HOME LOANS Complaints levied by Katrina victims

Many who lost homes say some lenders are demanding immediate payment.
LOS ANGELES TIMES
NEW ORLEANS -- As unpaid home-loan bills pile up, mortgage companies and owners of hurricane-ravaged property are still unsure what federal assistance they might get -- and uncertain if they can salvage their investments.
After Hurricanes Katrina and Rita struck, the mortgage industry granted victims an initial 90-day reprieve from payments, late fees and damaging reports to credit agencies. Most home lenders, including the two biggest -- Countrywide Financial Corp. and Wells Fargo & amp; Co. -- have added 90 more days of forbearance for borrowers who need more time. But strains are showing in the fourth month since New Orleans' levees gave way.
Perhaps 80,000 to 100,000 homeowners whose homes were inundated had no flood insurance, according to the Mortgage Bankers Association. Thousands of borrowers have yet to contact their lenders, increasing the odds of foreclosure, bankers and regulators said.
What's more, Louisiana officials said they have received hundreds of complaints about lenders' demanding large balloon payments to bring loans current.
"This is a big, big deal," said Rep. William Jefferson, D-La. "Many of the homeowners are not in their properties and cannot get back into them. Meanwhile they are being required to make lump-sum payments for properties they can't live in. The combination is not going to work."
Major lenders say they are willing to stretch out payment schedules or renegotiate mortgages, and are not demanding missed payments in a lump sum.
Diverted demands
Even so, regulators have received what they estimate as "several hundred" complaints from people who say they received statements from their lenders demanding immediate payment of the equivalent of four mortgage payments, said Darin Domingue, deputy chief examiner at the Louisiana Office of Financial Institutions.
Domingue said the demands are coming from certain so-called "sub-prime" lenders, who specialize in mortgages for people with credit problems, and other pockets of the market that are not underwritten with the prime lending standards used for traditional loans.
He declined to identify the lenders, but said authorities would have grounds to intervene if lenders demanded a new payment schedule that diverted from the original terms. Domingue said state officials are monitoring the situation, but are urging borrowers to first contact their lenders to see if they can resolve payment issues on their own.
Jay Brinkmann, vice president of research and economics for the Mortgage Bankers Association, said he thought any such demand statements had been generated mistakenly by computers after the end of the first 90-day grace period, and did not reflect the intent of any lenders to begin mass foreclosures.
Brinkmann estimated that 5 percent to 10 percent of borrowers in the hardest hit areas have yet to contact their lenders, perhaps because of what he called unwarranted fears of triggering a foreclosure.