$700 Billion Unpaid Mortgage Balances In Hurricane Harvey And Irma Disaster Areas

Tyler Durden's picture

Even as the damage from Hurricanes Harvey and Irma is still being tallied, a preliminary assessment released last week by Black Knight Financial Services estimated that as many as 300,000 borrowers in the vicinity of Houston could become delinquent on their loans and 160,000 could become seriously delinquent, or more than 90 days past due. 

That number is roughly four times the original prediction because new disaster zones were designated and more homes flooded when officials released water from reservoirs to protect dams, according to CNBC's Diana Olick. In total, the number of mortgaged properties in Texas disaster zones is 1.18 million, with Black Knight adding that Houston disaster zones contain twice as many mortgaged properties than Katrina zones, with four times the unpaid principal balance.

Putting the Harvey damange in context, after Hurricane Katrina mortgage delinquencies in Louisiana and Mississippi disaster areas spiked by 25%. The same could happen in Houston, as borrowers without flood insurance weigh their options and decide to walk away from the property. While they will get some federal relief, if rebuilding would cost more than the principal in their homes, they could decide to walk away according to Olick.

What about Irma?

According to a preliminary analysis by Black Knight released today, Florida FEMA-designated disaster areas related to Hurricane Irma include a whopping 3.1 million mortgaged properties.  As Black Knight's EVP Ben Graboske explained, both the number of mortgages and the unpaid principal balances of those mortgages in FEMA-designated Irma disaster areas are significantly larger than in the areas impacted recently by Hurricane Harvey.

Quantifying the damage, Black Knight calculates that Irma-related disaster areas contain nearly three times as many mortgaged properties as those connected to Hurricane Harvey, and nearly seven times as many as those connected to Hurricane Katrina in 2005. In dollar terms, this means that there is some $517 billion in unpaid principal balances in Irma-related disaster areas, nearly three times the amount as in those related to Harvey and more than 11 times of those connected to Katrina.

“While the total extent of the damage from Hurricane Irma is still being determined, it is clear that the size and scope of the disaster is immense,” said Graboske.

“Indeed, in terms of the number of mortgaged properties and their associated unpaid principal balances, Irma significantly outpaces even the number of borrowers impacted by Hurricane Harvey. With FEMA expanding the number of Irma-related designated disaster areas late Wednesday, Sept. 13, to a total of 37 Florida counties, more than 90 percent of all mortgaged properties in the state now fall into such areas. More than 3.1 million properties are now included in FEMA-designated Irma disaster areas, representing approximately $517 billion in unpaid principal balances. In comparison, Harvey-related disaster areas held 1.18 million properties – more than twice as many as with Hurricane Katrina in 2005 – with a combined unpaid principal balance of $179 billion. Irma-related disaster areas now contain nearly seven times as many mortgaged properties as those connected to Katrina, with more than 11 times the principal balances.

Combining the preliminary estimates for both Harvey and Irma suggests that over 3.3 million total mortgaged properties are located in Irma and Harvey-related FEMA Disaster zones, while the dollar amount of total unpaid mortgage balances in these two zones is massive: between Irma's $517 billion and Harvey's $179 billion, the total potential damage could impact as much as a $696 billion in notional mortgage values, which banks could be on the hook for if current occupiers decide to simply walk away.

Based on back of the envelope analyses by Black Knight, an extrapolation of the Katrina damage would suggest that Florida could suffer as much as 750,000 mortgage delinquencies as a result of Hurricane Irma.

To be sure, there are mitigating circumstances: Florida borrowers likely have more insurance and less exposure to loss, but for those homes with the most damage, homeowners will be making the same calculation as those that suffered devastating flooding after Harvey. Another issue in Florida according to Olick is that even a decade later, the housing market is still recovering from the foreclosure crisis. Five percent of Florida borrowers still owe more on their mortgages than their homes are worth, and an additional 5 percent have very little equity in their homes. Home prices in Fort Myers, which saw considerable flooding from Irma, are still 29 percent below what they were during the housing boom.

