Mortgage lenders face mass foreclosures due to extreme weather in under-insured areas Mortgage lenders would have faced a tsunami of foreclosures after Hurricane Harvey if investors hadn’t paid cash for thousands of Houston-area homes flooded by the storm
Floods, wildfires and other types of extreme weather are threatening not only the real estate industry but also the mortgage industry.
Mortgage lenders are unprepared for widespread foreclosures as natural disasters increasingly hit areas where few borrowers have insured their properties against fire or flood damage, according to former Freddie Mac executive Ed Delgado.
Assessing credit risk is a fundamental function of the mortgage industry, but lenders lack an understanding of “weather risk and where those events can take place,” said Delgado, who now serves as CEO of Five Star Institute, a mortgage trade association.
After large-scale natural disasters, mortgage servicers usually suspend foreclosure actions temporarily and adopt loan-forbearance programs, which extend the terms of mortgage loans while allowing borrowers to avoid making a few monthly payments.
Forbearance and foreclosure suspensions are post-disaster guidelines for mortgage servicers from Fannie Mae, Freddie Mac and the Federal Housing Administration (FHA), which insure or own most home loans.
But the mortgage industry has failed to quantify the potential losses if a large number of borrowers 上海千花社区