Houma Foreclosures Rose 379% Due to Post-Hurricane Deferrals

by Donald Hanz on cities

Houma foreclosures shot up by 379 percent in 2009 largely because of mortgage payment deferrals that were encouraged by the mortgage banks themselves.

Many Houma homeowners in foreclosure now are complaining that their mortgage banks encouraged and allowed them to defer their home loan payments after Hurricane Katrina devastated Louisiana and other Gulf Coast States in 2005.

These homeowners argued that the banks, which should know better, should have been more forthright and should have explained the risks. They said they could have considered other options if they know there is a risk their homes could become houses for sale.

What they thought at that time was that the deferred payments would be collected at the end of the payment term or at times when homeowners are able to pay increased monthly payments. Also, they never thought that the deferrals would affect their credit reports.

Now, most of them could not refinance their mortgages because of the payment deferrals. Some banks even require them to pay all the unpaid monthly amounts in a single payment, including penalties, interests and other fees, before any negotiation can be started.

Bernadette Guidry is among those whose homes almost became Houma foreclosures if not for the intervention by the Department of Veterans Affairs. But now, she has to cough out $1,252 every month, a jump from the $1,012 she has been paying before Hurricane Katrina and she now owes the bank $188,000, up by $49,000 from the $144,000 low-interest loan she originally got from the VA.

Guidry was also forced to file for bankruptcy protection in 2008 when her home was listed for foreclosure auction.

Charlotte LeBlanc is another homeowner who has lost faith in big banks. The roof of her $139,000 house was taken away by Hurricane Gustav in 2008. At the evacuation center, she called her lender Chase and was offered a deferral option. Last year, she was shocked when Chase sent her a notice saying she was eligible for loan refinancing with a monthly payment of $972, much higher than the $801 she used to pay monthly.

Louisiana did not suffer from the effects of toxic mortgages prevalent in other places in the U.S., but these post-hurricane payment deferrals have been driving Louisiana foreclosures.

In 2009, Louisiana had 11,750 foreclosure filings, a substantial increase of almost 65 percent from filings in 2008 and largely driven by the three-digit increase in Houma foreclosures.