Moratoria on foreclosures in hurricane-affected areas of Florida and Texas are ending, which will likely lead to a spike in foreclosure activity in these areas.
March 2018 foreclosure numbers were up 11.56 percent, or by 52,100 foreclosure starts, nationally over February 2018 according to a Black Knight report. Of that increase, Florida and Texas foreclosures were responsible for two-thirds. Of note: Compared to March 2017, foreclosure starts were still down 13.6 percent.
Black Knight analysts noted that the five states with the largest percentage of loans 90 days delinquent or later were all on the Gulf Coast. This is not surprising given Hurricanes Irma and Harvey slammed this area of the country in Fall 2017. In the wake of the disasters, the Federal Housing Administration (FHA) offered FHA Disaster Relief options, which applied to many of the households in the presidentially declared disaster area. These homes were automatically eligible for a 90-day moratorium, and many others were as well if their ability to pay their mortgage or a member of their household was “substantially affected” by the hurricanes.
Investor Insight: A foreclosure spike represents an opportunity to work with homeowners with distressed properties who do not want to go through foreclosure but cannot or do not wish to remain in their homes.
The FHA extended the foreclosure moratoria for Hurricanes Harvey, Irma, and Maria, which hit Puerto Rico, at the end of October of last year. The Harvey moratorium extended through February 21, 2018, while the Irma moratorium extended through March 9, 2018. While not all lenders are required to respect the guidelines the FHA lays down for servicing its own FHA-insured mortgage disaster-related moratoria, most follow similar, if not identical, protocols. This means that when the moratoria expire, there tends to be a spike in foreclosure activity as lenders initiate the foreclosure process on a high volume of homes that are delinquent but no longer shielded by the moratorium.