NEW ORLEANS (WVUE) – High property insurance costs are doing more than straining some people’s budgets. The ongoing insurance crisis in Louisiana is forcing some people into foreclosure.
Andreanecia Morris is the executive director of Housing NOLA.
“We’re seeing people who are having their principal and interest which is the largest part of your loan be eclipsed by the taxes and insurance portion, be double what that principle and interest payments to the banks is. That’s a dramatic increase in your monthly payment and it’s leading to foreclosures,” said Morris.
Insurance Commissioner Jim Donelon recently told FOX 8 that many people are losing their homes due to higher insurance costs.
“They are losing their houses every month because we had to raise the rates for Citizens, 120,000 policies at the time, this past January 1, so that 10,000 renew each month throughout the year and are hit with that 63% rate increase,” said Donelon.
Morris says, “We’re seeing that as well. We’re seeing people who are, foreclosure takes a minute, so we’re seeing people who are behind. We’re seeing particularly for people who were able to buy in the last 18 years through the myriad of programs that we stood up to help first-time homeowners build wealth here in New Orleans.”
Guy Williams is president and CEO of Gulf Coast Bank & Trust.
“Fortunately, none of our customers have lost their homes because of insurance but what we are seeing is some of our citizens, particularly the seniors that don’t have mortgages are choosing not insure and that’s unfortunate because if there’s a storm or hurricane they’ll have no ability to rebuild unless they have substantial assets,” said Williams.
He added that some real estate deals are not closing because of the insurance cost.
“Definitely, it makes the real estate business tougher we’re seeing fewer sales this year than last and I think people are having to adjust to higher insurance but also higher interest rates. And so it has been a challenge,” said Williams.
Typically, insurance costs get factored into monthly mortgage payments.
“When the buyer finds out what their premium is, particularly some of the new flood numbers they’re saying well I just can’t afford it and either the deal has to be renegotiated to a lower price or some cases the transactions just doesn’t occur at all.”
According to ConsumerFinance.Gov which has data through March 2023, Louisiana had a 2.5% mortgage delinquency rate compared to the national average of 1.3%.
And that’s not all. ConstructionCoverage.Com shows New Orleans-Metairie at the top of the list in terms of large metro areas and mortgage delinquencies.
Morris says it is not a surprise.
“Unfortunately, it’s not.”
She says communities could have done more years ago to help give people more of financial cushion.
“And so, when the recovery dollars come in, when the insurance proceeds come in, when the bank financing comes in, it’s all of our responsibility. I’m not letting the bankers off the hook, I’m not letting the insurance companies off the hook, I’m not letting our policymakers off the hook, I’m saying we need to design programs and we need to be holding that line that we are creating success stories not simply saying you’re going to pull yourself up by your bootstraps,” said Morris.
Meanwhile, Williams says people who want to become homeowners should not give up.
“What we encourage people to do is what we call, “marry the home and date the mortgage. If you find a home you love, go ahead and buy it and then when rates drop which we think they will in a year or so refinance to a lower mortgage,” he said.
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Source: fox8live.com