Still, in order to avoid a surge in foreclosures, lenders are more likely to offer borrowers, even seriously delinquent borrowers, options to catch up, although the biggest risk to lenders will be in Houston, where some homeowners may see no good reason to stay.

There was some silver lining: “As Irma forged its path of destruction through the Caribbean, one relatively positive development was that Puerto Rico escaped the direct hit many had predicted. From a mortgage performance perspective, this was particularly good news, as delinquencies there were already quite high leading up to the storm. At more than 10 percent, Puerto Rico’s delinquency rate is nearly three times that of the U.S. average, as is its 5.8 percent serious delinquency rate. In contrast, the disaster areas declared in Florida have starting delinquency rates below the national average, providing more than a glimmer of optimism as we move forward.”

Unfortunately, Hurricane Maria, now a Category 3, is expected to hit Puerto Rico some time on Wednesday, adding to the damage already suffered from Irma, and potentially sending the already bankrupt territory reeling even deeper into the financial hole.

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CPL's picture

Next time don't build on a flood plain with no hope of insurance coverage and a government that is already flat assed broke. 

E.F. Mutton's picture

The house I sold in 2014 required flood insurance.  It was originally $300 a year.  It was over $1600 a year when I sold it.

Now I live on a very high hill.

Manthong's picture

 

Just mail the keys back with a note that says it has been fun but you might need a front loader and a semi trailer end dump truck now.

BuddyEffed's picture

Down the mortgage hole with these where they can meetup with the subprime mortgages at the event horizon / balance sheet of last resort.

Shitonya Serfs's picture

If you stop paying, the bank will report you to Equifax

ParkAveFlasher's picture

The end result of this will be gold getting monkeyhammered, because that's the end result of all news ever.

toady's picture

Billions? Ha! Come back to me when you move up to the BIG leagues.... billions.... I shit bigger than a trillion!

DWD-MOVIE's picture

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Slack Jack's picture

When the temperatures are higher, hurricanes are (potentially) more powerful. Since hurricanes are formed by the evaporation of sea-water. The warmer the water, the more evaporation and the stronger the hurricane. You don't have to be a rocket scientist to figure out that global warming will add to the average strength of hurricanes. The occurrence of hurricanes depends on many factors, in particular the wind shear. So it is not clear that global warming will necessarily increase the number of Hurricanes, although it might.

The stronger the hurricane, the more it costs to clean up the mess.

So, why is the global rise in temperatures so worrisome?

For one thing, as temperatures rise good farmland will become desert (e.g., dust-bowl conditions will probably return to the American Midwest).

Another major problem is sea-level rise.

Have a look at http://pubs.usgs.gov/fs/fs2-00/

The U.S. Geological Survey people claim that;

The Greenland ice sheet melting will raise sea-level 6.55 meters (21.5 feet),
the West Antarctica ice sheet melting will raise sea-level 8.06 meters (26.4 feet),
the East Antarctica ice sheet melting will raise sea-level 64.8 meters (212.6 feet),
and all other ice melting will raise sea-level 0.91 meters (3 feet).

For a grand total of about 80 meters (263 feet).

So, what does an 80 meter (263 feet) rise in sea-level mean. Have a look at the following map of the world after an 80 meter rise. It means that over one billion people will have to be resettled to higher ground and that much of the most productive agricultural land will be under water. Fortunately, at current rates, the Greenland ice sheet will take over a thousand years to melt and the Antarctica ice sheet, much longer. However, the greater the temperature rise the faster the ice sheets will melt, bringing the problem much closer. Remember, the huge ice sheet that recently covered much of North America, almost completely melted in only 15,000 years (today, only the Greenland ice sheet, and some other small patches of it, remain). Since then (15,000 years ago), sea-levels have risen about 125 meters (410 feet), only 80 meters to go.

The ice sheets have been continuously melting for thousands of years. What is left of them today, is still melting, and will continue to melt. Human caused global warning will cause this remnant to melt significantly faster. This is a big, big, problem.

