Peter G. Miller
OurBroker®

Each year brings with it an assortment of floods, fires, earthquakes, blizzards, tornados, hurricanes, and droughts -- so much bad news that we sometimes forget the helpful and reasoned role now played by most mortgage lenders during such disasters.

Lenders are forever in a difficult public relations position because while borrowing is an accepted social activity, repayment is seen as a necessary evil. Neither history nor public opinion have been especially kind to lenders, but at least we should recognize lender actions -- positive actions -- in recent catastrophes.

When a community is devastated by natural disaster the usual norms of commercial behavior must be suspended. Gas and electricity are out; people are in shelters; homes are burned, buried, or under water, stores are shuttered and what we routinely see as normal and natural must be set aside for days and sometimes weeks.

For mortgage lenders, disasters raise two core problems. One concern is that loan security -- homes and buildings -- have been devalued. A second difficulty is that portfolio income is disrupted.

Given such conditions, what are lenders to do? It's unfair to ding credit reports -- payments are obviously going to be late if made at all. It makes no sense to demand full or timely payments -- most banks and postal facilities are closed, pay checks are either short or missing, and there is no practical way to foreclose -- local courts and sheriff offices have no incentive to further tax public facilities by adding new members to the ranks of the homeless and needy.

Lenders today -- most lenders, anyway -- understand that their best interests are served by helping borrowers when times are tough. Ask around and you are likely to find lenders who will work with those impacted by local and regional disasters. Some typical policies include:

• Payment extensions. Don't worry if your payment is late -- and forget about late fees.

• Credit forbearance. Late payments will not be reported to credit bureaus. (If late payments are reported and you later need to apply for a loan, don't worry about it: Loan underwriters will ask for an explanation, so all you need to do is describe what happened and provide documentation such as an insurance claim, news clipping, etc. Most lenders will regard payments made late or missing because of a natural disaster as entirely understandable.)

• Foreclosure delays. Lender don't want to foreclose in good times, and they surely don't want your home if it's under water or covered with ash.

• Revised payment schedules. A missed payment is permitted with the understanding that it will be made up over time.