Hurricane Florence wreaked massive destruction on homes in the
Carolinas in September. That devastation will likely mean thousands of mortgages
will fall into delinquency over the next several months, including an unusually
high number of home loans held by veterans and active military, according to
Black Knight.
“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,” said Ben Graboske, an executive vice president with Black
Knight. “As those affected by the storm begin recovery efforts, recent history
suggests many will have some difficulty remaining current on their mortgages.”
About 474,000 of the 1.2 million
properties located in the disaster area were mortgaged, Black Knight reported. A much higher-than-usual
concentration of the at-risk loans are held by veterans and active military.
Florence tore a path through 34 counties in the Carolinas
that have been declared disaster areas by the Federal Emergency Management Agency, or FEMA. North Carolina, which bore
the brunt of the storm, is home to Fort Bragg and Camp Lejeune. The overall
impacted area includes South Carolina and Virginia.
Black Knight said that VA loans represent about 20 percent
all the loans in the counties affected by Hurricane Florence, but four North Carolina
counties had concentrations as high as 40 percent. On a nationwide basis, VA
loans only comprise about 5 percent of all loans, according to Black Knight.
VA loan impact
VA loans tend to contain
more leverage than other loan products as the borrower can finance up to 100
percent of the home. The average loan-to-value (LTV) ratio in the affected areas was 63
percent, whereas on a nationwide basis the average LTV ratio is 51 percent. This likely
reflects the higher concentrations of VA loans.
Black Knight said VA loans were more vulnerable to
delinquencies after last year’s massive storms in Texas and the Gulf region.
“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,” Graboske said. “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.”
Black Knight also noted that this affected area had a
mortgage-delinquency rate (loans 30 days past due) of 4.4 percent prior to the storm, which was higher than the
national average of 3.5 percent. Home prices in these counties run about $100,000
less than the national average, however.
Overall, Black Knight projected that the delinquencies would peak in November at around 24,600. Serious delinquencies, or
properties at least 90 days past due, would top out at around 14,000 in
December and January, but there could be as many as 3,100 seriously delinquent properties
still on the books through August of 2019, Black Knight forecasts.
Last month, CoreLogic estimated that the storm caused as
much as $20 billion to $30 billion in damage to homes and commercial buildings. Of that
amount, as much as $18.5 billion could be uninsured flood losses. CoreLogic estimated 624,000 homes were damaged in the Carolinas and Virginia.