Houstonians in the flood stricken areas are focused on surviving and looking for a place to stay, not finding a way to pay their monthly bills or mortgage payments on homes that may be destroyed.
That is why Fannie Mae, Freddie Mac and the Federal Housing Administration, which back the vast majority of mortgages today, have already announced that they will offer forbearance for at least 90 days to borrowers in the Houston area and could, in some cases, extend that up to a year.
That means borrowers would not have to make their monthly payments, and no penalty fees would be charged. Interest, however, would still accrue; the offer is a band-aid, not a cure.
It is difficult to know what exactly Houston homeowners will find once the floodwaters recede—whether their homes can be dried out, cleaned up and made habitable quickly, or whether some will be total losses. Given the record rainfall, there will likely be many of the latter.
The unprecedented nature of a natural disaster like Harvey makes both comparisons and predictions difficult but not impossible. Hurricane Katrina, with its own intense flooding, is possibly the best comparison for those looking to gauge what will happen with homes and mortgages.
In the Houston area and outlying areas hit by Hurricane Harvey, there are more than twice as many mortgage properties with nearly four times the unpaid principal balance as there were in the Louisiana and Mississippi counties hit by Hurricane Katrina in 2005. If the impact on homes is similar, more than 75,000 Houston borrowers could become unable to make a mortgage payment within the next two months and 45,000 could become seriously delinquent on their loans in the next four months, according to Black Knight Financial Services.