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Monday, October 02, 2017

Black Knight Mortgage Monitor: "350,000 in Hurricane Irma Disaster Areas Have Negative or Limited Equity"

by Calculated Risk on 10/02/2017 08:09:00 AM

Black Knight released their Mortgage Monitor report for August today. According to Black Knight, 3.93% of mortgages were delinquent in August, down from 4.24% in August 2016. Black Knight also reported that 0.76% of mortgages were in the foreclosure process, down from 1.04% a year ago.

This gives a total of 4.69% delinquent or in foreclosure.

Press Release: Black Knight’s Mortgage Monitor: Most Borrowers Impacted by Hurricane Harvey Have Significant Equity; 350,000 in Hurricane Irma Disaster Areas Have Negative or Limited Equity

Today, the Data & Analytics division of Black Knight, Inc. released its latest Mortgage Monitor Report, based on data as of the end of August 2017. On the heels of reporting an early, 16 percent spike in mortgage delinquencies in Hurricane Harvey-related disaster areas, Black Knight examined the equity outlook for mortgage holders impacted by either Hurricane Harvey or Hurricane Irma. As Black Knight Data & Analytics Executive Vice President Ben Graboske explained, despite the extent of the damage in Texas, Hurricane Harvey-impacted borrowers have a greater equity stake, which may bode well for long-term recovery.

“Before Hurricane Harvey made landfall, the average combined loan-to-value ratio (CLTV) for homeowners with mortgages in what became FEMA-designated disaster areas was 53 percent,” said Graboske. “Right on par with the national average, that’s the lowest we’ve seen since prior to 2004. This equates to approximately $131,000 in equity per borrower. 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. In addition, over 75 percent of mortgages in the Hurricane Harvey footprint are held in Fannie Mae, Freddie Mac or Ginnie Mae securities. Therefore, the bulk of borrowers affected by the storm will be able to find assistance under the various foreclosure moratoriums and forbearance programs that have been instituted. 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.

“In Florida, Hurricane Irma impacted a much larger portion of the state. The 48 FEMA-declared Hurricane Irma disaster areas include over 90 percent of the state’s mortgaged properties. To put this in perspective, that means that by balance, over five percent of all mortgages in the U.S. are included in Hurricane Irma’s disaster areas. Unlike Houston, though, where all-time-high home prices have contributed to a significant reduction in negative equity, home prices in Florida remain 17 percent below their 2006 peak. On average, borrowers in Hurricane Irma-related disaster areas have a CLTV of 57 percent, somewhat higher than the national average. Of the 3.2 million borrowers impacted by Irma, an estimated 170,000 were still in negative equity positions before the storm, with another 180,000 having less than 10 percent equity in their homes. Due to lackluster home price recovery since the housing crisis, the negative equity rate in Irma’s disaster area is nearly twice the national average.”
emphasis added
BKFS Click on graph for larger image.

This graphic from Black Knight looks at negative equity volumes and rates over time.

From Black Knight:
• Along with increasing the amount of lendable equity, strong home price gains so far in 2017 have helped to continue to shrink the population of borrowers who owe more on their mortgages than their homes are worth

• Thus far in 2017, the number of borrowers underwater on their mortgage has fallen by nearly 750K, from 2.2M entering the year to 1.4M as of the end of Q2

• Today, just 1.4M borrowers remain underwater, representing 2.8 percent of all homeowners with a mortgage

• This is down from over 15M and more than 28 percent of the mortgage market at the end of 2011
There is much more in the mortgage monitor.