Tuesday, December 27, 2005

Gulf State Debt Mess 'Not Going To Work'

The LA Times reports on the foreclosure mess in the gulf states. "Across the nation, an average of 4.44 percent of all mortgages were behind by at least one payment, while in Mississippi the figure was 17.44 percent and in Louisiana 24.63 percent."

"As unpaid home-loan bills pile up, mortgage companies and owners of hurricane-ravaged property are still unsure what federal assistance they might get, and uncertain if they can salvage their investments."

"After Katrina and Rita struck, the mortgage industry granted victims an initial 90-day reprieve from payments, late fees and damaging reports to credit agencies. Most home lenders, including the two biggest, Countrywide Financial Corp. and Wells Fargo & Co., have added another 90 days of forbearance for borrowers who need more time. But strains are showing in the fourth month since New Orleans' levees gave way."

"Perhaps 80,000 to 100,000 homeowners whose homes were inundated had no flood insurance, according to Mortgage Bankers Association. Thousands of borrowers have yet to contact their lenders, increasing the odds of foreclosure, bankers and regulators said."

"What's more, Louisiana officials said they have received hundreds of complaints about lenders demanding large balloon payments to bring loans current."

"'This is a big, big deal,' said Rep. William Jefferson, D-La. 'Many of the homeowners are not in their properties and cannot get back into them. Meanwhile they are being required to make lump-sum payments for properties they can't live in. The combination is not going to work.'"

"Demands are coming from certain so-called 'subprime' lenders, who specialize in mortgages for people with credit problems, and other pockets of the market that are not underwritten with the prime lending standards used for traditional loans."

11 Comments:

At 7:23 AM, Blogger Ben Jones said...

What is unbelievable about this situation is; what did they think was going to happen? The US government doesn't have any excess cash. The one quote about the Feds coming to the rescue is a joke.

A key thing here for housing bubble watchers: if the Feds can't bail out a few cities on the low priced gulf, what are the chances they can save San Diego borrowers?

 
At 9:09 AM, Blogger Cassandra said...

Continuing that line of thought...

What did they think was going to happen? What kid of person lives below sea level, (or at least beneath a lake) in an area prone hurricanes, and doesn't have flood insurance?

Having visited once, I can't see why anyone would want to live there at all.

Don't the lenders require insurance?

Looks like both the borrowers and the lenders are going to be hurt. Fine.

I guess the moral problem I have here is why should taxpayers that were smart enough to buy insurance, and bear the financial burden of insurance, have to bail out those that didn't buy insurance? Doesn't that just encourage and reinforce irresponsible behavior? Why should I buy insurance if you’re going to bail me out?

If I remember correctly, we saw a similar behavior after 9/11. Families who lost relatives that had life insurance, received less than those that had planned ahead? Hey! Why waste money on insurance if someone else will pay the bill anyway?

Dear God forgive this horrible cynic…

 
At 4:44 PM, Blogger Chip said...

Cassandra -- that's not cynicism -- it's just the plain unvarnished truth. I'm baffled that the administration is discussing rebuilding, with taxpayers' money, any of the area that is below sea-level. Hopefully there will be an outcry from somewhere out there in Middle America, about the extraction of their hard-earned dollars for such a stupid purpose.

 
At 7:14 AM, Blogger MazNJ said...

Once more I shall misuse a blogger forum. As I've not been able to locate any good sources of information regarding this elsewhere, could anyone recommend a starting point to learn more about foreclosures/tax liens/etc - I happen to be a citizen of NJ. I know my county has sheriff sale and that the numbers and qualities of properties oddly has been growing and I'm interested in observing and possibly participating in the future, however from what people have told me, you have to be a cash buyer for the full amount and also that you need to do heavy research to see if there are additional liens on the property (i'd presume this would be part of the discovery or something during the sheriff sale but who knows)... so, would any of the far more knowledgable patrons of this blog have a recommendation?

 
At 10:10 AM, Blogger dawnal said...

MazNJ said...

" so, would any of the far more knowledgable patrons of this blog have a recommendation? "

I have no specific information for you but I would caution you to not worry about it. Be patient. You should not bite on an early foreclosure sale. Wait until the number of foreclosures is much higher before beginning to get serious about buying.

You will have plenty of time to learn the ins and outs of foreclosure sales before the right time comes.

 
At 11:43 AM, Blogger MazNJ said...

Nah, I'm a very slow and patient mover for the most part. Just wanted to be wholly familiar with the procedures for when the time comes.

 
At 11:52 AM, Blogger Catherine Wilkinson said...

cassandra,
You're absolutely right. And while we'll on the subject, what about the tornado alley counties that continue to allow mobile homes to be placed on land that is devastated yearly by tornados? I've read an article about one family that lost 3 homes (all manufactured) but continued to get bailed out by various programs and then they turn around and buy another flying tin can.

 
At 9:02 PM, Blogger Chip said...

maznj -- if you continue to read this blog regularly, what you want to know will appear. I'm not doing hocus-pocus -- just meaning that once the housing bubble has burst completely, many bubble bloggers will shift to this site and some of them will know the answers to your questions.

 
At 7:00 PM, Blogger Jim A said...

cassandra: Lenders require insurance if a house is in a flood zone. Apparently in N.O. many of the flooded houses were not thought to be in flood zones. And what organization makes the maps that show what houses are within flood zones? FEMA, my friends

 
At 9:23 AM, Blogger John Mc said...

FYI With regard to FEMA & the flooding zones in New Orleans. Mike 'Heckavajob' Brown told everyone he could on Capitol Hill that his department was starved of over $75Million bucks by the Department of Homeland Security during the merge of the DHS & FEMA. That flood plain maps were not upto date can only be blamed on the Administration & not directly on FEMA's 'Brownie'.

 
At 12:25 PM, Blogger Loren said...

Don't people understand that they are borrowing money and promising to pay it back NO MATTER WHAT? Just because the house is security for the loan doesn't mean that the lender is guaranteeing that the house is going to be habitable for the life of the loan.

Folks run into this with cars all the time.

It really shows that in this nation we really can't afford our houses, or at least we can't afford what we have to borrow to get our houses.

 

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