A recent Washington Post report discusses mortgage delinquency and foreclosure activity in the areas severely impacted by Hurricane Katrina.

Mortgage Payments Lag in Katrina Zone

More home-loan borrowers are behind on their payments in the area hit last year by Hurricane Katrina than in any part of the country in more than three decades, according to a lending trade group.

About 12 percent of mortgage holders in Louisiana and 8 percent in Mississippi were more than 90 days late on their payments, according to the most recent quarterly survey by the Mortgage Bankers Association, which was conducted at the end of 2005. Delinquency rates are higher for those with high-interest loans or loans insured by the federal government.

It is the highest level of mortgage delinquency recorded in any region since 1972, when the trade group began its quarterly survey of lenders. The foreclosure rate is lower than the national average because many lenders have voluntarily agreed not to begin proceedings to claim the properties while borrowers get back on their feet. However, recovery appears to be taking longer than many had anticipated.

"The numbers are still very high four months after the storm," said Jay Brinkman, vice president of research and economics for the Mortgage Bankers Association. He said the only comparison that comes close is with Alaska in the early 1980s, during the oil bust. "It's a once-in-a-century thing, at least I hope," he said. Before the storm, only about 1.33 percent of mortgages in Louisiana and 1.77 percent in Mississippi were seriously delinquent.

Some kinds of loans are more seriously in arrears than others. Borrowers with higher-cost mortgages known as subprime loans, who pay more because they are viewed as higher credit risks than people with good payment histories, are far more likely to have fallen behind. In Louisiana, about 24.3 percent of such borrowers are more than 90 days behind on their mortgages, and in Mississippi, about 19.8 percent are similarly delinquent.

Many loans insured by the Federal Housing Administration are at least 90 days behind -- 21.1 percent in Louisiana and 13.5 percent in Mississippi.

This week, Fannie Mae, the secondary mortgage market giant, said its loss from the storm might not be as high as it first feared. It lowered its estimate to as much as $450 million from $550 million.

Many of the properties whose owners are in default could end up owned by the lenders if cash-strapped borrowers do not have the money to make up the missed payments. Homes that are badly damaged may be too expensive to repair.

"The industry reached into its pockets to carry these mortgages, but the carrying costs are continuing to mount," Brinkman said.

Lenders had expected that many people would be somewhat late in their payments in the months after the hurricane, but many borrowers now appear to be waiting until after they receive federal grants or insurance payments. Many Gulf Coast residents have complained of delays in getting federal money and problems receiving what they consider fair insurance payouts.

Brenda Johnston, city clerk in Biloxi, Miss., said residents are still overwhelmed with the difficulty of rebuilding their lives. "Some folks have had to continue to pay a mortgage on a house that's unlivable," she said. "Some people were left without jobs and can't pay their mortgages because they don't have jobs."

A. Wes Fulmer, vice president of Peoples Bank, with 17 offices in southern Mississippi, said he expects many borrowers to make good in coming months because they are "waiting to settle with the insurance, and finding out what the federal grants will be."

"A lot of our customers are working through their problems, and we'll see a lot of payoffs with their insurance, and then they will try to decide what to do with the little bit of ground they have left," Fulmer said.

The high mortgage delinquency rate could hurt even those who are up to date on their payments or who own homes that had minimal damage. When many homes in an area go into foreclosure, property values typically fall as lenders sell the properties at low prices.

To view the online news report please click on the following link.

Mortgage Payments Lag in Katrina Zone