Hurricane Michael has carved a path through the Gulf of Mexico and is currently on a collision course with Florida, Alabama, and Georgia. Having just been upgraded to a category 4 storm, its destructive capabilities could have serious consequences for all borrowers, including those whose mortgages back securitizations in the secondary market.
The Federal Deposit Insurance Corporation [1] (FDIC) has issued an interagency statement on supervisory practices regarding financial institutions. Lenders are reminded that they are to work constructively with borrowers in areas negatively impacted by the storm.
Both Fannie Mae [2] and Freddie Mac [3] are reminding those fearful of the damage Hurricane Michael may do their homes that they have options for mortgage assistance. Those homeowners who are negatively impacted by the storm and are found eligible for relief will have the option to waive mortgage payments as well as have all foreclosure proceedings frozen for up to 12 months. Both GSEs are also ensuring homeowners that they will not be reported to credit bureaus for late payments nor incur late fees. Both GSEs are also authorized to suspend or reduce mortgage payments immediately for up to 90 days without any contact with the homeowner if they suspect the homeowner has been affected by the hurricane.
“It is important for those in the path of the storm to focus on their safety as they deal with the potential impact of Hurricane Michael,” said Carlos Perez, SVP and Chief Credit Officer at Fannie Mae. “Fannie Mae and our lending and servicing partners are focused on ensuring assistance is offered to individuals and families in need. We urge everyone in the area to be safe, and we encourage homeowners affected by the storm to contact their mortgage servicer for assistance as soon as possible.”
"As with past hurricanes, damage caused by Hurricane Michael poses a minor credit risk to residential mortgage-backed securities (RMBS) with high exposure to the counties in the storm’s path, in this case, those in the Florida panhandle, Alabama and Georgia,” said Moody’s [4] SVP Deepika Kothari. “Excluding SFR, RMBS exposure to the counties in Florida, Alabama and Georgia expected to be affected by the storm is small at less than 1 percent across the various asset classes.”
Single-family rental (SFR) RMBSs have a much higher rate of exposure with assets in Florida and Georgia accounting for roughly 1.5 percent of collateral. For SFR transactions, insurance policies that cover damages from windstorms or floods in special hazard areas will provide some protection to those in need.