Mortgage delinquencies from Florence could hit VA loans hardest

Delinquencies will be on the rise and Veterans Affairs loans have greater density within FEMA-declared disaster zones from Hurricane Florence, according to Black Knight.

While the scope of the damage still develops, an estimated 474,000 mortgaged properties are affected across North Carolina and South Carolina, with about 80% of those in the Tar Heel State.

VA loans account for about 5% of overall mortgages on a national scale, but in the veteran-heavy impacted locations like Fort Bragg, Camp Lejeune and surrounding areas, VA loans take up more than 20% of mortgages.

"In the wake of Hurricanes Harvey and Irma last year, the data showed the increase in the VA delinquency rate in affected areas was 40% higher than among conventional mortgages," Ben Graboske, executive vice president of Black Knight's data and analytics division, said in a press release.

"If the per-capita impact of Florence matches last year's storms, more than 5,400 veteran homeowners with VA loans would be among the nearly 25,000 borrowers who could become past due over the next three months."

The mortgage delinquency rate fell to 3.52% in August, dropping year-over-year from 3.93% and from 3.61% in July, representing the largest decline between those two months on record. Typically, delinquencies peak in December at the conclusion of hurricane season.

"In general, while average home prices in these areas run $100,000 below the national average, they tend to be more heavily leveraged. Nationally, the average combined loan-to-value ratio is 51%, while in these FEMA-declared areas the average is 63%. As a whole, the area also had a higher-than-average delinquency rate of 4.4% going into the storm, as compared to the national average of 3.5%," Graboske said.