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Overall about 21 percent of mortgages in Louisiana and 17 percent in Mississippi were at least 30 days delinquent as of Dec. 31.
By Martin Wolk Executive business editor
msnbc.com
updated 3/14/2006 7:40:23 PM ET 2006-03-15T00:40:23

Nearly one in every eight mortgage holders in Louisiana and Mississippi was considered seriously delinquent at the end of last year, but few lenders initiated foreclosure proceedings in the hurricane-ravaged area, a mortgage bankers group reported Tuesday.

Nearly 76,000 out of a total 632,000 mortgages were 90 days overdue or more as of Dec. 31, putting them in the seriously delinquent category, according to the Mortgage Bankers Association study. But almost no new foreclosure proceedings have been started because of government and industry actions giving owners more time to bring their mortgages up to date.

Overall about 21 percent of mortgages in Louisiana and 17 percent in Mississippi were at least 30 days delinquent as of Dec. 31, representing a slight improvement over the previous survey conducted at the end of September, just a month after Hurricane Katrina severely damaged or destroyed thousands of homes along the Gulf Coast.

But most of those mortgages have now moved into the "seriously delinquent" category, meaning payments are at least 90 days past due.

Normally that would mark a time when mortgage lenders could initiate action to take control of the property through foreclosure, but so far that has been extremely rare in the hurricane zone, according to the mortgage bankers.

In fact, foreclosures in Mississippi and Louisiana are much more rare than elsewhere in the country, in part because of government and industry "forbearance" programs that give homeowners more time to bring their loans up to date.

The rate of new foreclosures in the fourth quarter was only 0.16 percent in Louisiana and 0.26 percent, compared with the national rate of 0.42 percent. In both states, the rate was at least three times as high in the comparable year-earlier period.

In Louisiana, for example, lenders began foreclosure proceedings on only 657 homes in the fourth quarter, compared with nearly 2,400 in the second quarter, the last full quarter before Katrina, according to the MBA figures. In Mississippi lenders began foreclosing on 576 properties, compared with 1,400 in the second quarter.

All told there are about 630,000 properties with mortgages in Louisiana and Mississippi, according to MBA figures, of which 123,000 were at least 30 days delinquent. In the New Orleans area alone, at least 95,000 residential structures, or two-thirds of the total, suffered damage totaling $8 billion to $10 billion, according to a previous study by the mortgage bankers.

A spot check with real estate agents and other officials in Bay St. Louis and Waveland, Miss., a badly damaged region where MSNBC.com has done extensive reporting over the past six months, confirms that few if any properties have been foreclosed on since the storm swept through.

"There was speculation there would be massive foreclosures, but I have not seen any," said agent Herb Dubuisson Sr. of Coldwell Banker Alfonso Realty Inc. in Waveland, who has been selling homes in the region for more than 30 years.

Other agents and city officials could not point to a single new foreclosure proceeding, although any foreclosures would have to be well-publicized in local newspapers.

In fact, government and industry guidelines have put a lot of pressure on lenders to avoid beginning foreclosure proceedings. In general, homeowners with government-backed loans were allowed to suspend payments for 90 days after the Aug. 29 storm, and that period was extended for another 90 days, bringing it to March 1.

Federal guidelines, which are followed by most large lenders, then gave borrowers another 120 days before foreclosure proceedings could be initiated, bringing it up to July 1, as long as borrowers make a written commitment to work with their lender on bringing their loan up to date.

"By and large (lenders) have followed the advice on the moratorium," said Jay Brinkmann, vice president of research and economics at the mortgage bankers group. "Ultimately they did not want to do anything to impede long-term development, and they know it's in their best interest to promote long-term development down there.

The mortgage bankers study found that the delinquency rate is much higher -- nearly 33 percent -- for borrowers who have "subprime" loans, indicating they have a poor credit history and pay a higher-than-average interest rate.

Yet even for subprime borrowers, only about 500 foreclosures were initiated in the fourth quarter, compared with 1,600 in the last full quarter before the storm.

While borrowers in the hurricane zone still have to pay off their loans, in many cases lenders are not reporting delinquent borrowers to credit agencies, nor are they charging late fees or extra interest. But the responsibility still falls to the borrower to work with their lender on developing a payment plan.

"It's all about communication," said Nova Barnett, a spokeswoman for Washington Mutual, one of the nation's biggest mortgage lenders. "Foreclosure is never a primary option for us. We will work with our borrowers as long and as much as we need to to avoid foreclosure."

Lenders like Washington Mutual have good reason to wait in the case of Katrina-damaged properties. Thousands of homeowners have entered mediation or begun litigation in an effort to get more money from their insurance carriers. Many carriers have paid only a limited amount because so much of the damage was caused by rising floodwaters or storm surge, which generally is excluded under homeowner policies.

But even if homeowners are unsuccessful, Congress is providing relief that could allow many homeowners to bring their mortgages up to date and rebuild. Under a bill signed into law in December some homeowners in Mississippi can soon apply for grants of up to $150,000 to cover uninsured damages. The future is less certain for homeowners in Louisiana who suffered uninsured damages.

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