The Foreclosure Report

Gulf Coast Homeowners Running Out of Time

The Washington Bureau reports that time is running out for homeowners facing default in the hurricane damaged areas. "Federal bank regulators on Wednesday urged lenders to give thousands of homeowners along the hurricane-ravaged Gulf Coast more time before requiring them to resume making mortgage payments. The joint advisory from the Federal Financial Institutions Examination Council and other regulators comes as the initial 90-day grace period offered by most banks after Hurricane Katrina was about to expire and bills were being put in the mail."

"Since the storm, banks and regulators have urged borrowers to call their lenders to work out repayment plans and most lenders have been willing to give deferments of 60 to 120 days. Fannie Mae, the largest buyer of home mortgages in the country, faces up to $550 million in storm-related losses, said it is willing to grant deferments up to 18 months."

"Those in the banking industry say that lenders have an interest in cutting slack to borrowers. The alternative is to foreclose on a flooded-out home and take ownership of a property that has little value. 'Lenders want to rebuild these communities,' said David Boneno, general counsel to the Louisiana Bankers Association. 'Banks don't want to be in the real estate business.'"

"Still, some saw the regulators' statement as a sign of the precarious financial situation in which many property owners along the Gulf Coast find themselves. Rep. Richard Baker, R-Baton Rouge, said the regulators' advisory was an indication that some lenders were poised to ramp up the pressure on borrowers to settle their debts sooner rather than later."

"'The unfortunate reading is that there are lenders on the verge of taking steps to foreclose,' Baker said. 'To me it says that someone out there in significant numbers had plans to send out mortgage bills.'"

"Baker has proposed legislation to help homeowners and lenders. His Louisiana Recovery Corp. would use federal bonds to buy homes in storm-damaged areas with prices based on the amount the owners have paid in mortgage and improvements to their property. It also would pay lenders some percentage of what is owed by the borrower. The corporation would then package the properties and sell them to developers in hopes of reviving flooded-out communities and recouping some of the taxpayers' money."

posted by Ben Jones @ 11:45 AM