We instituted forbearance for payments on all loans in the Katrina area.  This caused major capital shortages for us.  We borrowed significant funds to make investor payments and meet payroll.
 
We also made sure our customers had access to their loan and insurance information and reassigned 75 percent of our staff to process the paperwork. 

The industry and our regulators also responded.  The entire industry instituted broad forbearance and began to try to contact customers, who had been evacuated and were now across the country.  

The mortgage industry created a working group made up of lenders, servicers and their trade associations to help work on public and private sector problems and solutions.  An industry practice was established that forbearance in the worst-impacted areas should continue and be re-visited every 90 days.  This was a watershed event and it helped avoid mass foreclosures.

Congress and the President put the region on the path to recovery by providing emergency funding for the CDBG program.  Despite efficiency issues in disbursing funds, lenders and homeowners see that money is on its way, even if it is coming slowly.  While implementation of this program has not been at the pace we’d all like to see, it is important to remember the enormous task at hand.  Establishing a whole new rebuilding program under crisis conditions is unprecedented.

Now one of the greatest challenges we face is the conveyance of FHA properties.  FHA’s current policy says payment of an insurance claim will only occur when it takes title to a property as a result of foreclosure.  To convey a property and receive insurance benefits, however, FHA requires a property be fixed up so it can be sold again.  We are a small company and cannot afford to rebuild all the damaged properties in the hurricane area.  Right now, these properties sit vacant.  Blighted properties, seen block after block, deteriorate neighborhoods and hinder the rebuilding effort. 

There are important lessons for future action.  I urge the Senate to pass S. 1668, The Gulf Coast Housing Recovery Act of 2007, which, among other things, authorizes funds to cover the shortfall that exists in The Road Home program.

Second, the National Environmental Policy Act (NEPA) has hamstrung the states in how they could design their grant distribution program.  The President should be able to activate NEPA exemptions for the purpose of rebuilding preexisting housing.

Third, federal agencies are not permitted to give recipients of federal assistance duplicate benefits.  In theory, this makes sense.  In practice, it is causing deficiencies for individuals and businesses.

Fourth, valuations and appraisals of damaged properties are often conducted numerous times by numerous agencies.  There should be some mechanism to share this information.

Lastly, MBA recommends prohibiting FHA from adding requirements that are above and beyond those determined acceptable by EPA and the appropriate state environmental agency in the production of affordable rental housing.  EPA and the states are well-qualified to determine environmental standards, so it only delays critical production when HUD also adds requirements. 

The mortgage industry responded admirably to the many challenges of Katrina and Rita, despite significant cost.  We will do all we can to ensure that the region is rebuilt better than ever.  We have shown our willingness to sacrifice, but that will not be enough.  This is a national problem, and national solutions need to continue to ensure that the region returns better than it ever was.”

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The Mortgage Bankers Association (MBA) is the national association representing the real estate finance industry, an industry that employs more than 280,000 people in virtually every community in the country. Headquartered in Washington, D.C., the association works to ensure the continued strength of the nation's residential and commercial real estate markets; to expand homeownership and extend access to affordable housing to all Americans. MBA promotes fair and ethical lending practices and fosters professional excellence among real estate finance employees through a wide range of educational programs and a variety of publications. Its membership of over 2,400 companies includes all elements of real estate finance: mortgage companies, mortgage brokers, commercial banks, thrifts, Wall Street conduits, life insurance companies and others in the mortgage lending field. For additional information, visit MBA's Web site:  www.mortgagebankers.org.