Rebuilding Gulf Coast Means Settling Debts

With thousands of flooded-out Louisiana homeowners in a similar bind, a buzz of interest is growing around legislation to bail them out. A bill by Rep. Richard Baker, R-Baton Rouge, would create the Louisiana Recovery Corp., which would use proceeds from the sale of federal government bonds over 10 years to buy up storm-damaged property and pay off the mortgages.

Under Baker's plan, no one would make a profit or receive the pre-Katrina value of their homes. But they could at least avoid the poorhouse.

The corporation would make offers to homeowners based on how much they have paid toward the mortgage and possibly include what they have spent on home improvements. If the homeowner had insurance, it would go toward settling the mortgage.

Baker is reluctant to say how much people could get. The extent of storm damage is still unknown and he said he prefers to leave it up to the LRC board to develop a formula. But he said payments could range from 60 percent to 80 percent of what homeowners have paid in.


Everyone gets something

Most important to homeowners like Perrot, the LRC would also negotiate with lenders to settle up, taking less than the full value of the mortgage from the LRC and releasing the homeowner from the debt.

"I can say this much: Individuals will fare much better than the banks will," Baker said, since he envisions that banks will get at least 40 percent of the unpaid mortgage value.

Nonetheless, the mortgage and banking industries have reacted favorably to the legislation. They have few other choices. Baker's bill is the only one moving through Congress that would bail them out of a financial crisis that could ripple through the national economy if large numbers of an estimated 350,000 borrowers along the Gulf Coast default and banks foreclose.

For banks after Katrina, to foreclose means to own property with value that doesn't come close to covering what is owed on it.

"Banks want to rebuild these communities. They don't want to be in the real estate business," said David Boneno, general counsel to the Louisiana Bankers Association.

From the sound of this capsule summary, it appears to be a good idea. The devil is in the details.

And speaking of devils and details, elections scheduled for February may not come to pass. It all depends on whether the Governor thinks that the elections can be held.

New Orleans' mayoral and city council elections should be postponed for up to eight months because of Hurricane Katrina, the state's top election official recommended Friday.

Gov. Kathleen Blanco has the final say on whether the elections will go forward as scheduled Feb. 4. She was not immediately available for comment but has said she will follow Secretary of State Al Ater's advice.

In his recommendation, Ater said the election should be held by Sept. 30.

The highest profile race set for Feb. 4 is for mayor. Incumbent Ray Nagin, who has gotten both criticism and compliments for his handling of the Katrina disaster, has not formally announced whether he will seek re-election. A Nagin spokeswoman said the mayor had no immediate comment but would likely release a statement on the postponement later Friday.

Races for city council and sheriff are also on the ballot.

In other words, the group of politicians that failed the people of the state of Louisiana are getting to decide whether they can stay in office that much longer because they don't think that they can hold elections in February as originally scheduled. Considering their track record of misjudgment, I think they better make damned sure the elections go off as originally scheduled. Louisiana deserves better.

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