Mortgage

Black Knight: Harvey-area homeowners have strong motivation not to walk away from home

But not Irma-area homeowners

Hurricanes Irma and Harvey came within a week of each other, and wrought havoc on parts of Florida and South Texas; thousands of homeowners saw their homes destroyed.

While the disaster story may be much the same for both hurricanes, the recoveries could be very different.

The now-rebranded Black Knight released its latest Mortgage Monitor report Monday, showing the nearly opposite differences in the FEMA-declared disaster areas in both states, which could cause one city to quickly recover from the storm even as the other continues to struggle.

Before Hurricane Harvey hit South Texas, homeowners in the disaster area held an average combined loan-to-value ratio of 53%, or an average $131,000 in equity per borrower, according to Black Knight’s report. This is the same as the national average, and the lowest for the Houston area since before 2004.

“That works out to a lot of skin in the game, and will likely serve as strong motivation for borrowers not to walk away from a storm-damaged home,” said Ben Graboske, Black Knight data and analytics executive vice president.

However, in Florida, home prices remained 17% below their previous 2006 peak, compared to Houston’s all-time high. The combined loan-to-value ratio in Irma-impacted areas was 57%.

In fact, of the 3.2 million borrowers impacted by Irma, about 5% or 170,000 borrowers were still in negative equity before the storm hit. Another 180,000 borrowers held less than 10% equity in their homes.

More than 75% of all Hurricane Harvey victims held loans held in Fannie Mae, Freddie Mac or Ginnie Mae securities. Fortunately for homeowners, these government-sponsored entities have several programs available including suspending or reducing mortgage payments for up to six months.

“While we have already seen an early spike in delinquencies in Hurricane Harvey-impacted disaster areas, with many more likely to follow in September’s data, the combination of available assistance and healthy equity stakes on the part of borrowers are both very positive signs for the long term,” Graboske said.

But as Houston’s strong housing market could be on the road for a healthy recovery, high foreclosure rates in Florida, twice as high as the national average, show the state still hasn’t recovered from the last housing crisis.

But the road to recovery will by no means be easy – even for Houston. The report shows in disaster areas from Harvey and Irma combined, a total of $705 billion in unpaid principal balance was hit. That is spread across 4.38 million mortgaged properties.

In the beginning stages of the recovery process for Houston, Black Knight predicted the mortgage industry could see up to 300,000 new delinquencies as a result of the storm, with 160,000 borrowers becoming seriously past due.

Later, the first numbers from Black Knight are starting to roll in showing an uptick of 16% in mortgage delinquencies, and according to the report, the hurricane’s impact on mortgages will likely get worse.

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