CDBG Seen as Hurricane Relief Tool.(United States. Department of Housing and Urban Development. Community Development Block Grant Program)

Washington -- With rising mortgage delinquencies along the Gulf Coast, the Bush administration is hoping lenders will continue to be patient and wait for federal housing assistance in the form of Community Development Block Grants before initiating wide-scale foreclosures.

The president's coordinator for Gulf Coast rebuilding, Don Powell, told a congressional committee he is planning a meeting with mortgage lenders in Louisiana to remind them that CDBG funds will be available to homeowners in the hurricane disaster areas. "Hopefully in a very short period of time," he said. Mr. Powell held a similar meeting in Mississippi in February.

He noted that lenders have legal and shareholder obligations. However, the CDBG funds will enable homeowners to "satisfy some mortgage obligations that they might not otherwise be able to do," he testified on March 9.

In December, Congress approved $6.2 billion in CDBG funds for Louisiana and $5.1 billion for Mississippi in response to Hurricanes Katrina and Rita. The two states are still in the process of finalizing their housing assistance plans, which they have to file with the Department of Housing and Urban Development for approval.

Mississippi is further along in the process and state officials want to begin taking housing assistance applications by April 1. But they estimate it could be another three months before the CDBG funds actually reach homeowners.

Lenders have exercised forbearance on mortgage payments for the past six months and they are extending it in many of the hardest hit areas. But servicers are still reporting delinquencies and defaults (90 days or more past due) and the numbers are staggering, particularly of subprime and Federal Housing Administration single-family loans.

Mortgage Bankers Association data show that the default rate on prime loans in Louisiana is 9.75% and 6.25% in Mississippi as of Dec. 30.