GULFPORT — Intent on helping Gulf Coast homeowners recover from hurricanes Katrina and Rita, Hancock Bank has a deal too good to resist. Mortgage executives with the 107-year-old company are offering an innovative new type of disaster relief construction loan to assist homeowners repairing or rebuilding homes.
The Hancock Bank Home Recovery Construction Loan allows homeowners to borrow up to 103% of the appraised value of the home. Unlike conventional mortgage loans, no down payment is required, and the loan allows for construction periods up to 18 months during which borrowers are required to make interest-only payments. With most construction loans, the maximum time allowed for construction is 12 months. With this loan, borrowers can lock in a rate up front and can reduce that rate by 1/4% when construction is complete.
Borrowers also may extend the amortization to 40 years. “We anticipated problems of borrowers making 30-year payments with rising insurance costs,” Dan Zoble, Hancock Bank Mortgage Division manager, said, “so we asked for payments to be extended to 40 years.”
All of these loan guidelines further reduce the financial burden of homeowners struggling to rebuild their homes and lives after the destructive storms.
“This type of loan takes into account the challenges homeowners face in trying to rebuild or repair their homes after such devastating events,” he said. “Being able to borrow up to 103% of the appraised value of the home allows a homeowner to obtain funding for rebuilding. The homeowner uses the extra 3% for closing costs and prepaid items.”
He says bank officials realize it’s going to take much longer to recover and rebuild than anyone at first imagined. “There are a lot of people out there waiting and we looked at what it would take to get them back in their homes,” he said. “We knew those not fully insured would not have enough funds to complete building or repairs.”
However, Zoble says Hancock Bank can not take full credit for the new construction loan. The bank began consulting with other seller-servers for Fannie Mae in November of 2005.
“We anticipated what people would need and asked what we could do with this product to help,” he said. “We decided to ask for the moon and we got it.”
At this time, Hancock Bank is the only bank in the area offering the new loan product to homeowners along the Mississippi and Louisiana coastlines. It is being well received but Zoble says the new product is worth the effort even if it helps just one or two homeowners.
“We expect this product to help those homeowners across the coastal areas who have struggled to find the financing to complete their repairs,” said Debbie Tretler, vice president of Fannie Mae’s Single Family Disaster Response Team. “As families work to restart their lives, we are hopeful this product can provide a good financial alternative to homeowners.”
Zoble points out that officials with Fannie Mae have visited the coastal area several times since Hurricane Katrina struck and have been helpful in finding housing solutions.
“We also asked to use this loan for people moving into this market so they could rehab houses and get them back in the market place,” he added. “In banking terms, this loan is an extraordinary measure, but this is what is needed to keep our rebuilding process move forward. We are very pleased that we could work with Fannie Mae to offer it.”
The new loan is available only in Federal Emergency Management Agency designated disaster areas for the hurricanes of 2005. Additionally, Fannie Mae — a financial services company that serves the home mortgage industry by working with lenders to provide accessible, affordable financing — must approve those areas. Fannie Mae will buy the eligible loans from Hancock Bank. As a seller/server, the bank originates and services the loans.
Zoble believes Fannie Mae will use the new loan product as a model for disaster products around the country.
An independent appraisal of the homeowner’s property is required to receive the full benefit of this loan. Zoble says getting market comparisons is not a problem for most of the Coast but is difficult in some areas because there have not been enough sales of property.
“It’s spotty in New Orleans and some parts of Hancock County,” he said. “We have an alternative appraisal method to create the appraised value. It’s conservative and allows us to look at sales of property ‘as is’.”
There is more credit flexibility to qualify for this loan too. Zoble says a lot of concessions have been made since Katrina.
“Credit that was good until the storm may have suffered. For a while, mail wasn’t running and communications were limited. Some things slipped through the cracks,” he said. “Some people had to borrow money on credit cards just to exist. Some lost jobs and had to take lesser paying jobs.”
The loan officer says all of the new product’s guidelines add up to make it a very attractive opportunity for affected homeowners. “It’s a new world and this loan is another example of Hancock’s inherent community commitment,” he said.
In South Mississippi, Hurricane Katrina destroyed approximately 70,000 homes. The storm’s floodwaters affected 80% of New Orleans.
Contact MBJ contributing Lynn Lofton at email@example.com.