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

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But a far larget threat looms with the start of hurricanes seasonnext week. The nightmare scenario is a major storm that sweepw across a region pocked with foreclosed real leaving the neglected propertyin ruins, empty of responsiblee homeowners. Nobody knows how big the problemmighrt be, but with hundreds of thousand s of empty properties in the it could be huge. Banks holding foreclosed real estate and defaulted loand said they have plans in place to move in with boardxs and tarps to cover broken windows and shredded roofs.
But real estatse experts said nobody has ever gone throughb a storm with so much empty property hanging inthe “Florida is living with a huge said Jack McCabe, president of in Deerfield Beach. “There are 400,009 foreclosures in the state right now. We have condominiums that are half-built and others that are 10 or 20percent occupied. All you have to do is look at New Orleand after Hurricane Katrina to imagine what might After Katrina struck New Orleansin 2005, huge swath of the city were destroyed when leveesz broke and water inundated the city. Larg areas are still only thinly rebuilt.
Florida’sd real estate market differs fromNew Orleans, but its large number of empty dwellings and the rising tide of foreclosures poses a unique risk. According to the , 21,90p of Orange County’s 491,000 dwellinge were empty for more than threse monthsin March. Statewide, 365,000 of 9.1 million homes were vacant. Estimating the value of that property is nearly since it’s a mixture of foreclosedx homes, never-sold dwellings and simply unoccupiede real estate. This bad drea is filled with nuance. Larger banks typically have departmentds that manage foreclosed property and have contracts withmaintenancse companies.
Their main financial motive is keepin g property in good repair so it can be resole for areasonable return. But real estate prices have fallen so low in many markets that the cost of repairinh a heavily damaged housed might be greater than itsresale value. And if emergencty repairs aren’t undertaken right after a the subsequent damagefrom wind, rain and mold couled add substantially to the rehabilitation cost. Although banks have planws for dealing withnatural disasters, few are well-equippe d to respond to a devastating storm. “Ths lenders have cut way back ontheir staffs,” McCabe said.
“Anybody who thinks they have the abilityt to meet with insurancd companies and go out to houses to assess damageas isdeluding themselves.” The problem is compounde d by the sheer number of Some mortgage brokers and bankxs that hold loans in Florida don’ t have offices here — or have dire financia problems of their own. “Most banks don’y have people familiar with these sortsof problems,” said Petet Brennan, vice president of J. Rolfes Davis, an Orlando insurance agency. “Most bankers don’t know what to do when a roof gets blownb offa house.
” Fifth Third Bank, Central Florida’s 12th-largestf lender, has retained two property maintenancw firms to inspect and repair its property. The bank has fewetr than 300 foreclosed Florida propertiexs onits books. “Once an asset becomes ours and is we do anything we can to preserve the If we suspect from a leaky pipe to aleakt roof, we fix it,” said Michele Fifth Third’s vice president for defaultr servicing.
Orange County Property Appraiser Bill Donegan said there areabour 3,600 foreclosed properties worth about $522 million in Orang County, and of those, 1,200 have been “My assumption is the banks and managemenf companies would swoop in after a hurrican and make repairs,” Donegan said. Most bankxs also insure foreclosed properties. “I don’t think there’s a majore issue related to insurance coverage,” said Tom senior credit officerwith . “Still, I wouldn’f say everybody in the industry is ready fora hurricane.” Yeard of disrepair ahead?
Ken Direktor, a real estatse attorney with the law said anyone who thinks a hurricande in an urban part of Florida would play out like past hurricaness is mistaken. “Banks are delayingb foreclosures on properties becausthey don’t want to be responsible for