Hurricane Irene could cause home refinancing, purchasing issues

Damage from Hurricane Irene could make it difficult for homeowners in the Northeast to close on pending home refinancing and mortgage purchase applications. “What has to happen — or what is required — is that they need to have a re-inspection completed on the property by the original appraiser to verify no damage has been done and the value of the home has not been affected,” by the storm, according to John Walsh, president of Total Mortgage Services, a lender based in Connecticut. Walsh said the re-appraisal issue will impact homeowners who had pending home purchase and refinancing applications in FEMA-designated disaster areas before the hurricane. The FEMA website names at least 11 states and Washington as federal disaster areas impacted by last weekend’s storm. Walsh said somewhere between 15% to 50% of his firm’s pending mortgage application pipeline requires a new inspection. At the same time, he stresses a required re-inspection does not mean all of those properties were actually damaged by the storm. Even still, he sees costs and delays as a problem. “There are going to be homes that are uninhabitable,” Walsh said. “One house that I know of ended up with oil all over it.” He said in situations where the damage runs deep, a financial institution is not going to lend on the property once the new appraisal shows the impact of the storm.Walsh sees this paradigm as being particularly difficult in situations where a person has yet to close on a mortgage for a home damaged by the storm, especially if the buyer has already sold his or her existing residence. “If I’m buying that house and I can no longer purchase it, and I’ve already sold my own home, the domino effect of that could be a big problem,” he said. Andrew Wilson, a spokesman for Fannie Mae, said it’s too early to tell how many refinancing and purchase applications will be impacted by Hurricane Irene, which swept up the coast hitting every state between Virginia and Vermont. “If there has been damage to a home that was looking to refinance, they indeed have to seek a reappraisal,” Wilson said. He said the larger issue for the GSE is letting impacted homeowners with Fannie Mae loans know that if they are facing flooding and other damages they can qualify for a loan forebearance. “I don’t know if we have received requests for this from lenders yet,” Wilson said. However, he said lenders are empowered under GSE guidelines to grant those forebearances in natural disaster situations. Write to: Kerri Panchuk