At a recent  USFN Conference, a session was held to discuss disaster issues. These discussions continue to foster dialogue for resolution and only serve to benefit the industry in preparation for future disasters.  Robert Wooley, the former Insurance Commissioner for the State of Louisiana, provided a firsthand account of the challenges of rebuilding, issues surrounding insurance disbursement of funds, and the status of the New Orleans metropolitan area. 
 
 HUD ML 2006-12 was released on May 24 and extended the foreclosure moratorium for an additional 120 days, provided the affected borrowers contact their mortgage company and make a written commitment to resolve the delinquency.  HUD expects this will be the last moratorium extension since servicers have had sufficient time to make contact with borrowers and perform loss mitigation. 
 
HUD also clarified that standard first time vacancy date rules do not apply to the properties under the foreclosure moratorium.  Servicers will have 90 days from the expiration of the moratorium to initiate foreclosure or loss mitigation.  Servicers will still have 30 days from foreclosure to convey the property. 
 
Servicers remain confused as to the securing procedures in the hurricane-affected areas.  Each file needs to be evaluated on a case-by-case basis prior to ordering preservation work, with the key factor being whether contact has been made with the borrower.  Servicers should attempt to make contact and notify the borrower before performing any preservation services. Upon completion of any preservation service,  a notice should be posted at the property to inform the occupant of whom to contact for information regarding the property.
 
The Department of Veteran Affairs is still encouraging servicers to issue forbearance and have issued servicers instructions similar to HUD.  The Phoenix Regional loan center is assisting the Houston Regional Loan center in addressing the property preservation and payment requests relating to properties in the hurricane areas.  A list of case numbers to be directed to the Phoenix RLC is available at: http://www.vba.va.gov/ro/houston/lgy/home.html.
 
The industry is reporting no contact with borrowers in the affected areas on 10-15% of their loans.  Servicers will need to initiate foreclosure after June 30 on properties where no contact has been made with the borrower. 
 
Several devastated areas remain in the same condition as they did only weeks after the hurricane, with large amounts of remaining debris and unsecure homes.  To help speed the rebuilding effort, several cities and municipalities have issued ordinances requiring property board ups and debris removal by Aug. 29.  The city will issue citations or demolish homes if homeowners do not comply.  The state of Louisiana recently reported less than 200 missing persons.  With such a low number of missing persons, it is evident borrowers that have not been in contact with their lenders after nearly a year following the hurricane, have no intention of returning to their property.  It is recommended that servicers secure properties and remove debris, regardless of loan status, prior to the deadline for demolition. 
 
Cities are proceeding with demolitions of the severely damaged properties because of the extent of mold and structural damage.  Lack of mitigation following the hurricane and flooding led many properties to have severe mold damage.  Insurance carriers will deny claims for mold citing exclusion from the insurance policy.  Robert Wooley explained that mold is not an excluded peril in the state of Louisiana.
 
Servicers' concerns regarding damaged properties remain, whether repairs are being completed correctly and borrowers are receiving sufficient insurance settlements to complete repairs.  The LRA and MDA have issued proposals for the award and disbursement of grant money to homeowners for severely damaged properties not covered by flood insurance.  A total of $9 billion has been allocated by Congress for distribution as grant money to facilitate the rebuilding efforts and encourage the return of residents to the metropolitan areas for the re-establishment of their lives. 
 
Construction prices have risen at an accelerated rate in the hurricane-affected areas due to the shortage of supplies and contractors, and increased demand for both.  Insurance settlements were issued within pricing guidelines established prior to the hurricanes and may not be sufficient to cover the increased costs.  This, coupled with the increased costs and short supply of contractors, may inhibit borrowers from repairing properties timely, if at all. 
 
Services are also receiving reports from borrowers that they have not received hazard insurance checks, despite the settlement of the claim. This is further delaying the rebuilding process.  There have also been reports of checks being issued immediately to the borrower and repairs are underway or completed without notification to the servicer.  Neither example appears to be widespread, but check disbursement controls should be implemented prior to the next disaster.
 
Insurance companies, cities, and the mortgage industries are evaluating their disaster response policies and modifying them as necessary in preparation for future disasters of this magnitude.  Several issues surfaced following Hurricanes Katrina and Rita, including the shortage of contractors and insurance adjusters, shortage of housing and hotel rooms to house the contractors and insurance representatives, and inaccurate insurance settlements (underpayments and overpayments).  Additionally, the undefined NFIP reforms, pending release of new flood maps, and unfinished levee repairs are impeding the rebuilding efforts. 
 
Robert Wooley suggested the servicers and industry coordinate a meeting with the insurance commission and legislators to discuss the unresolved issues prior to establishing business rules for the next disaster.  A cooperative meeting will help the insurance commission, city and state officials, and legislators to understand the role of the servicer and investors in regard to damaged properties and unpaid liens.  Communication between all of the impacted parties is essential to establishing policies that create a win-win situation for all.  Cooperation from the servicers, investors, and legislators will better enable the industry to reach out to the borrowers and educate them on the processes.
 
Robert Wooley emphasized that the cities and municipal offices (such as the sheriff) don't understand the property preservation industry or the client's need for information. In turn, the cities don't understand the roles of the investors, servicers, or field service providers. Communication and education are the keys to developing processes and procedures that allow the industry to handle future disasters with cooperation and success.