A report in the Times-Picayune discusses the press conference held in New Orleans by Sheriff Valteau.

Abandoned-home rule suspended
Lock boxes meant to avert damage

Responding to complaints from homeowners who say they have been locked out of their homes by their mortgage companies, the Orleans Parish civil sheriff's office and the Department of Housing and Urban Development said Monday that they have suspended a practice that requires lending institutions to physically secure abandoned properties in Orleans Parish.

Under the deal, lending institutions should not "install lock boxes on or otherwise secure vacant properties in Orleans Parish that were damaged in Hurricanes Katrina and/or Rita." To do so would undermine recovery efforts, Sheriff Paul Valteau Jr. said. Lenders can continue to secure properties that have been substantially damaged.

The agreement applies only to mortgages backed by the Federal Housing Authority, but Valteau's office is working with other guarantors. Fannie Mae and Freddie Mac, for instance, have said that they have authority to "preserve the property" but would not do it without an attempt to notify the homeowner.

Since the start of the year, there have been several cases in which mortgage companies, following a HUD rule, have installed lock boxes on homes in Orleans Parish that they determined to be abandoned, Valteau said. Lock boxes are steel boxes that prevent a door from being opened by either prohibiting a key or knob to turn.

HUD ordinarily requires lenders servicing loans insured by the FHA to "secure" properties from further deterioration or other damage if the property is abandoned by the homeowner, HUD spokesman Jerry Brown said. It is up to the mortgage company to decide whether a property is abandoned.

"This helps protect communities and helps retain the value of the home," Brown said.

When lenders do not secure property that has been abandoned, HUD may determine that damages incurred are the result of "mortgagee neglect," Brown said. HUD then would reduce any FHA mortgage claim paid to the lender.

"The mortgage companies were acting in response to this clause," Valteau said.

He estimates that 20 to 50 homes in Orleans Parish, most of them in eastern New Orleans, were affected by the rule.

In effect, the rule now is suspended in Orleans Parish.

"Given the widespread displacement of families and the emotional strain these families already faced, HUD recommended that lenders not exercise their authority and automatically secure properties in Orleans Parish," Brown said. "We also removed a potential financial penalty lenders could otherwise face."

Mortgage companies that find they must prohibit access to a property now must contact HUD, which along with the sheriff's office will make determinations on a case-by-case basis.

There is, however, no penalty for mortgage firms that do not follow the agreement. But Valteau said homeowners could take legal action. If necessary, he said, his office also could intervene legally on a homeowner's behalf.

"We haven't worked it to that point because we've received cooperation from the companies that were doing it," Valteau said.

Still, Valteau said suspending the rule is necessary to keep up with continued rebuilding efforts. He noted that several of the homes that had been targeted were not abandoned but that the people who lived in them were displaced and likely returning to the city in increments to repair damage.

Valteau, for instance, began his investigation into the issue in February after learning that a courthouse employee nearly was locked out of a home she owns in central city and rents out.

Myrna Shelton was at work when her contractor called to tell her that her lender, Chase, and a representative from a security company were attempting to install a lock box on the house.

"I was all upset, for one thing, because my notes are all paid up," Shelton said.

The episode was resolved and Shelton said Chase has apologized for the error.

Chase spokesman Chris Spencer said it is common practice for Chase inspectors to visit homes that the company holds mortgages on to ensure that they aren't vacant. After inspectors visit and determine that a home is abandoned, the company calls the homeowner, then sends letters. If there is no response, the property is locked. Doing so "protects the customer as well as ourselves," Spencer said.

However, Chase is working with the sheriff's office and has stopped securing properties as of March 1, Spencer said.

 To view the online article please click on the following link.

 HUD FEMA Orleans Parish Pre Sale Securing