New Orleans? Welfare to a hole in the ground.

12Sep08

So another disaster in New Orleans not happening because hurricane Gustav went 30 miles to the west and not directly overhead, everybody can go back to rebuilding. Why is there no-one asking the question why? Simple stubbornness cannot explain it surely. The truth is that any risk of future disasters will be canceled out by mandated insurance coverage by state law. Any customer who has had insurance coverage for three years or more, must have their insurance coverage continued. Insurance companies of course are no carrying the cost of this high risk, insurance policies are rising. State Farm stated that some policies have risen by 30 percent since Katrina. So what does coverage for those who have this kind of insurance policy dating back three years look like?

A typical homeowner in New Orleans, for example, has to contract with the federal National Flood Insurance Program for flood damage, the state-owned Louisiana Citizens Property Insurance Corp. for wind, and private insurers for the rest.

So we foot the bill. The situation is far worse for newcomers. Not required to cover the new home owner, they are left to go to the state owned, “Louisiana Citizens Property Insurance Corp” for coverage.

This is obviously an absurd reality. A city is built below sea level, the sea destroys that city (at least big parts of it), and the city expects to rebuild and hold onto hope that it does not happen again, then again, then again. At what point would the effort have been deemed a waste of time and effort? The next time it happened? Which if Gustav had been to the east, we would be discussing right now. Or the next time after that?

Surely smarter heads can come together, and find a solution. I think I have one, but read on to my next observation first.

Fannie Mae and Freddie Mac

SO what do Fannie Mae and Freddie Mac have to do with New Orleans? Fannie Mae announce in a news release on April 16, 2008, that it had invested over $1 billion in Orleans parish since hurricane Katrina. Freddie Mac on October 22, 2007 announced that they pushed money into New Orleans with a reserve fund that they should have spurred $100 million to be spent on home renovations. One of their partners in this venture was Countrywide Home Loans, which as we now are acutely aware was leading the charge on home loans to those unable to make the payments.

Freddie Mac way back on June 15, 2007, stated :

To date, we’ve provided more than $16 million in humanitarian assistance. As well as mortgage relief for many, many borrowers – our most comprehensive relief ever. And new investments that have financed low-cost mortgages for 10,000 families.

So they have at least 10,000 mortgages in the New Orleans area.

As recently as September 3, 2008 Freddie Mac extended a helping hand to disaster stricken homeowners:

In addition, Freddie Mac gives servicers the discretion to reduce or suspend mortgage payments or foreclosure proceedings for up to 12 months for borrowers with Freddie Mac-owned mortgages in federally declared major-disaster areas where individual assistance was provided.

Freddie Mac also strongly encourages servicers to extend several other measures to help affected borrowers with Freddie Mac-owned loans:

— Waiving assessments of penalties or late fees against borrowers with disaster-damaged homes; and,

— Not reporting borrowers to the nation’s credit bureaus when a forbearance or repayment plan has been extended because of the disaster.

What are we doing? We give relief to homeowners in a proven flood plain, so that they can rebuild their flood destroyed homes, and give them an insurance option so that they do not wear the risk of disaster, all so that we can maintain the city under sea level that is New Orleans. Yes, I said “we” Freddie and Fannie, and the taxpayer provides these things which are all publicly owned or backed.

This is insanity.

A much better option would be for this area to be developed into canal front property, by building up sections of land well above the height of the storm surge. What Freddie and Fannie need to do is foreclose on properties that have defaulted then sell these foreclosed properties to a private investor with this intent. Insurers would be confident in insuring the property. As waterfront property it would yield high property values, and the problem of yearly disaster aversion would be solved.

Some of you are saying, “…but but but it’s people’s homes!… you would be taking away people’s homes… you can’t do that!” That would be a precise problem associated with Fannie and Freddie and the reason they should be privatized, and deregulated. These institutions have been backing up loans that should NEVER have been made to people who could never pay. It was wrong to make the loans to begin with, and it should be corrected. Extending loans to these homeowners was underhanded welfare.

We either accept that the taxpayer will be footing the bill for this idiocy for the next generation, or we say, “NO more!” I say enough with the throwing money into this hole in the ground.

Other Articles:

Gerry Charlotte Phelps: Raise New Orleans Ground Level LIke Galveston Did

City Comforts, the blog: Rebuild New Orleans but ‘Floodproof” it first by filling.

Batesline: Raise New Orleans?

“Levees and Other Raised Ground” American Scientist January-February 2006, Volume 94, Number 1, p7 (subscription required)

An intriguing concept is put forward at New Orleans Artifacts that states that the low lying areas could be raised using siphoned water from the Mississippi river which carries an enormous amount of sandy silt, as a sedimentation project.

Some of the statistics on Freddie Mac in Louisiana up to 2007 are shown in this corporate brochure.

Half Sigma: Why I hope Rita hits New Orleans

The Hill’s Pundit blog: New Orleans: The New Atlantis

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