Pay for this pile of debris?

OCEAN SPRINGS, Miss. – Like many homeowners around here, Janet Kisling owes a pile of debt on little more than a pile of debris. She has a $1,000-a-month mortgage on a home that is uninhabitable.

For her and others along the Gulf Coast, December brings a cruel cutoff: It marks the end of an informal 90-day grace period that many lenders offered to Hurricane Katrina victims that let them put their mortgage payments on hold.

That means Kisling, a self-employed wardrobe consultant who sells clothing to wealthy women across the country who are too busy to shop, will have to start making payments again on Dec. 15.

“I lost my business. I lost all my merchandise. I’m way behind the eight ball,” said Kisling, who is sleeping in a trailer and waiting for her flood insurance money to come through so she can rebuild her home.

Hers is a tale of woe that stretches across the Gulf Coast, from Pascagoula on the Alabama line through this artsy village on the edge of Biloxi Bay, to New Orleans and west across Louisiana.

Banks and lenders cannot forgive loans entirely without risking the stability of their institutions. Some homeowners will have to pay off debt for years, whether they rebuild or move away; others will be forced to declare bankruptcy.

The scope of the problem is unclear three months after Katrina came ashore Aug. 29.

“How many fit into that category, we don’t really know,” said Chevis Swetman, president and chief executive of Peoples Bank of Biloxi, a $720 million bank that lost several of its branches to wind and floodwaters. He is planning to write off $5 million in losses, but said that is just a guess.

In Pass Christian, where the floods left block after block of tumbled-down trees and upended homes, Philip LaGrange warned: “This month will be a major turning point for most Katrina victims.”

“They’ve been sheltered with no mortgage payments for three months,” said LaGrange, who is trying to rebuild his 160-year-old bed-and-breakfast. “Now, as a December Christmas gift, mortgage payments are due.”

Willie Smith, a 58-year-old funeral home manager in Pascagoula, has to dig himself out of debt before he can begin to think about starting over. He and his wife had less than six years of mortgage payments left on their home when the storm came. The waters rose nearly 6 feet up the walls, ruining nearly everything. He had no flood insurance because his home was not in a federal flood zone.

Smith’s insurance company sent him $1,000 upfront on his homeowner policy. A month after the storm, an adjuster came and concluded that nearly all the damage was from the flood, not the storm, so his policy did not cover it. It covered just under $1,000, meaning Smith owed his insurer $28.97.

But his big worry is the $28,000 left on the mortgage. He and his wife hope to pay their bills and save what they can to rebuild. He can do some work himself. His brother-in-law will help him do electrical work; a volunteer group in Texas has promised to help put up wallboard once he gets new siding, a new roof and power.

“I told my wife, every payday we’ll buy a little bit more. It’ll take us a couple of years to put it back together,” Smith said. “We have no choice. That’s life.”

Bankers across the region say they will try to show some flexibility, but they have obligations to stockholders and banking regulators.

After Katrina, regulators recommended that lenders give homeowners a grace period on their mortgage payments. Most provided 90 days, according to the Federal Financial Institutions Examination Council in Virginia.

O. Bruce Coffman, president of the Louisiana Mortgage Lenders Association, said the industry is not eager to see a lot of foreclosures.

“We’re not in the real estate business,” he said. “They certainly don’t want to own property that’s been virtually destroyed. So I don’t look for the mortgage services industry to pull out the knives this month.”

With the grace period coming to an end, most mortgage companies and banks do not plan to force homeowners to pay everything back at once, Coffman said. Companies will spread the amount over several months: If your mortgage payment is $1,000 a month and you took advantage of the three-month grace period beginning in September, in December you would owe $4,000. But the back payment of $3,000 could be spread out over nine months, so your new monthly payment would be about $1,333.

In cases where homeowners cannot afford to spread out the three payments, mortgage companies will try to work something out, Coffman said.

Mac Deaver, president of the Mississippi Bankers Association, said banks must help homeowners where they can.

“If the community can’t work, can’t get the wherewithal to be employed, make money, make payments, then the banks can’t survive. They’re all in this together,” Deaver said. “It’s an economic engine that has to work together.”

