High Numbers of Louisiana, Mississippi Home Loans Past-Due; Foreclosure Remains Low

Almost 123,000 borrowers in Louisiana and Mississippi are behind on their mortgages as of the fourth fiscal quarter of 2005, according to a story in today’s New Orleans Times-Picayune. Most are individuals who took advantage of delayed payment structuring in the weeks after Hurricane Katrina, but are now left with past-due loans.

As expected, the percentage of mortgages in the two states that were 30 or more days past due is significantly higher than either state has reported in recent times. However, the good news is that fewer mortgages were designated for foreclosure than in the past, said the Mortgage Bankers Association (MBAA) in a recent survey.

“The foreclosure forbearance program is working,” said Jay Brinkmann, V.P. of Research and Economics for the MBAA.

In the immediate aftermath of Katrina, most lenders offered 90-day payment deferrals. Yet those delayed payments are still considered to be in the delinquency stage. The percentage of Louisiana home loans 30 or more days late rose to 24.6 percent in the third quarter, which ended one month after the storm hit. By the fourth quarter, some borrowers had resumed payments and the delinquency rate dropped to 20.8 percent. By comparison, only 7.5 percent of all Louisiana mortgages were past due in the second half of 2004.

A similar pattern developed in the Mississippi housing market, where 17.4 percent of all home loans were delinquent in the third quarter of 2005. That number dropped to 16.9 percent in the fourth quarter, but still represents a huge jump from the 9.2 percent of all Mississippi mortgages past due in 2004. The two states boast a combined 76,000 mortgages that are considered “seriously delinquent” — 90 days or more past due — as of the final quarter 2005. Were it not for the natural disaster, seriously delinquent loans would be widely subject to foreclosure.

“Given the numbers, some number of delinquent loans will end in foreclosure. But in the immediate aftermath, you don’t want to hold foreclosure over their heads because it would exacerbate economic development,” Brinkmann said.

The delinquency numbers in Louisiana were substantially higher for those holding Federal Housing Administration (FHA) loans or subprime mortgages. Brinkmann said those two groups are considered higher credit risks and do not qualify for the conventional (or prime rate) mortgages in the mainstream market. Thus, higher monthly payments make it harder to rebound from such a setback. In Louisiana, 33.9 percent of subprime loans and 31.8 percent of FHA loans were at least 30 days past due as of the end of 2005.

Brinkmann said the growing number of individuals who have missed three or more payments exacerbates the need for a housing and economic development program funded by the State of Louisiana. Mississippi is further along on its economic recovery program, which follows the lead of the Department of Housing and Urban Development’s efforts to rebuild the region and offer financial assistance. Interestingly, Brinkmann also noted that a number of homeowners continue to make their mortgage payments despite not being able to occupy their homes.

“These people are putting their faith and money into their expectations of a recovery along the Gulf Coast,” he said. “Those expectations absolutely must be met.”

Whether it’s devastating damage or lesser, but still important issues such as rising insurance premiums, the fallout from last year’s hurricane season continues to hamper the Gulf Coast. Clearly these issues will take a long time to straighten out. We can only hope that the affected individuals will continue to receive Louisiana and Florida home loan relief, and that the entire region will be better prepared next time around.