Presidentially Declared Major Disaster Area Super Storm Sandy for 203(K) Insured Mortgages

Written By: Glenn Michaels, Op-Ed Writer

It has always been the rule under the FHA 203(K) that if an existing foundation was removed the property no longer fits under the FHA 2039K0 program and the property would now fit as “new construction’.

It has been the policy of the United States Department of Housing and Urban Development (HUD) to amend their guidelines as conditions and events take place in the United States. The department once again has made changes to reflect things that have happened in the United States.

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Super Storm Sandy also known as Hurricane Sandy was a catastrophic storm of epic proportions and the President of the United States was forced to declare numerous counties in New York, New Jersey, Pennsylvania, Connecticut, and Massachusetts “Presidentially Federal Disaster Areas”.

With the declaration in mind HUD has now made more changes to their guidelines. HUD previously stated that homes demolished or will be razed as part of the rehabilitation work are eligible provided the existing foundation system is not affected and will still be used. The complete foundation system must remain in place.

Now, under HUD’s Mortgagee Letter 2013 – 36 dated September 27, 2013 and effective September 27, 2013 properties that could not reuse the existing foundation due to Super Storm Sandy may still be eligible under the FHA 203(K) program. More specifically the guidelines are further clarified and all FHA 203(K) transactions where a home has significant damage from Super Storm Sandy can be eligible:

• The existing foundation does not currently meet the flood elevation requirements;
• Any additional repairs or modifications to the foundation must be required by applicable codes, community development plan, an insurance plan, or other local, state, or federal laws and regulations;
• The foundation after elevation, must comply with local building codes, and FEMA requirements;
• The lowest floor must be elevated at or above the Base Flood Elevation based on the most recent FEMA data plus one foot freeboard. The most recent FEMA data information must be submitted in the loan file and the FHA preplanner must have this information at the time of inspection.
• A structural engineer’s report must be present stating that the proposed foundation is capable of supporting the proposed construction of the dwelling;
• The FHA case number must be assigned within 18 months (540 days) from the effective date of the mortgagee letter;
• The loan must be processed as a standard FHA 203(K).
• The 203(K) preplanner must conduct a preliminary feasibility analysis to determine that the subject property is damaged but can be rebuilt to comply with building codes and FHA Minimum Property Requirements; and
• The loan amount prior to the addition of any financed UFMIP does not exceed 100% of the after repaired value.

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These changes, although kind of late, but better than never, should help many homeowners that are planning to raise their homes to avoid another storm similar to Super Storm Sandy.

As I travel around the impacted areas numerous homes are being raised up and materially altered in the event of another Super Storm. These homeowners received federal and state grants as well as other types of loans. This now creates another FHA 203(K) market for those that are aware of Mortgagee Letter 2013 – 36.

About The Author

Glenn Michaels - As an op-ed writer, Glenn Michaels is a mortgage underwriting instructor for CampusUnderwriter ( As a BBA & FHA DE Underwriter, Glenn is a Pace University graduate who also graduated from New York University’s School of Mortgage Finance. Glenn has conducted numerous training classes and has worked in the mortgage banking industry for 38 years. 




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