Roughly 474,000 mortgaged residential properties are located in the 34 counties FEMA has declared disaster areas as a result of Hurricane Florence – and if the post-storm trajectory follows that of hurricanes Harvey and Irma, thousands of those homeowners could become delinquent on their mortgages in the coming months, an analysis by Black Knight shows.
“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,” says Ben Graboske, executive vice president of Black Knight’s data and analytics division, in its August Mortgage Monitor report. “As those affected by the storm begin recovery efforts, recent history suggests many will have some difficulty remaining current on their mortgages.”
Graboske says about 80% of the 474,000 mortgaged properties potentially in danger of storm damage are located in North Carolina. They account for more than 20% of the homes in that state. The remainder are in South Carolina.
“In general, while average home prices in these areas run $100,000 below the national average, they tend to be more heavily leveraged,” Graboske says.
Nationally, the average combined loan-to-value (CLTV) ratio is 51%, while in these FEMA-declared areas, the average is 63%, Graboske explains.
“As a whole, the area also had a higher-than-average delinquency rate of 4.4 percent going into the storm, as compared to the national average of 3.5 percent,” he says.
Also adding to the risk is that there is a high concentration of VA mortgages in the area.
Graboske points out that VA loans “offer borrowers the option of up to 100 percent LTV,” thus, their preponderance in the area “may be skewing the average CLTV higher.”
“Nationally, VA loans make up approximately five percent of the market, but in this area – home to Fort Bragg, Camp Lejeune and a heavy veteran population – VA lending accounts for more than 20 percent of all mortgages,” Grabsoke says. “In some counties, that number surpasses 40 percent.
“In the wake of Hurricanes Harvey and Irma last year, the data showed the increase in the VA delinquency rate in affected areas was 40 percent higher than among conventional mortgages,” he adds. “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.”
Meanwhile, the areas in Texas and Florida impacted by last fall’s hurricanes are now about 80% recovered, in terms of loan performance, Black Knight’s data shows.
Improvement continues in Puerto Rico as well, albeit at a slower pace.