(WAFB) - Some mortgage lenders were brutally honest on Thursday when they met with the State Senate Committee on Homeland Security. Many flood victims are in a bad spot.
Representatives from GMFS Mortgage, one of the largest operations in the state, says 2,000 of their borrowers alone were impacted by the flood, and 60 percent of them did not have insurance. This company didn't have any clients affected by Hurricane Katrina, so this is the first time they've dealt with a disaster of this magnitude.
"Those that have flood insurance are ones that certainly have the proceeds to rebuild, but the federal guidelines require fairly significant and onerous documentations," said Tee Brown, one of the lenders that spoke. "Those that don't have flood insurance, their challenge is different. They don't have those restrictions, but they have the requirement of coming up with the proceeds themselves."
The committee's biggest question was how to help those without insurance. Senator Mike Walsworth says many homeowners have told him they are either paying for the repairs out of pocket, selling their home, which might severely damage their credit, or as a last resort, are giving up.
"So I walk away and it may damage my credit over the next five to eight years, but they didn't have a choice," Walsworth told the lenders. "They're not going to be able to buy another house for four or five years. Their cost of living, because their credit is damaged, has increased so substantially that they probably end up in bankruptcy and so on, but if you look at who losses other than the borrower, it's the mortgage holder," Brown said.
The lenders said they are encouraging customers not to take this route since it could leave the companies holding the mortgages ultimately owning hundreds of abandoned, unrepaired properties. Instead, they are advising homeowners to start their repairs as soon as possible and hope for more federal aid.
Congress has approved $1.6 billion in recovery aid so far. The committee expects homeowners won't start to see that money until April at the earliest, and even then, it may not be enough.
"That 1.6 billion, as they say, is not going to go far enough for all the folks, so you know, our community is resilient, our community is going to be rebuilt, and you know, we are just concerned about those that are not going to have the right amount of money to be able to get back where they are," Brown said.