction, or refinance of a property a challenge.
Homeowners insurance has to be in place when a new mortgage is funded. When there is an event like a wild fire, most insurance companies can institute a moratorium on binding any new policies in the region affected. That can be temporary, or long term. Many times insurance companies won’t renew existing policies if they’re in an impacted area, even if they weren’t affected directly or had a claim.
Another potential problem can be funding a mortgage. The security of the loan is the real estate. That’s why they do an appraisal. To verify the condition of the property, and determine the value of the asset. Lenders have very differing criteria on if, and when, they’ll fund a loan applicable to a property located in a region that had an event where there is a State of Emergency implemented.
The investor of the mortgage will justifiably be concerned if the property (their security for the loan) was impacted by the event. The same lender can have different funding criteria for different loan programs.
The funding criteria can range substantially.
The easiest is the underwriter just verifies on a map that the property wasn’t in the vicinity of the event, and allows the loan to fund without additional scrutiny.
Next the lender sends out the appraiser after the event is no longer an active issue, to confirm the subject property and it’s neighborhood wasn’t impacted by the event.
A more conservative approach is a complete moratorium from funding the loan applicable to any property located in the county with the State of Emergency (SoE), for as long as the SoE is in place. That can be a long time. SoEs literally stay in place for many months to a year. This can be county wide, and applicable to any property regardless to how many miles away the property is from the actual event.
Generally a non-conforming portfolio type lender could have more lenient underwriting/funding guidelines. In this case many non-conforming lenders can have a tighter guidelines than a standard Freddie or Fannie lender.
Regardless if a loan is in the beginning of the loan process, or ready to fund, it’s advantageous to check with the lender’s funding department to confirm their guideline. Better to be proactive. You don’t want to be broadsided late in the transaction.
I’m approved on the wholesale side with numerous lenders to originate mortgages. The guidelines are a moving target. I’m constantly checking on lender’s positions, and any changes, before loan submissions, or during the processing/underwriting process. I have had to pull loans from one lender to submit to another because events like wild fires because an issue, out of the blue. It’s advantageous being a broker. You always want to get the best rate, but other terms and guidelines are critical.
All that said, my heart and prayers go out to the families affected by the recent wild fires.
If you are in the Los Angeles area, have any questions or real estate sales or financing needs, feel free in contacting me.
Ron Henderson GRI, RECS, CIAS
President/Broker
Multi Real Estate Services, Inc.
Gov’t Affairs Chair – California Association of Mortgage Professionals (2017-2018)
BRE #00905793 NMLS #310358
www.mres.com
ronh@mres.com
Specialist in the Art of Real Estate Sales and Finance
Real Estate market, mortgage rates, Los Angeles, San Fernando Valley, Conejo Valley, Simi Valley, Woodland Hills, West Hills, Calabasas, Chatsworth
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