"Highly-leveraged" Florence-affected areas risk delinquency spike

by Steve Randall08 Oct 2018

The areas of the Carolinas affected by Hurricane Florence could see 25,000 mortgage delinquencies in the next three years according to a new anlyasis.

Black Knight Inc. says that the FEMA-declared disaster region has 1.2 million properties of which 474,000 have at least one mortgage.

“Although the situation in the Carolinas continues to evolve as we speak, we are beginning to get a sense of the potential scope of the storm’s impact from a mortgage performance aspect,” Ben Graboske, executive vice president of Black Knight’s Data & Analytics division explained. “As those affected by the storm begin recovery efforts, recent history suggests many will have some difficulty remaining current on their mortgages.

Highly leveraged, risky VA share
The firm’s Mortgage Monitor points out that, although the average value is $100K below the national average, the region’s homes are more highly leveraged.

“Nationally, the average combined loan-to-value ratio is 51%, while in these FEMA-declared areas the average is 63%,” added Graboske. “As a whole, the area also had a higher-than-average delinquency rate of 4.4% going into the storm, as compared to the national average of 3.5%.

They also have a far higher share of VA-backed loans than the 5% national average; 20% of all mortgages in the region and up to 40% in some counties.

Black Knight’s analysis of delinquencies following hurricanes Irma and Harvey shows that the VA delinquency rate was 40% higher than for conventional loans.

“If the per capita impact of Florence matches last year’s storms, more than 5,400 veteran homeowners with VA loans would be among the nearly 25,000 borrowers who could become past due over the next three months,” warned Graboske.

The majority – 80%– of these properties are in North Carolina, and account for more than 20% of the homes in that state. The remainder are in South Carolina.


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