Hurricane Sandy’s terrifying sweep through the Northeast and Mid-Atlantic left billions of dollars of damage in its wake. As homeowners scramble to estimate the impact and work together to rebuild communities, it’s clear that there will be some-short term and possibly long-term effects on the mortgage industry.
The word that describes the industry’s response to the disaster is relief. Mortgage lenders have recognized the long-term implications of damage and loss for homeowners, some even suspending mortgage payments for up to 12 months. The purpose of this “recovery time” is to provide homeowners with the time to heal, calculate losses, and move forward to rebuild. The cost and time to repair and rebuild parts of the East Coast could take well over a year, and this suspended payment process brings hope and relief to the many homeowners facing devastation from Hurricane Sandy.
Sandy Impact #1: Mortgage companies are offering a helping hand to many families and communities in need.
In the short term, it’s not surprising that mortgage application numbers have dipped since the Hurricane hit. Certainly, families that were about to enter the application process have put that on hold in order to deal with immediate concerns, but these numbers are expected to grow over time as more people transition back to their life before the storm. Directly following a disaster, communities and relief agencies must rally to fix immediate infrastructure issues and to develop a plan for the long run.
Although hurricanes and other natural disasters can create billions of dollars in damage in even less than a few hours, the severity of the devastation and the widespread impacts throughout an entire region makes rebuilding a lengthy process.
Sandy Impact #2: Although mortgage applications have dropped, they are expected to recover over time
Another effect of this rebuilding time is that the foreclosure process will be put on hold for many. While this stalls the processing currently, the large numbers of foreclosed homes will be added to a long list of foreclosures already on the market from the 2008 economic and housing collapse. The potential impact of so many foreclosed homes hitting the market in 2013 is uncertain, but could have negative impacts on the mortgage industry, depending on the timing.
Sandy Impact #3: A large number of foreclosed homes suddenly on the market might depress the market further but the full effects are not known.
Experts predict that the majority of the factors in play with regard to the housing market will be short-term effects and that over time, the market will bounce back. The industry has already calculated its response to the issues by implementing measures geared at helping homeowners and suspending deadlines and payments over time.
The housing industry has been experiencing a slow but steady growth throughout the country after the implications of collapse a few years ago were drawn out over 4 years. The positive growth has been much-needed in an industry that had to adapt several times over the course of this downturn. Many experts had hoped that the market would recover from that collapse quicker than it did, but this is just one example of an affected industry challenged by large amounts of homes on the market and a continued low interest rate environment.
Although Sandy will slow the growth, this effect is expected to be short-term, which is positive news for mortgage lenders.