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HUD offering mortgage relief to homeowners with Chinese Drywall problems

Homeowners with tainted drywall can get assistance, especially if they have an FHA-insured mortgage and are behind on their payments.

The Consumer Product Safety Commission (CPSC) reports that more than 2,360 homeowners in 35 states and the District of Columbia (primarily in Florida, Louisiana, and Virginia) have filed complaints of possible drywall-related problems including damage to electrical wiring, plumbing, utilities, and a variety of health concerns. Experts say as many as 100,000 homes nationwide have tainted drywall--much of it from China.

Most of these houses were constructed from 2004 to 2007, during the housing boom. Fixing the problem requires replacing drywall and appliances in a home at an average cost of $100,000.

The drywall emits sulfur gases (which has a rotten egg stench). One of these, hydrogen sulfide, which corrodes copper, was found at higher levels in homes with the drywall. Copper sulfide corrosion damage has been found on wiring, pipes, and household appliances in homes with the drywall.  In addition, the Centers for Disease Control and Prevention (CDC) is examining possible health consequences related to this drywall.

The U.S. Department of Housing and Urban Development announced that FHA-insured families experiencing problems associated with problem drywall may be eligible for assistance to help them rehabilitate their properties.

In addition, HUD’s Community Development Block Grant (CDBG) Program may also be a resource to help local communities combat the problem. FHA is reminding its approved lenders that they are to offer special forbearance for borrowers confronted with the sudden effects of damaging drywall products in their homes including the financial hardship associated with related home repairs.

“We’re instructing our FHA mortgage lenders nationwide to extend temporary relief to allow these families time to remove problem damaging drywall and repair their homes,” said FHA Commissioner David Stevens. “We want to remove additional pressures for these families as they find solutions to allow them to return to a safe, decent and sanitary home."

FHA Type 1 Special Forbearance (noted in Mortgagee Letter 2002-17) provides relief that is not typically available under an informal forbearance or repayment plan. This relief provided can include one or more of the following:

  • suspension or reduction of payments for a period sufficient to allow the borrower to recover from the cause of default;
  • a period during which the borrower is only required to make their regular monthly mortgage payment before beginning to repay the arrearage; or
  • a repayment period of at least six months.

HUD is instructing lenders that no late fees are to be assessed while the borrower is making timely payments under the terms of the Special Forbearance plan. The total arrearage for a Type 1 Special Forbearance cannot exceed 12 months of delinquent payments. Lenders can review borrower applications and make a determination as to the most appropriate loss mitigation tool including loan modification, partial claim, or FHA HAMP. Any questions or clarification regarding the Type 1 Special Forbearance should be directed to the HUD National Servicing Center at 888-297-8685.

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