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For Sonoma County fire victims: Here’s what you need to know about your mortgage

Mark West Estates residents Brett and Cheryl Gripe, with their dog Major, pose for a portrait at a roadblock on Lambert Drive, which leads into their Larkfield-Wikiup neighborhood, in Santa Rosa, California on Friday, October 20, 2017. (Alvin Jornada / The Press Democrat)

BILL SWINDELL,

Brett Gripe said he wants to rebuild after losing his house in Larkfield’s Mark West Estates neighborhood to the Tubbs fire.

“I think so. Still, it’s too early to tell,” said Gripe, a retired police officer who teaches at Santa Rosa Junior College’s police training academy and referees youth sports. He and his dog escaped from the fast-moving fire thanks to a family friend who knocked on his door at 1:30 a.m. on Oct. 9 to wake him up and tell him to flee.

As part of the recovery process, Gripe has had several phone conversations with officials at his insurance company, Safeco. He’s also been in touch with his mortgage lender, Exchange Bank, where he had just recently refinanced his home loan.

Mortgage lenders are urging the thousands of displaced homeowners like Gripe to reach out to them in the aftermath of the devastating wildfires so fire victims can begin the process of either rebuilding or moving on, leaving behind the home they once had.

“Most of us haven’t been through anything like this before,” Gripe said. “I have lived in Santa Rosa most of my life. Hopefully, they will rebuild the neighborhood.”

While homeowners do reach out to their insurance agents right after natural disasters, mortgage lenders may be an afterthought. But those banks also play a critical role in the recovery process and can aid loan holders as they start down a path that will be new and foreign to the vast majority of them. Most notably, the homeowner is still responsible for their mortgage and property taxes as they go through the claims process.

“People really need to reach out. At Redwood, we want to help people,” said Diane Berthinier, senior vice president of lending at Redwood Credit Union, which had customers who lost their homes. “Everybody is here to help.”

Mortgage holders could be eligible for immediate relief, depending on their circumstances. Redwood, for example, is willing to defer mortgage payments if borrowers are financially strapped as a result of the fires. “There are a lot of people living just paycheck to paycheck,” she said.

Wells Fargo Bank is offering a 90-day relief period for its mortgage customers in areas where residents are eligible for individual assistance by the Federal Emergency Management Agency, said spokesman Ruben Pulido. Homeowners outside those areas could be eligible for relief and should contact the bank. The company has 53,000 home lending customers in Northern California who could have been affected by the wildfires.

Wells Fargo will suspend all negative credit bureau reporting, late fees, collection calls and foreclosure referrals and sales during this post-fire period. Those who are still unable to make payments after the 90-day period will be evaluated for further assistance, Pulido said.

Bank of America will offer assistance based on a customer’s specific need, which could range from waiving fees on its credit cards to temporary forbearance of home loans, according to a statement by spokeswoman Colleen Haggerty.

Borrowers who have loans backed by government-regulated mortgage holders Fannie Mae and Freddie Mac also are eligible for certain relief, those two agencies have announced. The U.S. Department of Housing and Urban Development (HUD) has granted a 90-day moratorium on foreclosures of mortgages insured by the Federal Housing Administration. HUD also has a 203(h) loan for disaster victims, a mortgage that provides 100 percent financing for the reconstruction of their homes, and a 203(k) loan program that allows the displaced to finance the purchase or refinance of a house and its repair through a single mortgage. Those are offered by licensed lenders.

Eventually, the homeowner will come to a settlement with his or her insurance company, resulting in a payout for the cost of replacing the destroyed structure.

However, most do not realize the check from the insurance company will be payable to both the borrower and the lender and that the bank controls the payout, said Richard Redmond, a mortgage advisor with ACM Investor Services loan agency in Larkspur.

The lender controls the payout until the borrower pays off the loan in full, Redmond said. Any monies remaining can be used for rebuilding or buying another property. If they decide to leave the area, though, they will still own the land on the vacant plot if they choose to move.

If a borrower opts to rebuild, they can be placed in a new loan tailored for construction of the new house, said Kevin Smart, vice president for residential mortgages at Exchange Bank. The Santa Rosa bank has 694 home loans worth $279 million in its portfolio, but Smart said it has not determined how many of those homes were damaged or destroyed.

Those building loans are structured for a specific time frame, typically 12 to 18 months, and have slightly higher interest rates than a traditional mortgage, Smart said. Money from the insurance settlement will be combined in a pot with the new loan to cover the cost of the rebuilding, he said.

The reconstruction money will be allocated to the contractor in phases as the construction reaches certain mileposts. That piecemeal process is done to ensure the contractor is adhering to the overall budget as well as performing quality work, said Bill Lowman, president and CEO of the Sacramento-based American Pacific Mortgage lending company.

“As bad as it sounds, you see fraudsters pop up doing this unpermitted work and trying to take advantage of a horrible situation,” Lowman said. “I would be wary of out-of-town folks … You want someone who is reputable and licensed.”

In fact, most lenders use a funds control company to handle payout to contractors, said Redmond. These companies have expertise in weeding out unscrupulous contractors and analyzing accounts for runaway costs, protecting both the borrower and the lender.

Such fraud was rampant in the aftermath of the 1991 Oakland Hills fire and has continued in subsequent disasters, said John Bohannon, director of business development for BuildZig, an Oakland funds control company.

“People rush to do things. They want to rush and rebuild, instead of saying, ‘Hey, let’s vet this contractor,’” Bohannon said.

He also noted that annual inflation for construction labor and materials is about 6 percent, a figure that he said is likely to double because of the North Bay fires, which will add to the overall construction costs.

Once the construction for the new home is completed, any remaining debt can be wrapped into a new home mortgage, Smart said.

Still, experts cautioned there is no way to predict how many displaced homeowners will want to go through the rebuilding process given the hurdles ahead. In the 2015 Valley fire in Lake County, a number of Exchange Bank mortgage holders chose not to rebuild, Smart said.

“It’s going to be frustrating to people. It’s going to be difficult,” Redmond said.

Even homeowner Gripe said he realizes the long road ahead. He considers himself lucky because he has long-term temporary housing, moving into a vacant house in Bennett Valley that his late parents had owned.

“I’m just trying to live day to day,” Gripe said. “I’m for building, but it just can’t bog down for too many people.”

You can reach Staff Writer Bill Swindell at 707-521-5223.

or bill.swindell@pressdemocrat.com.