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Hurricane Victims' Bills Coming Due
Carlton Roy cleans out a flooded home in Chalmette, La., on Tuesday. Roy works for a contractor that is cleaning out hurricane-damaged homes.
(By Chuck Burton -- Associated Press)
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The mortgage industry, on the other hand, is proposing an additional 90-day automatic reprieve but for only the hardest-hit homeowners -- those with completely uninhabitable, uninsured homes; the rest of the victims could get waivers, but on only a case-by-case basis.
"The clock is ticking, and we need to make a decision on what to do," said Peter K. Gwaltney, head of the Louisiana Bankers Association. "We want to do everything we can for our customers, to make sure they are here in the long run; we don't want to give them any incentive to leave or not come back. We're looking to the regulatory agencies to see how flexible we can be, not what we can get away with."
Houston's Litton Loan Servicing LP, which receives monthly payments on about 500 mortgage loans in Katrina-affected areas, is still in the process of determining where many borrowers are and what condition their homes are in. Larry B. Litton Jr., chief operating officer, said his biggest problem is lack of information about the status of the actual properties. Of the 500 Gulf Coast loans totaling $85 million that Litton services, he has good information about the status of only 100 of the properties.
"It's going to be a very slow process," Litton said. "In many cases, we won't know about the actual condition of these loans for another three to six months." Litton is not planning on beginning foreclosure proceedings any time soon, even on borrowers he has not heard from.
"I can't imagine a servicer is going to foreclose on a property right now, because what are you going to do with the property? Sell it? It makes no sense to own property in the city of New Orleans right now," he said.
New Orleans-based Standard Mortgage Corp., one of the most active mortgage lenders in the metropolitan area, is accepting signed payment plans -- even a pledge scratched out on a napkin -- with a promise to become current by August of next year if borrowers in the disaster areas can't make their Dec. 1 payment deadline.
Metairie Bank & Trust, a small, 56-year-old commercial bank in Jefferson Parish, granted an automatic four-month deferral of payments after the flooding to all of its 5,000 borrowers. Most of those borrowers are now current, said chief executive Ric Smith. For those who aren't, the bank this week began sending letters reminding borrowers that they are expected to become current on their interest payments by Jan. 1.
"But for those that ask us -- and all they have to do is call us and ask us -- we'll let them push the interest payments back," Smith said. He added that the bank has not initiated any foreclosures on loans secured by real estate, "and we don't plan to."