For HUGE detailed maps of the "World after the Melt" go to:

http://preearth.net/phpBB3/viewtopic.php?f=16&t=23

Global temperatures are increasing. And by quite a lot each year.

2016 is the hottest year on record for global temperatures.

This is 0.0380 degrees centigrade hotter than the previous record year which was 2015.

0.0380 is a large increase in just one year.

2015 was the hottest year (at that time) for global temperatures.

This was 0.1601 degrees hotter than the previous record year which was 2014.

0.1601 is an absolutely huge increase in just one year (at this rate temperatures would increase by 16 degrees in a century).

2014 was the hottest year (at that time) for global temperatures.

This was 0.0402 degrees hotter than the previous record year which was 2010.

http://preearth.net/images/temp-anomalies-1880-2017.txt

The conspiracy to hide global warming data.

The National Oceanic and Atmospheric Administration (NOAA) is given tax money to make global temperature records available to the public. However, certain people at NOAA continually sabotage this aspect of NOAA's mandate. For example, these people have (deliberately) sabotaged the web-page that delivers the temperature records.

Look for yourself:

Go to the page: https://www.ncdc.noaa.gov/monitoring-references/faq/anomalies.php scroll down to the The Global Anomalies and Index Data section and click the download button and see what happens. Well, you get the message:

"Not Found. The requested URL /monitoring-references/faq/anomalies-download was not found on this server."

I guess that the 2017 data must be truly horrible if they have to hide it away.

It turns out that this seems to be the case; NASA reports that:

July 2017 had the hottest average land temperatures on record.

The new July 2017 record was +1.20 degrees centigrade above the 20th century average (of the July data). The previous record average land temperature for July was just last year. It was +1.10 degrees above the 20th century average.

Did the media bother to tell you about this? No!

http://preearth.net/phpBB3/viewtopic.php?f=16&t=23

They are apparently too frightened to tell you about the August 2017 data. How many months does it take to figure out the averages for August? I guess the August data must be truly truly horrible.

BarkingCat's picture

Give it up.  

Nobody reads your shit.

Everyone just skips down to the bottom and goes to the next comment.

Most don't even bother to down vote your shit anymore. You are not worth the effort.

 

 

ThankUGartman's picture

You're going to hurt Al's feelings you big meany!! That is you right Al (Gore) tell us what do you have planned next before Geo Storm comes out? HAARP up and running again it's been a little while.

venturen's picture

and yet for 12 years you were wrong...care to comment on the Great Colonial Hurriance?

gmrpeabody's picture

I don't give a fuuk about no bank.., they get money for nothing and charge you 15%...

Uncle Sugar's picture

Draghi will pay 100 cents on the dollar for these AAA notes. Way better than the shit he's been buying

NoVa's picture

Sadly, those MBS are 100% guaranteed for timely P&I payments, backed by Fannie and Freddie. Oh wait, they have no capital for losses. 

Thank you Obama. 

 

NoVa

 

Antifaschistische's picture

So let me guess...FEMA, like every other .gov agency, will be used to bail out the Wall Street BANKERS first who irresponsibly loaned money to people who lived in holes by the ocean.

Then, they will incentivize the banks to give more money to developers to rebuild crappy homes a mile away....

FoggyWorld's picture

FEMA isn't in the business of building or rebuilding houses.  They can though force through new building codes that require houses built to stand up to most horrible weather.  Problem is though that many people will find they just cannot afford to meet the new standards.   They will walk.

zebra77a's picture

In 2008 $17 Triilion was given to Europeans banks by the Feddie Reserve.. Whats the problem! Write a check lets build the houses twice as big this round.. What can go wrong?

Ben A Drill's picture

Just say, I lost my car, job and a place to live, sorry for the mess. I can't pay you anymore. You won't need any keys since the flood.

Have a nice day.

Don't call me, I'll call you. Lost my phone in the boating accident.

peopledontwanttruth's picture

Thanks I needed the laugh. Hilarious

DosZap's picture

My home is rated in a flood Zone @ 600+ ASL!!!

The insurance co's are Crooks.

