Home loan relief in the wake of Hurricane Katrina

Hurricane Katrina, the recent storm that hit the states of Louisiana, Mississippi, and Alabama and turned the city of New Orleans into a swamp has caused untold billions of dollars worth of damage. In addition, the storm put tens of thousands of people out of work, killed thousands more, and completely ruined an untold number of houses. The economic devastation from this storm is so great that it will probably not be able to be fully measured for decades to come.

Adding to the situation is the fact that the entire city of New Orleans has been evacuated while the government cleans up the water, mud and toxic waste that covers the city. Most people who were forced to leave their homes aren’t aware of the extent of the damage to their houses or even if they have homes remaining.  And yet, per their mortgage agreement, they must continue to make their monthly house payments or risk foreclosure.

 This is troubling for man homeowners, who may wonder why they should continue to make payments on a house that may not even exist!

Help may be on the way. The Federal Deposit Insurance Corporation, a government institution that handles banking matters, recently issued some guidelines for home lenders, suggesting that the agency would find it acceptable if lenders were willing to make concessions to homeowners affected by the storm. Along with the FDIC, Fannie Mae and Freddie Mac, two large federally chartered mortgage investment firms, indicated that they would support such accommodations as well. Most major home lenders are expected to go along.

The options will vary from lender to lender, but the guidelines issued by the FDIC included:

• Offering up to three months of no mortgage payments.
• Offering up to eighteen months of reduced mortgage payments.
• Possibly restructuring the loan’s payback schedule completely.

No lender is required to go along with these guidelines, but most are expected to follow them to some extent. Others may even go further, as they examine their customers’ needs on a case by case basis This much is clear, however - the lender can only help their customers if they know that their customers are suffering from a financial hardship. 

The first step for any affected homeowner would be to contact his or her lender in order to explain the problem. Some homeowners know their homes are damaged; others know their homes are gone. Others haven’t been able to see their homes and don’t know if they have been damaged or not. Each homeowner should contact their lender and explain their own particular set of circumstances. At that time the financial institution can explain what concessions, if any, are available to the customer. These institutions are earning their living through real estate investing, but they can’t earn money if they have no customers. 

Many people who work for mortgage companies, banks, and other lenders in the affected areas are homeowners themselves, so they will be particularly sympathetic to anyone who has suffered a hardship as a result of Hurricane Katrina. Help is available to anyone who needs it, but the first step is to pick up the phone and call.