By Ray Birch
HOUSTON—One credit union CEO here is very concerned for members whose homes were severely damaged by Hurricane Harvey and don’t have flood insurance, and is looking for ways to help them get back on their feet.
But Steve Gilman, who leads Houston Texas Fire Fighters FCU, also has concerns for his credit union and other lenders in Houston that might be strapped with these borrowers’ problems if they walk away from their homes.
“The people that don’t have flood insurance and need to start working on their homes--that potentially is a huge problem in the area, because many homes that have flood damage are not in the flood zone,” said Gilman, whose credit union has been working diligently to assist the community and all of its members affected by Harvey. “We don’t know the number of homes in the Houston area in this situation and the total dollar impact. But the biggest challenge I see are homeowners with a massive amount of damage to their house who don’t have flood insurance.”
According to estimates from Black Knight Financial Services, as many as 300,000 borrowers in Houston could become delinquent on their loans and 160,000 could become seriously delinquent, that is, more than 90 days past due, as a result of Hurricane Harvey. Black Knight Financial Services compared mortgaged properties in the FEMA-designated disaster areas in Houston to those in Hurricane Katrina, and the resulting delinquencies in the four months following Katrina. After Hurricane Katrina, mortgage delinquencies in Louisiana and Mississippi disaster areas spiked 25 percentage points, noted Black Knight.
CU Taking Action
The $257-million credit union has initiated a skip-a-payment program and is working on a case-by-case basis on loan payment extensions. It is also offering a 2.9%, $500 short-term loan to get cash to members who need it quickly.
“We are working with members individually, and if we see a special situation, we will try to address it,” said Gilman.
Gilman has yet to have a member approach the credit union who has suffered major flood damage and is without flood insurance. However, it is still early in the recovery process, he noted. But Gilman said his concerns over members walking away from their homes are not as great as those of other lenders in the area, since Houston Fire Fighters does not have an extensive mortgage portfolio.
“But I think this situation may be challenging for some local banks and credit unions,” said Gilman, who emphasized that the credit union’s primary concerns from this disaster are for its members, staff and community. “Some who have suffered catastrophic damage to their homes and are without flood insurance may walk away from their homes simply because they don’t have the dollars to rebuild. Then the lender will have to deal with a badly damaged home that will take a lot of money to repair.”
Gilman pointed out last week that many homes in Houston remained under water.
“You can imagine the dollars potentially involved,” Gilman said, adding that FEMA could step in with assistance for homeowners facing this tough situation.
“And I know Washington is working on some dollars to shore up FEMA funds, but right on the heels of Harvey Florida was hit with Irma, so that recovery will demand a lot of dollars,” noted Gilman. “My hope is that Washington will address the problems in Florida and Texas that have resulted from two unprecedented storms. And we are not even through hurricane season. We will have to see how this situation plays out.”
Issues Addressed As They Come
Asked if Houston Fire Fighters has coverage to address a member walking away from a flooded home that does not have flood insurance, and Gilman said the credit union would address those issues as they arise.
“At this point we don’t have any of these situations I am aware of,” Gilman said. “You almost have to face one of these particular situations and then go to the insurance company to see what it covers. Rather than speculate, I will wait to see what or what does not occur and cross that bridge at the time.”
The record-breaking storm that dropped about 50 inches of rain on Houston over a few days has placed the credit union and its members in uncharted territory, said Gilman, who noted that none of the CU’s three locations suffered any significant damage.
“The credit union was fortunate. Overall, we are doing all that we can to work with our members to help them through this period,” said Gilman.
Transportation, too, has become a major issue, said Gilman.
“It’s estimated that 500,000 to one-million cars have been destroyed by the flooding here,” said Gilman. “But the cars should be covered by insurance, so I think our members are in good shape in that regard. I understand that dealers are trying to get cars from outside the area to meet the demand that is here and is coming.”
Gilman thanked credit union CEOs from across the country who have reached out to Houston Firefighters with offers of assistance. He also thanked CUNA and the Cornerstone CU League for their critical support.
“We are reaching out to our neighbor credit unions that were hit hard by the storm,” said Gilman. “Several credit unions have flooded branches and main offices.”
No Way Predict
Gilman emphasized that while Houston has seen heavy rains from storms in the past, no way could the city have predicted and prepared for what Harvey brought.
“We have rains and storms that drop 10-15 inches of water. We have faced several hurricanes. But 50 inches of water in four to five days, no one expected that,” said Gilman. “What has impressed me the most has been our staff—how they have been supporting those in need. Many of them have issues at home as well, but they come to work, put in a full day, and then go home to volunteer. It has been good to see how the credit union community is helping out here in Houston.”