Property Loss: Harvey vs. Katrina

As DS News reported on Wednesday, property damage caused by Hurricane Harvey is projected by Moody’s Analytics to be between $51 billion and $75 billion, but there are immense unknown costs. Given the dense population of the impacted region, stats given to DS News by Black Knight Financial Services project Harvey’s effect on the mortgage market to be greater than that of Hurricane Katrina. In Houston and the surrounding areas, there are over twice as many mortgaged properties and four times the unpaid principal balances compared to Katrina’s FEMA disaster zones.

The GSEs—who announced a 90-day suspension of all evictions and foreclosures in primary disaster areas—own a majority of the impacted loans (56 percent). GSE loans have, on average, $100,000 higher balances than those held in agency and non agency securities. The average portfolio loan in Houston has a balance of $240,000 compared to $139,000 for the rest of the market. By investor, the GSEs account for 592,000 active mortgages, Ginnie Mae accounts for 194,000, portfolio lenders account for 175,000, and private lenders account for 87,000.

Subsequent to Hurricane Katrina, the number of borrowers in affected areas behind on their mortgage increased by 7.5 percent within the first two months. Within four months, the proportion of borrowers 90 or more days delinquent or in foreclosure rose by over 4 percent.

According to Black Knight, if a similar impact occurs in Houston, it would result in more than 75,000 borrowers being unable to make their mortgage payment within the next two months and 45,000 borrowers becoming seriously delinquent on their mortgage or facing foreclosure within the next four months.


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