Harvey could cause mortgage delinquencies to soar – study

After Hurricane Katrina, mortgage delinquencies spiked. Areas impacted by Harvey have more than twice as many mortgaged properties – and nearly four times the unpaid mortgage balance

Harvey could cause mortgage delinquencies to soar – study

Hurricane Harvey could result in up to 300,000 new mortgage delinquencies, with 160,000 becoming seriously past due, new data suggests.

According to a study by Black Knight Financial Services, Harvey’s impact in Texas and Louisiana presents the possibility for big spikes in both early and long-term delinquencies.

Although the situation around Hurricane Harvey continues to evolve, millions of American lives have already been impacted by the storm and immense flooding,” said Ben Graboske, Black Knight’s executive vice president for data and analytics. “For many, their struggles are just beginning. Using post-Hurricane Katrina as a model, Black Knight has found that as many as 300,000 homeowners with mortgages in FEMA-designated Harvey disaster areas could become past due over the next few months. Post-Katrina, delinquencies spiked in Louisiana and Mississippi disaster areas, jumping 25% to peak at 34% of all mortgaged properties being past due. The serious delinquency rate – tracking mortgages 90 or more days past due, but not yet in foreclosure – rose to more than 16%. New Orleans was hardest hit, with its delinquency jumping by 46 percentage points to nearly 55%, and the serious delinquency rate increasing by 24%.”

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There are nearly 1.2 million mortgaged total properties with a total of $179 billion in unpaid mortgage balances in Harvey-related FEMA disaster areas, according to Black Knight. That’s compared to just 456,000 mortgaged properties with $46 billion in unpaid loan balances in Katrina-related disaster areas. Fortunately, housing and mortgage agencies have already taken steps to mitigate Harvey’s impact on mortgage borrowers.

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“Thankfully, Fannie Mae, Freddie Mac and the Federal Housing Administration have all announced temporary moratoria on evictions and foreclosure sales in Harvey-related disaster areas,” Graboske said. “With these three organizations accounting for nearly 900,000 of mortgaged properties, the moratoria should help temper the negative effects. Forbearance plans will help as well, though interest on the mortgage will continue to accrue under any of these efforts. Still, there are 1.18 million mortgaged properties in Harvey-related disaster areas, more than twice as many as were hit by Hurricane Katrina, with nearly four times the unpaid principal balance. This will be a long-term recovery. If the Harvey-related disaster areas follow the same trajectory as those hit by Katrina, within four months we could be looking at as many as 160,000 borrowers falling 90 or more days past due on their mortgages.”