[StBernard] Foreclosures still rare in Katrina-ravaged zone

[Westley Annis]

Foreclosures still rare in Katrina-ravaged zone 
One in eight mortgages seriously delinquent, but lenders show patience

By Martin Wolk
Chief economics correspondent
MSNBC
Updated: 7:40 p.m. ET March 14, 2006


Nearly one in every eight mortgage holders in Louisiana and Mississippi was
considered seriously delinquent at the end of last year, but few lenders
initiated foreclosure proceedings in the hurricane-ravaged area, a mortgage
bankers group reported Tuesday.

Nearly 76,000 out of a total 632,000 mortgages were 90 days overdue or more
as of Dec. 31, putting them in the seriously delinquent category, according
to the Mortgage Bankers Association study. But almost no new foreclosure
proceedings have been started because of government and industry actions
giving owners more time to bring their mortgages up to date.

Overall about 21 percent of mortgages in Louisiana and 17 percent in
Mississippi were at least 30 days delinquent as of Dec. 31, representing a
slight improvement over the previous survey conducted at the end of
September, just a month after Hurricane Katrina severely damaged or
destroyed thousands of homes along the Gulf Coast.

But most of those mortgages have now moved into the "seriously delinquent"
category, meaning payments are at least 90 days past due.

Normally that would mark a time when mortgage lenders could initiate action
to take control of the property through foreclosure, but so far that has
been extremely rare in the hurricane zone, according to the mortgage
bankers.

In fact, foreclosures in Mississippi and Louisiana are much more rare than
elsewhere in the country, in part because of government and industry
"forbearance" programs that give homeowners more time to bring their loans
up to date.

The rate of new foreclosures in the fourth quarter was only 0.16 percent in
Louisiana and 0.26 percent, compared with the national rate of 0.42 percent.
In both states, the rate was at least three times as high in the comparable
year-earlier period.

In Louisiana, for example, lenders began foreclosure proceedings on only 657
homes in the fourth quarter, compared with nearly 2,400 in the second
quarter, the last full quarter before Katrina, according to the MBA figures.
In Mississippi lenders began foreclosing on 576 properties, compared with
1,400 in the second quarter.

All told there are about 630,000 properties with mortgages in Louisiana and
Mississippi, according to MBA figures, of which 123,000 were at least 30
days delinquent. In the New Orleans area alone, at least 95,000 residential
structures, or two-thirds of the total, suffered damage totaling $8 billion
to $10 billion, according to a previous study by the mortgage bankers.


A spot check with real estate agents and other officials in Bay St. Louis
and Waveland, Miss., a badly damaged region where MSNBC.com has done
extensive reporting over the past six months, confirms that few if any
properties have been foreclosed on since the storm swept through.

"There was speculation there would be massive foreclosures, but I have not
seen any," said agent Herb Dubuisson Sr. of Coldwell Banker Alfonso Realty
Inc. in Waveland, who has been selling homes in the region for more than 30
years.


Other agents and city officials could not point to a single new foreclosure
proceeding, although any foreclosures would have to be well-publicized in
local newspapers.

In fact, government and industry guidelines have put a lot of pressure on
lenders to avoid beginning foreclosure proceedings. In general, homeowners
with government-backed loans were allowed to suspend payments for 90 days
after the Aug. 29 storm, and that period was extended for another 90 days,
bringing it to March 1.

Federal guidelines, which are followed by most large lenders, then gave
borrowers another 120 days before foreclosure proceedings could be
initiated, bringing it up to July 1, as long as borrowers make a written
commitment to work with their lender on bringing their loan up to date.

"By and large (lenders) have followed the advice on the moratorium," said
Jay Brinkmann, vice president of research and economics at the mortgage
bankers group. "Ultimately they did not want to do anything to impede
long-term development, and they know it's in their best interest to promote
long-term development down there.

The mortgage bankers study found that the delinquency rate is much higher --
nearly 33 percent -- for borrowers who have "subprime" loans, indicating
they have a poor credit history and pay a higher-than-average interest rate.

Yet even for subprime borrowers, only about 500 foreclosures were initiated
in the fourth quarter, compared with 1,600 in the last full quarter before
the storm.

While borrowers in the hurricane zone still have to pay off their loans, in
many cases lenders are not reporting delinquent borrowers to credit
agencies, nor are they charging late fees or extra interest. But the
responsibility still falls to the borrower to work with their lender on
developing a payment plan.

"It's all about communication," said Nova Barnett, a spokeswoman for
Washington Mutual, one of the nation's biggest mortgage lenders.
"Foreclosure is never a primary option for us. We will work with our
borrowers as long and as much as we need to to avoid foreclosure."


Lenders like Washington Mutual have good reason to wait in the case of
Katrina-damaged properties. Thousands of homeowners have entered mediation
or begun litigation in an effort to get more money from their insurance
carriers. Many carriers have paid only a limited amount because so much of
the damage was caused by rising floodwaters or storm surge, which generally
is excluded under homeowner policies.

But even if homeowners are unsuccessful, Congress is providing relief that
could allow many homeowners to bring their mortgages up to date and rebuild.
Under a bill signed into law in December some homeowners in Mississippi can
soon apply for grants of up to $150,000 to cover uninsured damages. The
future is less certain for homeowners in Louisiana who suffered uninsured
damages.

C 2006 MSNBC Interactive

C 2006 MSNBC.com

URL: http://msnbc.msn.com/id/11829232/page/2/