Hurricane Irene created massive flooding throughout Pennsylvania and the surrounding areas, property damage across delaware valley and power outages to many.  But wait Ms. Irene is not complete her damage.

The aftermath of Irene may delay the funding of your or your clients new mortgage financing.

Can you imagine showing up at your Pennsylvania title insurance company for settlement only to learn that the proceeds from your loan will not be available until the property is re-inspected?  Oh boy!

The problem is obvious.  The adoption of the following language is affecting and has effected many closings in the last 24-48 hours and probably will continue to effect transactions over the next few weeks.

If the appraisal on a property located in an affected area was completed prior to the disaster event, addtitional collateral documentation will be required for all loans, with the exception of HELOC’s and HomePath mortgages.  If the appraisal was completed prior to the incident, an appraisal update documented on Fannie Mae/Freddie Mac Form 442 or HUD92051 must be completed by the original appraiser. 

Yes Pennsylvania is one of the states on the watch list for lenders.  Hence, many Pennsylvania home buyers with closings that went to the table early yesterday found themselves with no money from their lenders.  Many of these settlements had to close “dry” and many others were delayed.  With out the certification many lenders have decided to delay funding often causing a domino effect in the industry.  If one settlement gets delayed it usually impacts a future settlement where the seller is turning around and purchasing another home with his/her proceeds from the sale.  This chain effect will become a bit smoother as the 442′s are being ordered ahead of time but still there is no guarantee that the cert will come in on time.  Appraisers are becoming overburdened with this windfall of work, delays are to be expected.  This coupled with the fact that rates are still very very very low and refi’s continue to flood the market place.

Moreover, closings are also getting delayed due to the suspension of new homeowners insurance policies either not bounded or the effective date of coverage is being delayed due to the potential of FEMA declaring the locality a disaster area. Most insurance companies have all but stopped issuing policies until the damage has been determined, essentially creating an inspection duty for the insurance agent as well.  Obviously lenders are not going to be funding a loan with out the proper home owners insurance in place.

It is wise that all realtors and lenders should properly inform their borrowers and buyers of the possible delay of their settlement and the requirement of a certification of the property by both the appraiser and sometimes as mentioned the property insurer.

Other States that this bulletin is applicable for are as follows:

Connecticut, Delaware, DC, Maryland, Massachusetts, New Hampshire, New Jersey, New York, North Carolina, Pennsylvania, Puerto Rico, Rhode Island, Vermont and Virginia.