DS News - U.S. Bank

32 DISASTER'S LONG SHADOW e risk to mortgages and delinquency increases in the months following a natural disaster can be substantial. In a report from CoreLogic, Amy Gromowski, Senior Leader, Science & Analytics for CoreLogic, discussed how deep the impact from a natural catastrophe can stretch, not just to property damage but also to homeowner finances in the long term. "When discussing the impact of natural catastrophes, the amount of property damage is well covered," Gromowski said. "But what about the financial impact on homeowners well after the catastrophe event is over? How do people manage to pay their mortgage while also paying to reconstruct their homes? In addition, the closing of schools, blocked routes to work, and damage to their place of employment often cause disruption in income." In a case study conducted in the aftermath of Hurricane Harvey in Texas, CoreLogic found that FEMA designated counties following Hurricane Harvey saw a significant increase in 90+-day delinquency when compared to delinquency rates just six months prior. In these counties, properties estimated to be damaged saw a 205 percent increase in 90+-day delinquency, and undamaged properties saw a 167 percent increase in 90+-day delinquency. Following a disaster, the costs associated with repairs can add up. In addition to the delinquency impact, CoreLogic studied the costs of damage repair from flooding following Harvey. According to Gromowski, high amounts of damage can result in negative equity. "Let's say a house has a market value of $300,000 and the homeowner has 30% equity in their home. If they sold their home for $300,000, they would walk away with $90,000 after paying the outstanding loan amount of $210,000," Gromowski said. "If the same home experienced $100,000 in damage due to the event, the homeowner must pay $100,000 to repair the damage, or sell the home at a significant discount. From the homeowner's perspective, they have negative equity." Homeowners covered by the National Flood Insurance Protection or in a Presidentially Declared Major Disaster Area (PDMA) will receive some funding for repairs, but CoreLogic noted that PDMA FEMA payouts are often not enough. HOW WILL SANDERS' LEGISLATION IMPACT BIG BANKS? Sen. Bernie Sanders (I-Vermont) introduced legislation aimed at breaking up the nation's biggest banks and risky financial institutions. Rep. Brad Sherman (D-California) also announced plans to introduce a companion bill in the House. According to a statement released by Sanders and Sherman, the bill would break up the six largest banks in the country by applying a cap on the size of financial institutions. is would affect JPMorgan Chase, Bank of America, Citigroup, Wells Fargo, Goldman Sachs, and Morgan Stanley. e bill would also address large nonbank financial service companies such as Prudential, MetLife, and AIG. "No financial institution should be so large that its failure would cause catastrophic risk to millions of Americans or to our nation's economic well being," Sanders said in a statement. "We must end, once and for all, the scheme that is nothing more than a free insurance policy for Wall Street: the policy of 'too big to fail.'" Under the bill, entities that exceed the 3 percent cap would be given two years to restructure until they are no longer "too big to fail." ese institutions would no longer be eligible for a taxpayer bailout from the Federal Reserve and could not use customers' bank deposits to speculate on derivatives or other risky financial activities. is legislation would force banks such as JPMorgan Chase and Bank of America to shrink their sizes to where they were in 1998, Wells Fargo would shrink to its 2005 size, and Citigroup would shrink to the size it was in the early 1990s. "By breaking up these institutions long before they face a crisis, we ensure a healthy financial system where medium- sized institutions can compete in the free market," Sherman said. of households headed by homeowners aged 65–74 have a mortgage. Source: Federal Reserve Survey of Consumer Finances, released October 2018 STAT INSIGHT 35%

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