State Says Mortgage Issues To Be Solved Case By Case

AP/John Curran

A house that was destroyed by Tropical Storm Irene in Rochester.

(Host) The type of damage Vermont suffered in Tropical Storm Irene has unleashed a storm of legal problems with no easy solutions.

For example: What do you do when your house and land have washed away, but you're still paying a mortgage?

It's a question that still hasn't been fully answered, as VPR's Susan Keese reports.

(Keese) State officials say they don't know how many Vermonters were left paying a mortgage on property that's uninhabitable or literally gone.

That's partly because so many different mortgage lenders do business here, only a fraction of them chartered by the state.

And it's partly because each case of damage is unique. There are no established categories to total up, no boxes for people to check.

(Candon) "We're struggling for answers because some of the things that occurred were like first time for us here in Vermont."

(Keese) Tom Candon, Vermont's deputy commissioner for banking, was part of a task force formed to address the many legal questions the disaster posed.

The group's report will be presented to lawmakers this week. It contains many recommendations for the Legislature to consider.

But Candon predicts that individual mortgage issues will have to be solved one at a time.

(Candon) "Obviously we'd like to help the homeowner. But the only thing we can tell people is they need to talk to their lender, see what their contract is with the lender, that loan agreement, and see if they can work something out with their lender."

(Keese) Chris D'Elia of the Vermont Bankers Association chaired the task force's banking and finance subcommittee. He says many banks offered to defer mortgage payments while homeowners explored whether they could get help from federal agencies, insurance or other sources.

(D'Elia ) "We need to know what all those various pieces are before a good decision can be made on behalf of that borrower with also the lending institutions' interests in mind. I'm sure in some instances there will be mortgages out there or portions of mortgages that will be forgiven."

(Keese) In cases where it's possible to rebuild, D'Elia says mortgages may be restructured. He says lenders don't want homeowners to be unable to pay the combined cost of mortgage payments and repairs.

In some cases, the FEMA Hazard Mitigation program may help. It's a buy out program. Flood-prone properties can be sold and are then set aside, never to be built on again.

FEMA pays 75 percent of the value of properties, plus the cost of demolition and related expenses. Several state and nonprofit initiatives plan to help out with the other 25 percent.

Ray Doherty administers the FEMA Mitigation program for the state. He says some mortgage problems will be solved through the buyout.

(Doherty) "And it's up to the town and the home owner to negotiate directly with the mortgage holder to say, ‘This is what you get. Do you agree or don't you agree?' And in many cases it's not the full amount of the mortgage - but in many cases it may be the best offer."

(Keese) Decisions in that program won't be made until spring.

For VPR News, I'm Susan Keese.