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2 years After Katrina, FEMA still not Ready









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Thursday, March 16, 2006
Mortgage delinquencies in Louisiana and Mississippi at record levels
As you might expect, mortgage delinquencies in Louisiana and Mississippi are at an all time high as a result of Katrina. A new report by the Mortgage Bankers Association says that nearly 76,000 homeowners were "seriously delinquent" (90 days or more past due or in foreclosure) at the end of December, 2005. According to the MBA:
"…the fact that we have almost 76,000 people who have not been able to resume making their mortgage payments, most as a direct result of Hurricane Katrina, points to the need to get a housing and economic development program funded and under way in Louisiana, and build support for the initiatives already undertaken in Mississippi," said Jay Brinkmann, vice president of Research and Economics at MBA.According to the report, "In Louisiana, 16.1 percent of prime loans were delinquent, 33.9 percent of subprime loans and 31.8 percent of FHA loans." (Subprime loans are loans to people with lower credit ratings.)The report notes, however, that the rate of foreclosure has decreased significantly, and is currently well below the national average. The MBA attributes this to "forbearance" programs initiated by lenders to give Katrina victims a temporary break from making mortgage payments. And, the MBA sees some positive signs:
"It is also important to realize that a number of homeowners continue to meet their financial obligations despite not being able to occupy their homes or being temporarily relocated for other reasons. These people are putting their faith and money into their expectations of a recovery along the Gulf Coast and those expectations must be met," Brinkmann added.You probably didn't expect to see a reference to the Mortgage Bankers Association here at Facing South, but this report illustrates a) Katrina's far reaching effects on the economy, and b) that even the most conservative members of the business community are concerned about the pace of the recovery effort and the need for immediate and substantial government funding to help the people of the Gulf Coast.
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Credit Agencies Won't Give Katrina Victims A Break
Equifax, Experian Refuse to Note Pre-Storm Credit Scores

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October 6, 2005 Six national consumer organizations are stepping up the pressure on the consumer reporting agencies Equifax, Experian, and TransUnion to help Hurricane Katrina survivors who are facing major economic disruption.
Hurricane Katrina• Mississippi Sues State Farm Over Katrina Coverage• Katrina's Legacy: A Flood-Damaged Handicap Van• Payback: State Farm Writes Off Mississippi• Judge Nixes State Farm Katrina Settlement• Judge Rules Against State Farm in Katrina Case• Victimized Twice: Hurricane Victims Scammed by Unscrupulous Contractors• New Orleans Refloats Its Cruise Ship Business• One Year Later: To Miss New Orleans• Louisiana Probes Humane Society• Airlines Slow to Ramp Up New Orleans Flights• Insurance Rates Up Sharply in Katrina's Wake• Controversy Swirls Around Louisiana Reconstruction Plan• Gulf Coast Homeowners File Class Action against State Farm• Future of Gulf Coast Homeowners Insurance Murky, S&P Warns• Christmas Among the Ruins: A New Orleans Holiday• Sen. Trent Lott Sues State Farm over Katrina Damage• Gray Line to Offer Katrina Tours• No Flood Contamination Found in Gulf Coast Seafood• More ... The groups say the suffering from the devastation will be quickly compounded by adverse consequences from reduced credit scores based on late payments reported by creditors.
Consumer groups predict the reduced credit scores will hinder survivors trying to get apartments, home mortgages, car loans, home or auto insurance, and credit cards after the disaster.
On Sept. 12, the groups say they approached Fair Isaac Corp., a leading developer of credit scores, seeking a change in the credit scoring model. While those discussions have been productive, a change in the scoring model takes more than a year to develop and implement.
For this reason, the consumer groups said they approached each of the three major consumer reporting agencies and asked them to develop and retain on file a "pre-disaster information" credit score based on current information on consumers in the counties affected by Hurricane Katrina.
The consumer groups made the request on Sept. 21, 2005. Equifax declined on Sept. 30, and Experian declined on Oct. 3. The groups are still awaiting TransUnion's response.
"We asked the consumer reporting agencies to do one simple thing - run and keep a credit score before negative information starts to pile up in Katrina survivors' credit files, unfairly depressing their credit scores and driving up the prices these consumers will face for new credit," said Maude Hurd, President of ACORN.
"Creditors could still get a current credit score, but at least the consumer credit file would also show the credit score before any Katrina-related delinquencies began to be reported," added Travis Plunkett of the Consumer Federation of America.
?The pre-Katrina score is likely to be a better indicator of a person's future credit behavior than a score artificially depressed by missed payments in the wake of the disaster.?
In declining to run and retain pre-disaster credit scores, Equifax and Experian argue that creditors can decide not to report negative information about people in disaster-affected areas. The consumer groups say this doesn't solve the problem, because creditors also are free to decide to keep reporting negative information; no law prevents creditors from reporting missed payments from disaster survivors. If they do so, Katrina survivors will be harmed.
A report by community group ACORN, long headquartered in New Orleans, and ACORN Housing, showed that credit card holders and consumers with high cost home mortgages were not consistently getting the same "90 days to pay," treatment as traditional home mortgage consumers in the disaster area.
"Time is getting short, because negative information may be coming into credit files already, and more of it will come in during October, when creditors who are allowing consumers to skip one payment start reporting October payments as late. The situation will get even worse after 90 days, when more creditors' programs for delaying payments end." said Gail Hillebrand of Consumers Union.
?The contents of credit files can change every day. Until credit scoring models are changed, these models will treat a late payment from a Katrina victim the same way as any other late payment - as a prediction that this consumer is less likely to pay his or her bills in the future. This will increase the interest rates these consumers face. It is imperative that the credit reporting agencies run the pre-disaster score before new negative information begins to pollute the credit files.?
Bruce Dorpalen of ACORN Housing has a team of ACORN Housing counselors helping evacuees in Houston and Dallas.
"Credit card companies were telling our counselors that the consumer could skip one payment, but would have to call back again the next month," Dorpalen said. "People aren't going to complete their recovery from this disaster in one month, or even in the first three months. Negative information coming into the credit files of hurricane victims could devastate their chances to recover by driving up the cost of credit, and hurting chances to qualify for jobs or apartments."
The groups say consumer reporting agencies told them that putting this simple additional information into the credit file would violate federal law.
"We think that is an excuse" said Chi Chi Wu of the National Consumer Law Center.
"Putting the pre-Katrina information score into the comments section of the credit file can only help consumers, and may even help lenders who are trying to quickly evaluate the credit of displaced people," she added.
Ed Mierzwinsky of U.S. PIRG pointed out that legislative reforms also will be needed.
"Creditors shouldn't be allowed to choose to report missed payments from victims of a major disaster in the same way as any other missed payment. Congress will ultimately have to address that issue."
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