Talk to us

More in Herald Business Journal

Members of Gravitics' team and U.S. Rep. Rick Larsen stand in front of a mockup of a space module interior on Thursday, August 17, 2023 at Gravitics' Marysville facility. Left to right: Mark Tiner, government affairs representative; Jiral Shah, business development; U.S. Rep. Rick Larsen; Mike DeRosa, marketing; Scott Macklin, lead engineer. (Gravitics.)
Marysville startup prepares for space — the financial frontier

Gravitics is building space station module prototypes to one day house space travelers and researchers.

Orca Mobility designer Mike Lowell, left, and CEO Bill Messing at their office on Wednesday, Aug. 16, 2023 in Granite Falls, Washington. (Olivia Vanni / The Herald)
Could a Granite Falls startup’s three-wheeler revolutionize delivery?

Orca Mobility’s battery-powered, three-wheel truck is built on a motorcycle frame. Now, they aim to make it self-driving.

Catherine Robinweiler leads the class during a lab session at Edmonds College on April 29, 2021. (Kevin Clark / The Herald)
Grant aids apprenticeship program in Mukilteo and elsewhere

A $5.6 million U.S. Department of Labor grant will boost apprenticeships for special education teachers and nurses.

Peoples Bank is placing piggy banks with $30 around Washington starting Aug. 1.
(Peoples Bank)
Peoples Bank grant program seeks proposals from nonprofits

Peoples Bank offers up to $35,000 in Impact Grants aimed at helping communities. Applications due Sept. 15.

Workers build the first all-electric commuter plane, the Eviation Alice, at Eviation's plant on Wednesday, Sept. 8, 2021 in Arlington, Washington.  (Andy Bronson / The Herald)
Arlington’s Eviation selects Seattle firm to configure production plane

TLG Aerospace chosen to configure Eviation Aircraft’s all-electric commuter plane for mass production.

Jim Simpson leans on Blue Ray III, one of his designs, in his shop on Friday, August 25, 2023, in Clinton, Washington. (Ryan Berry / The Herald)
Whidbey Island master mechanic building dream car from “Speed Racer”

Jim Simpson, 68, of Clinton, is using his knowledge of sports cars to assemble his own Mach Five.

Yansi De La Cruz molds a cheese mixture into bone shapes at Himalayan Dog Chew on Thursday, Sept. 21, 2023 in Arlington, Washington. (Olivia Vanni / The Herald)
Give a dog a bone? How about a hard cheese chew from Arlington instead!

Launched from a kitchen table in 2003, Himalayan Pet Supply now employs 160 workers at its new Arlington factory.

Inside the new Boeing 737 simulator at Simulation Flight in Mukilteo, Washington on Wednesday, Sept. 20, 2023. (Annie Barker / The Herald)
New Boeing 737 simulator takes ‘flight’ in Mukilteo

Pilots can test their flying skills or up their game at Simulation Flight in Mukilteo.

An Amazon worker transfers and organizes items at the new PAE2 Amazon Fulfillment Center on Thursday, Sept. 14, 2023, in Arlington, Washington. (Ryan Berry / The Herald)
Amazon cuts ribbon on colossal $355M fulfillment center in Arlington

At 2.8 million square feet, the facility is the largest of its kind in Washington. It can hold 40 million “units” of inventory.

A computer rendering of the North Creek Commerce Center industrial park in development at 18712 Bothell-Everett Highway. (Kidder Mathews)
Developer breaks ground on new Bothell industrial park

The North Creek Commerce Center on Bothell Everett Highway will provide warehouse and office space in three buildings.

Dan Bates / The Herald
Funko president, Brian Mariotti is excited about the growth that has led his company to need a 62,000 square foot facility in Lynnwood.
Photo Taken: 102312
Former Funko CEO resigns from the Everett company

Brian Mariotti resigned Sept. 1, six weeks after announcing he was taking a six-month sabbatical from the company.

Cash is used for a purchase at Molly Moon's Ice Cream in Edmonds, Washington on Wednesday, Aug. 30, 2023. (Annie Barker / The Herald)
Paper or plastic? Snohomish County may require businesses to take cash

County Council member Nate Nehring proposed an ordinance to ban cashless sales under $200. He hopes cities will follow suit.