38BWD22's picture

 

 

Which banks (or other institutions) are most exposed?  The article did not address this point, would seem to be important.

Giant Meteor's picture

http://www.nasdaq.com/article/us-banks-to-face-loan-losses-from-hurrican...

The usual suspects.

However as you are aware, exposure (loss) and banks are not necessarily synonymous ...

Too big to fail and all, backstopped and all ..

 

38BWD22's picture

 

 

Excellent link, thank you.

Rusty Shorts's picture

From the link above.

 - "Of the banks mentioned above, Zions Bancorporation sports a Zacks Rank #1"

 

claytonmoore50's picture

"Which banks (or other institutions) are most exposed? "

I suspect it is in fact not many banks, but rather these mortgages are bundled and sold and resold as dirivitives to various investment groups; pension funds, etc.

I wonder if, in about six to eight months we dont see another 'mortgage crisis' similar to what we had ten years ago... Hmmm

detached.amusement's picture

Considering that when these loans were made, ledger entries were made to the bank's balance sheet and the currency was invented right then and there, the banks should simply be told fuck you

silverer's picture

You simply build a sturdy house boat. Go with the flow, as they say.

WillyGroper's picture

biblically speaking...Noah looked out of his Arkansas.

OverTheHedge's picture

Here is a house that floats during a flood. Cool engineering but a bit more expensive than the usual US housing solution of chipboard and newspaper

http://www.constructionmanagermagazine.com/news/amphibious-grand-design-...

silverer's picture

In their infinite wisdom, the Dodd-Frank gang have the banks well protected with working people's investments. Whatever they need is as close as the closest keyboard.

moorewasthebestbond's picture

Didn't fake ass senator (when Ted Kennedy croaked) Scott Brown cast the deciding vote on that clusterfuck known as Dodd-Frank?

asteroids's picture

Anybody know how the Japanese dealt with the complete loss around Fukushima?

Shitonya Serfs's picture

They dealt with it the same way as they dealt with Hiroshima.

Too soon??

Ben A Drill's picture

All flood plains should stay undeveloped. Make it a bird wildlife sanctuary. Nature has a way to remind us that humans are stupid creatures.

Byrond's picture

And birds prefer houses in trees.

FoggyWorld's picture

It's not that simple.  Houses that were minimally damaged and can be lifted onto pilings can be saved.  So much of what has gone wrong is due to inferior building codes along coastlines.   The builders and realtors wanted low prices and got those sloppy codes by donating to politicians.

We built our house to Outer Banks building codes on a Bay in NJ that was hit by Sandy and our 44 neighboring houses were pretty much totalled.  Ours received minimal damage and we stayed in it during the storm and lived in it right through today.  

After Sandy though, FEMA didn't do a perfect job and it took years, but now our new building codes really would have saved all of those homes had they been built properly in the first place. 

wizteknet's picture

16 foot near are coast after Ike.

To Hell In A Handbasket's picture

"FUCK YOU PAY ME!" The banks remind me of the gangsters in Goodfellas. What a gig these fuckers have? Creating money from nothing, then lending it out as legal tender. Fuck the money changers.

Dexter Morgan's picture

Numbers combined with doom porn, I love it.  It's like chocolate and peanut butter.

Fake Trump's picture

Sub prime reinvented.  

saldulilem's picture

Mortgage defaults. Property tax defaults. Bullish!

aloha_snakbar's picture

Jingle mail... then move somewhere drier... D'OH...

Bill of Rights's picture

We can print that in seconds...

Giant Meteor's picture

Exactly correct, and they will ..

But as per usual, the plebians will be bent over even lower ..

Byrond's picture

Give it Apple. They have a safe place for it.

Byrond's picture

Finding out that drywall falls apart when it gets soaked is one of life's magical wonderments. Finding out that it costs $200 an hour and months off full time labor to nail together $2 wall studs and $5 sheets of drywall (with an added 1000 percent markup on materials) also constitutes pure wonderment. The banks deserve it.

wizteknet's picture

Thats why you do it yourself much cheaper.