Oso Residents Lose Homes, Mortgages Still Standing


The March 22nd mudslide in Snohomish County, Washington killed 29 people and destroyed 35 homes. With President Obama’s declaration of the Oso mudslide a “major disaster,” the area will have access to federal relief, including financial help for mortgages on the destroyed homes.

Federal Relief for Affected Oso Homeowners

Washington Governor Jay Inslee’s request last week for a federal major disaster declaration was successful, bringing relief for the hard-hit area. In addition to providing help removing debris and implementing safety measures, federal resources will likely be used to help homeowners left with a mortgage but no house.

The Department of Housing and Urban Development started a 90-day moratorium on foreclosures of the destroyed houses. It will also allow Washington State to use its Community Development Block Grant money to help, possibly by writing off the mortgages.

Another option includes the Federal Emergency Management Agency (FEMA) covering 75 percent of the cost of purchasing land in disaster areas. In this case, the property owners would be compensated fairly.

Before the federal government made assistance available, some banks had already offered help. Coastal Community Bank said they were prepared to write off their debt, and others like JPMorgan Chase and Wells Fargo have pledged tens of thousands of dollars to help with disaster relief.

Mudslides Covered Under Flood Insurance or Homeowner’s Insurance?

Flood insurance may help some homeowners affected by the disaster, but probably not those who lost their homes entirely. Only houses that were affected by the backed-up river will be covered under the flood insurance.

None of the destroyed houses had insurance to protect against landslides. Mudslides and landslides, along with floods and earthquakes, are not covered under standard insurance policies. A “difference-in-condition” policy can help in the case of an earthquake or landslide, but only a fraction of people have such a policy in Washington State. It’s difficult to get such a policy in a location with an imminent threat of such disasters, so home and business owners need to buy a policy long before there is any apparent threat.

Interestingly, this threat does not stop banks from offering mortgages on properties in slide-prone areas. A landslide occurred in the same location in January 2006, but many houses were bought with a loan since then, including 21 that were destroyed in the March 22 mudslide.