NEW ORLEANS (WVUE) – The high cost of property insurance is doing more than straining some people’s budgets. Louisiana’s ongoing insurance crisis is forcing some people to foreclose.
Andreanesia Morris is the executive director of Housing NOLA.
“We see people whose principal and interest, which is the largest part of your loan, are dwarfed by the tax and insurance part, double that principal and interest payments to the banks. This is a drastic increase in your monthly payment and leads to foreclosure,” Morris said.
Insurance Commissioner Jim Donnellon recently told FOX 8 that many people are losing their homes due to higher insurance costs.
“They’re losing their houses every month because we’ve had to raise rates for citizens, 120,000 policies at the time, this past January 1, so 10,000 renew every month all year and be hit by this 63% increase on the rates,” Donnellon said.
Morris says: “We see that too. We see people who are, foreclosure takes a minute, so we see people who are behind. We’re especially seeing people who have been able to buy over the past 18 years through the countless programs we’ve organized 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 that some of our citizens, especially seniors who don’t have mortgages, are choosing not to insure, and that’s a shame because if there storm or hurricane, they’re not going to be able to recover unless they have significant assets,” Williams said.
He added that some real estate deals don’t close because of the cost of insurance.
“It’s definitely making the real estate business more difficult, we’re seeing less sales this year than last year and I think people have to adjust to the higher insurance but also the higher interest rates.” So that was a challenge,” Williams said.
Insurance costs are usually included in the monthly mortgage payments.
“When the buyer finds out what their premium is, especially some of the new flood numbers that say well, I just can’t afford it and either the deal has to be renegotiated at a lower price or in some cases the transactions just don’t at all happens.”
According to ConsumerFinance.Gov, which has data through March 2023, Louisiana had a mortgage delinquency rate of 2.5 percent, compared to the national average of 1.3 percent.
And that’s not all. ConstructionCoverage.Com shows New Orleans-Metairie at the top of the list in terms of large metro areas and delinquent mortgages.
Morris says it’s no surprise.
“Unfortunately, it isn’t.”
She says communities could have done more years ago to help people secure more financial support.
“So when the recovery dollars come in, when the insurance proceeds come in, when the bank financing comes in, the entire responsibility is ours. I’m not letting the bankers off the hook, I’m not letting the insurance companies off the hook, I’m not letting our politicians off the hook, I’m saying we need to design programs and we need to stick to the fact that we’re creating success stories, not just saying that you’re going to pull yourself up,” Morris said.
In the meantime, Williams says people who want to become homeowners shouldn’t 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 like, go ahead and buy it and then when rates come down, which we think they will refinance to a lower mortgage,” he said.
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