Hurricane Season Hits Hard: Millions of Mortgages at Risk!

Brace yourselves! The Federal Housing Finance Agency (FHFA) has just unleashed a powerful new tool designed to assist mortgage servicers and investors as they navigate the stormy waters of loan performance in the face of two major hurricanes set to impact the U.S. in 2024.

This dynamic dashboard offers vital insights into single-family mortgages backed by Fannie Mae and Freddie Mac, specifically targeting counties designated for disaster-related individual assistance by FEMA. We’re talking over 200 counties from Virginia all the way to Florida—areas battered by the wrath of Hurricanes Helene and Milton.

“Our mission is clear,” the FHFA stated. “We aim to equip decision-makers with invaluable data to aid in supporting the victims of these storms and mitigate the impacts of future natural disasters.”

In a remarkable two-week stretch, Helene and Milton made their mark on the Southeastern U.S., with Helene tragically recording the highest storm-related fatalities in nearly twenty years.

With more than 2.6 million government-sponsored loans in the storm-affected zones, averaging an unpaid balance nearing $200,000, the total outstanding principal for both GSEs skyrockets to over $526 billion. Thankfully, only a fraction of these loans is expected to result in losses.

To break it down: Helene alone impacted over 1.1 million mortgage holders, while Milton affected more than 834,000 borrowers. Approximately 696,000 homeowners found themselves ensnared in the path of both hurricanes.

In immediate response, both Fannie Mae and Freddie Mac initiated a year-long mortgage forbearance program for those impacted by the storms. Before the hurricanes struck, the rate of loans in serious delinquency was a mere 0.88% in September.

As of November, the share of loans in forbearance across all portfolios has climbed to 0.5%, marking the sixth consecutive month of increase. This translates to around 250,000 homeowners seeking relief. The Mortgage Bankers Association reports that 46% of these forbearances are directly linked to natural disasters.

Focusing on Fannie Mae and Freddie Mac-backed loans, forbearances rose slightly to 0.21% on a month-to-month basis.

However, the FHFA has raised a red flag regarding potential stress due to the lack of flood insurance. Although GSEs mandate flood insurance for homes in high-risk areas, only 5.2% of the mortgages they hold in hurricane-affected regions are for properties in these perilous zones.

Hurricane Helene unleashed devastating floods across North Carolina, submerging vast areas and leaving many properties in dire straits.

“Standard property insurance doesn’t cover flood damage, making these loans vulnerable to delinquency if homeowners struggle with mortgage payments or repair costs,” FHFA emphasized.

Despite not being obligatory, some homeowners may have taken it upon themselves to purchase flood insurance. Yet, FEMA estimates reveal a sobering statistic: only 4% of U.S. households actually carry a flood insurance policy.

As three months have passed since the first storm ravaged the U.S., government agencies have begun to extend relief measures originally implemented this fall. In early December, the Department of Housing and Urban Development announced a continuation of its foreclosure moratorium for hurricane-impacted areas, extending support through April for FHA-insured mortgages.

Shortly thereafter, FHA rolled out a plan to waive reviews of early defaults for loans in affected states post-November 1, acknowledging that these defaults may stem from unforeseen events like natural disasters.