How disasters affect your chances
of getting a mortgage
By JEFF LAZERSON / CONTRIBUTING COLUMNIST
Awful environmental tragedies and natural disasters happen. We have no control over these blindsiding events but we may suffer the brunt of the devastation left behind, for years or a lifetime, be it your health or your home value.
Look no further than 75 miles up the freeway to Porter Ranch which is experiencing a horrific methane gas nightmare. Or consider the water contamination tragedy in Flint, Michigan. Both were preventable environmental tragedies according to news accounts.
Orange County property owners are sitting ducks when it comes to environmental hazards and natural disasters.
Consider: Downwind of us is the broken San Onofre nuclear power plant, though shut down, still looms as an environmental threat. Creative terrorism is always a potential threat in urban O.C. We are also exposed to the possibilities of floods, brushfires, extreme droughts, landslides, mudslides and earthquakes.
On the preventive side, before you purchase a property, ask your insurance agent to look up your potential prize property through CLUE or the Comprehensive Loss Underwriting Exchange.
That database system was developed by the insurance industry to track and prevent property owner claim fraud. But you can find out if any claims were made in the last several years like earth movement, mold or anything else.
Consider the cost of coverage. If you are in a brushy area or in a flood zone, your insurance will be both considerably more expensive and offers you more exposure to a flood or fire. That is something to consider.
“Make sure you review your policy,” said Wendy Holt of Rancho Cucamonga-based Holt Insurance Agency, who explained that property owners may be underinsured in respect to dollar coverage.
Surprisingly, Holt told me that only 10 percent of her clients carry earthquake insurance because it’s expensive and the deductibles are high. She has seen a spike in folks getting flood insurance because of El Nino, regardless of being in a flood zone or not.
On the mortgage side, if you have equity, you should always carry a home equity line-of-credit for safety sake. And, if something happens to your house or your neighborhood, immediately siphon the money out and put it in your bank account because you may need the cash to rehabilitate your home or just to live on until the disaster passes and life goes back to normal.
I have one client in Porter Ranch who needs to refinance and one in a nearby Granada Hills who wants to knock his rate down. Both zip codes are on many lenders’ temporary timeout list. It took a lot of checking before I could find any lenders willing to loan now.
My point is to do some exhausting checking on your own. Don’t let someone tell you that you are frozen out from getting a loan.
The most important point is for you to wait as long as possible before trying to sell a property that has been in catastrophic crosshairs. The worst time to sell is right after the event. Buyers in the near-term will be uncertain if things are going to be OK. Time tends to heal all housing wounds.
Jeff Lazerson - Mortgage Columnist since 2011