How Does Mortgage Performance Vary Across Borrower Demographics Following a Hurricane?

Hurricanes cause billions of dollars in damages to the United States annually. Property damages and associated local economic impacts from hurricanes can affect homeowners' ability to pay their mortgage and in turn can harm borrowers' access to credit or decrease property values in the long term. This paper studies how hurricanes affect loan outcomes in the year following the event. With our unique dataset, we are able to consider how mortgage performance varies by severity, interventions, and low-income or minority status borrowers. We find that delinquencies, modifications, and foreclosures increase after an event and that more severe events see higher increases. For example, we find the average impact of all 28 storms on 90-day delinquencies is 0.025% over the following 12 months, increasing by another 0.013% with each inch of rain. Prepays decrease overall due to a decrease in refinances, but non-cashout and non-refinance prepays increase for a subset of the population with access to insurance and disaster assistance. Delinquencies increase more so for minority and low-income borrowers. Further, minority borrowers experience higher rates of modifications after a hurricane. These results demonstrate that hurricanes decrease borrower welfare overall and more so for vulnerable borrowers through increased negative loan outcomes.