In the literal wake of a second major hurricane in as many weeks, Black Knight Financial Services is again warning of some potentially disastrous outcomes for mortgage guarantors.  The company issued a report on September 11 estimating there was the potential of losses to mortgaged properties in Texas and Louisiana at $179 billion from Hurricane Harvey.  Now they are back again with bad news about Hurricane Irma.

Irma hit the U.S. Virgin Islands, rather than hitting Miami as expected, and slammed into Florida's Cudjoe Key, making yet another landfall at Marco Island at category 3 windspeeds. Because of its late westerly shift and the hours it spent churning offshore of Florida's west coast the hurricane caused major storm surges on both coasts, affecting coastlines as far north as South Carolina and causing significant wind damage over the interior of both Florida and Georgia.

Black Knight's preliminary report on damages from Irma estimates the storm may have affected more than 3.1 million mortgaged properties, a number that represents $517 billion in unpaid principal balances. This is three times the number of properties as were involved with Hurricane Harvey and seven times those connected to Hurricane Katrina which clobbered Louisiana and Mississippi in 2005.  In terms of dollars, Irma involved three times the projected unpaid balances of mortgages potentially impacted by Harvey and 11 times more than did Katrina.

Irma-related disaster areas now include more than 90 percent of all mortgaged properties in Florida.

Black Knight Executive Vice President Ben Graboske said, "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.  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." 

It is important to note that Black Knight is reporting the number of mortgaged properties within the damaged areas, not necessarily the number that sustained losses. However, a salient point is how many of those properties may have been uninsured.  Leading up to the storm, Patch reported that, according to FEMA data, less than 42 percent of homes in Florida's 38 coastal counties carried flood insurance.

After Harvey, Black Knight said that, of the 1.18 million mortgaged homes in affected areas, the government sponsored enterprises (GSEs) Fannie Mae and Freddie Mac together held or guaranteed 56 percent of the loans.  We can probably assume similar numbers in Irma's path.  

Further, the company noted that, within two months of Katrina, delinquencies among borrowers in Louisiana and Mississippi's disaster areas spiked 25 percent, peaking at 34 percent of mortgaged homes.   Four months post-hurricane, serious delinquencies, those over 90 days past due or in foreclosure, rose 14 percentage points to 16 percent.  The company extrapolated those numbers to estimate that a similar pattern among Harvey's victims could result in 300,000 borrowers missing one mortgage payment in the next two months and 160,000 becoming seriously delinquent within four months. With three times the number of properties potentially damaged by Irma, those numbers become 900,000 and 480,000 respectively.

Graboske added, "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."