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Foreclosures may tick up in hurricane-affected areas

Hurricane-ravaged Texas, Florida and Puerto Rico have so far been spared a wave of foreclosures thanks to forbearance programs that have given homeowners breathing room to recover.

The programs blocking foreclosures actions on most federally guaranteed mortgages have now mostly come to an end, though, and some analysts expect an uptick in foreclosures to follow.

floodinsureOne case where this appears to be happening already is Houston. Thousands of homes there were damaged and destroyed following the massive flooding wrought by Hurricane Harvey last August.

Foreclosure activity in Houston has risen year over year for four consecutive months through June, according to Attom Data Solutions. In Houston, foreclosure starts were up 25 percent in the first half of 2018 compared to the same six months in 2017. Counter to the national trends, foreclosures were also up 10 percent for the same six-month period in Texas as a whole compared to 2017. 

An upsurge in foreclosures is overdue according to normal timelines of a major natural disaster, Attom Data Solutions Senior Vice President Daren Blomquist said. Three massive storms — hurricanes Harvey, Irma and Maria — struck in rapid succession in August and September last year, causing billions of dollars in damage and destroying thousands of homes in Texas, Florida, the Gulf Coast and Puerto Rico.

“Foreclosure activity typically drops off as well immediately in the wake of the natural disaster given that many lenders often issue short-term foreclosure moratoriums,” Blomquist told Scotsman Guide News earlier this week. “Then, about six to eight months following the natural disaster event, there is a spike in foreclosure activity as those moratoriums are lifted and lenders catch up with the deferred distress.”

On Thursday, the U.S. Department of Housing and Urban Development (HUD) granted a final 30-day extension, through Sept. 16, to the ban on foreclosing on hurricane-damaged homes that were financed with Federal Housing Administration (FHA) loans in Puerto Rico and the U.S. Virgin Islands. Puerto Rico has roughly 425,000 homes with mortgages, a quarter of which are guaranteed by the FHA, the New York Times reported in July.  

HUD informed servicers that this would be last extension and urged residents to contact their servicers if they are in need of relief. HUD has also rolled out a last-resort relief option that would allow homeowners to take out an interest-free loan to cover the missed payments.

Moratoriums imposed by Fannie Mae and Freddie Mac preventing foreclosures on conventional loans in Puerto Rico ended on May 31.

Given the numbers of remaining seriously delinquent homes, a surge in foreclosures in hurricane-affected states remains possible.

According to Black Knight, as of June, there were still 56,600 seriously delinquent loans on properties on the mainland as a result of hurricanes Harvey and Irma. These were properties that were 90 days or more past due on the mortgage, and thus ripe for a foreclosure filing. One piece of good news is that the situation is much improved over what it was at the beginning of the year. Delinquencies on the mainland have been falling rapidly from a peak of 142,600 serious delinquencies in December 2017, according to Black Knight.

In Puerto Rico, there were 28,900 seriously delinquent properties and another 9,300 properties that were less than 90-days delinquent.

CoreLogic recently reported that Texas and Florida were the only two states in May to see a year-over-year increase in serious delinquencies. In both states, overall foreclosures declined year over year, likely partially a result of the forbearance granted.

“We see in the Houston metro and in the Naples [Florida] metro area, that serious delinquency rates or mortgages are still double what they were this time a year ago prior to the hurricanes,” CoreLogic Chief Economist Frank Nothaft said. “If you look at Puerto Rico, Puerto Rico has a whole variety of serious issues in the aftermath of the hurricanes. Their serious delinquency rates are quadruple, four times higher, than they were a year ago.”  


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