Katrina-Linked FHA Defaults Surge

Nearly 35% of Federal Housing Administration borrowers in hurricane-stricken New Orleans are 90 days or more past due on their mortgage payments as of Nov. 30, according to an FHA report.The report shows that the FHA default rate in the New Orleans metropolitan statistical area has jumped from 11.0% on Sept. 30 to 34.3% as of Nov. 30. Prior to Hurricane Katrina, New Orleans was ranked 37th in terms of FHA defaults. Now it is ranked first in the nation. The MSA defined by the Mississippi coastal cities of Biloxi, Gulfport, and Pascagoula is ranked second, with a 27.8% default rate as of Nov. 30, up from 10.3% at the end of September. The Department of Housing and Urban Development has extended its moratorium on FHA mortgage foreclosures in the Gulf Coast state from March 1 to June 30. However, homeowners in the disaster areas hit by hurricanes Katrina, Rita, and Wilma have to contact their lender/servicer and make a commitment to develop a workout plan by March 31 to avoid foreclosure. FHA borrowers and lenders have until June 30 to finalize and implement a workout plan, HUD said.