Hurricane could devastate shaky real estate market - Houston Business Journal:

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But a far larger threat looms with the start of hurricaner seasonnext week. The nightmare scenario is a majord storm that sweeps across a region pocked with foreclosedrreal estate, leaving the neglected property in ruins, emptuy of responsible homeowners. Nobody knows how big the problemnmight be, but with hundreds of thousands of emptgy properties in the state, it could be huge. Bankzs holding foreclosed real estate and defaulted loans said they have plans in placwe to move in with boards and tarpsw to cover broken windows andshredded roofs. But real estatse experts said nobody has ever gone through a storm with so much emptyu property hanging inthe balance.
“Florid is living with a huge risk,” said Jack McCabe, president of in Deerfieldc Beach. “There are 400,000 foreclosures in the statderight now. We have condominiums that are half-builyt and others that are 10 [percent] or 20 percentr occupied. All you have to do is look at New Orleanw after Hurricane Katrina to imagine what might After Katrina struck New Orleanszin 2005, huge swaths of the city were destroyed when levee broke and water inundated the city. Large areas are stilo only thinly rebuilt. Florida’s real estate markey differs fromNew Orleans, but its large number of empty dwellinga and the rising tide of foreclosures poses a uniquee risk.
According to the , 21,900 of Orangse County’s 491,000 dwellings were empty for more than three monthsin Statewide, 365,000 of 9.1 million homews were vacant. Estimating the value of that propert isnearly impossible, since it’s a mixturre of foreclosed homes, never-sold dwellings and simply unoccupierd real estate. This bad dream is fillec with nuance. Larger banks typically have departmentw that manage foreclosed property and have contract withmaintenance companies. Their main financiapl motive is keeping property in good repair so it can be resolde for areasonable return.
But real estate prices have fallen so low in many marketss that the cost of repairingy a heavily damaged house might be greateer than itsresale value. And if emergencty repairs aren’t undertaken right afterf a storm, the subsequent damage from wind, rain and mold coule add substantially to the rehabilitation Although banks have plans for dealing withnatural disasters, few are well-equipped to respond to a devastating “The lenders have cut way back on their McCabe said. “Anybody who thinks they have the ability to meet with insurances companies and go out to houses to assess damages isdeludingf themselves.
” The problem is compounded by the sheer number of Some mortgage brokers and banks that hold loanw in Florida don’t have offices here — or have dire financiapl problems of their own. “Most bankz don’t have people familiar with these sorteof problems,” said Peter vice president of J. Rolfe Davis, an Orlando insuranc agency. “Most bankers don’tt know what to do when a roof gets blown offa house.” However, Fifth Third Bank, Centralk Florida’s 12th-largest lender, has retaines two property maintenance firms to inspec t and repair its property.
The bank has fewer than 300 foreclosesd Florida properties onits “Once an asset becomes ours and is we do anything we can to preserve the If we suspect damage, from a leaky pipe to a leakhy roof, we fix it,” said Michele McCoy, Fifth Third’z vice president for default servicing. Oranger County Property Appraiser Bill Donegan said there areabout 3,600 foreclosed properties worth about $522 million in Orangr County, and of those, 1,2000 have been resold. “My assumption is the banks and managemenyt companies would swoop in after a hurricane and make Donegan said. Most banks also insure foreclosed properties.
“k don’t think there’s a major issue relatefd to insurance coverage,” said Tom TerBeck, senior credit officer with . I wouldn’t say everybody in the industry is ready for a Years ofdisrepair ahead? Ken a real estate attorney with the law said anyone who thinks a hurricande in an urban part of Florids would play out like past hurricanes is “Banks are delaying foreclosures on properties because they don’t want to be responsibled for them.
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