Retired New Orleans cook Hattie
Warren survived Hurricane Katrina. Now, at 82, she is struggling
with the $100,000 subprime mortgage she took out to pay bills
and ``have a few dollars'' five months before Lake Pontchartrain
flooded the city.
The payment on her adjustable-rate loan, about $860 a
month, eats up three-quarters of her income from Social Security
and the rent daughter Gloria pays to share the two-family Creole
cottage.
``I'm going to have a little problem,'' she says, sitting
in the pink-paneled living room of her home in the city's Treme
section, one of the first places in the U.S. blacks were allowed
to own property.
To trace the turmoil in the subprime mortgage market, come
to New Orleans, where borrowers who can't repay are fueling a
surge in delinquencies. With acres of gutted houses and weed-
choked yards, Louisiana's largest city is being slammed again as
lenders exit the business, demand late payments and impose
tougher standards on new loans.
About 21 percent of the state's 60,000 subprime mortgages
were at least 30 days past due in last year's fourth quarter, up
from 15 percent in 2004, the year before the storm. Only
Mississippi and Michigan had higher delinquency rates for home
loans to borrowers with weak credit or heavy debt, according to
the Washington-based Mortgage Bankers Association.
`Our Best Interest'
``We are urging lenders not to demand immediate payment,''
Louisiana Governor Kathleen Blanco says. ``It's in all of our
best interest that they help our people.''
Massachusetts Representative Barney Frank, the Democrat who
is chairman of the U.S. House Financial Services Committee, said
in an interview that there is ample reason to give ``special
consideration'' to Louisiana mortgage holders. He also wants to
ensure no one else takes out a loan they can't handle.
``Lending people money if they don't have a good chance of
paying it back doesn't help,'' he says.
Warren, who was born when Calvin Coolidge was in the White
House, was able with her limited income to get a mortgage for as
much as some New Orleans real estate agents estimate to be the
full value of her house.
``I would guess she could get just around $100,000 to
$110,000,'' says Helen Krieger, a broker who priced a termite-
damaged listing down the street for just under that amount.
Bruce Dorpalen, director of housing counseling with Acorn
Housing Corp., a Chicago-based group assisting Warren, says she
never should have been given an adjustable rate loan.
`Forced Into Foreclosure'
``If your income is going to be steady and your mortgage
payments are going to reset, you are essentially forcing
somebody into a situation where they are going to be either
delinquent or forced into foreclosure,'' he says.
Countrywide Financial Corp., which holds Warren's loan,
``cannot and does not discriminate based on age as a credit
granting criteria,'' Jumana Bauwens, a spokeswoman, said in an
e-mailed response to questions about the credit and Dorpalen's
comment.
The Calabasas, California-based company, the biggest U.S.
mortgage lender, offered homeowners ``temporary mortgage payment
relief'' after hurricanes Katrina and Rita hit in August and
September 2005, Bauwens says. It also contracted with Acorn
Housing to help ``locate borrowers who had not contacted their
mortgage lender to begin working toward alternatives to
foreclosure,'' she said.
Hurricanes Katrina and Rita damaged or destroyed 123,000
owner-occupied homes and 80,000 rental units in Louisiana. About
half the property was in Orleans Parish, which encompasses New
Orleans.
Poorest Residents
The Lower Ninth Ward, home to many of the city's poorest
residents, remains virtually uninhabited. Sections including
Gentilly and Lakeview have a mix of boarded-up houses and newly
refurbished Cape Cods and Colonials.
Borrowers such as Gwendolyn Adams, who took out a 9.99
percent loan before Katrina to pay her son's college tuition and
renovate, are trying to manage payments on homes that no longer
exist. The city tore down her Lower Ninth Ward house because it
was deemed a safety hazard.
Citigroup Inc. agreed to reduce her payment to $350 from
about $650, says Adams, a 55-year-old housing activist who used
insurance money to cut her outstanding balance to about $14,000.
``They wanted money, and they were willing to take a little bit
rather than none at all.''
Road Home Grants
Adams is one of more than 100,000 people waiting for grants
under Louisiana's Road Home program, a federally funded plan to
compensate residents whose properties were damaged or destroyed
by Katrina and Rita. About 11 percent of 134,000 applicants had
received payments as of May 5, according to ICF International,
of Fairfax, Virginia, the program's administrator.
Blanco says Road Home came to a ``screeching halt'' for
almost a month after a March 16 rule change by the U.S.
Department of Housing and Urban Development.
HUD told the state it could no longer require grant money
to be paid into escrow accounts, where it was protected from
creditors and doled out in incremental payments to fund
rebuilding. The governor says HUD left no alternative but to
give lump sums to residents, who may now be forced to use the
money for mortgage payments rather than repairs.
``It just stunk to high heaven,'' Blanco said in an
interview.
Andrew Kopplin, executive director of the Louisiana
Recovery Authority, said that he heard an increasing number of
complaints from families being pressed for payment.
`Pressure From Lenders'
``There is a lot more pressure from the lenders on our
homeowners today than there was three months or six months
ago,'' Kopplin said.
Subprime borrowers face other problems too.
Seth Weingart, a counselor with the Greater New Orleans
Fair Housing Action Center, said that he found lenders billing
for taxes that weren't owed and insurance coverage already paid
for. Some demand fees when people use insurance to prepay loans,
he says.
Borrowers also sometimes have trouble deciphering messages
from companies servicing their mortgages, Weingart said.
In one case, Option One Mortgage Corp. told borrowers
Fannie Mae and Freddie Mac, the two largest buyers of U.S. home
loans, were telling lenders ``to end the moratorium'' on
foreclosures that went into effect after Katrina. In a letter
dated Oct. 16, 2006, the Irvine, California-based company said
it would begin reporting delinquent mortgage loans to credit
bureaus, assessing late charges and pursuing foreclosure.
Fannie Mae's Position
Fannie Mae replaced the foreclosure ban with a requirement
that lenders must have ``exhausted all'' alternatives and
received written approval before beginning legal action. It
never directed lenders to foreclose, said Christina McHenry,
director of media relations for Fannie Mae.
``In hindsight, in reviewing the letter, we agree that we
could have communicated this more effectively,'' Option One
spokeswoman Christine Sullivan said in an e-mail response to
questions.
H&R Block of Kansas City, Missouri, the largest U.S. tax
preparer, agreed April 20 to sell Option One to Cerberus Capital
Management LP, a New York private-equity and hedge-fund manager.
Hattie Warren -- who has trouble remembering how many
grandchildren she has, let alone dissecting her loan -- pins her
hopes on Regan Brewer, a counselor from Acorn.
Brewer said she is looking into whether it's possible to
negotiate lower payments on the black-and-white cottage Warren
has called home since 1973.
Seeking help wasn't easy, Warren said. ``I don't like to
ask nobody,'' she said.
To contact the reporter on this story:
Sharon L. Crenson in New York at
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