As Florence Approaches, Homeowners, Real Estate Finance Industry Holds Breath

Mike Sorohan msorohan@mba.org

September 12, 2018


It's hard to imagine a crazier weather summer than 2017, with its devastating hurricanes and massive wildfires. To which 2018 appears to be saying: "Hold my beer."

An already 2018 active hurricane season kicked into high gear this week, with Category 4 Hurricane Florence bearing down on the Eastern Seaboard. Florence is expected to make landfall along the North Carolina/South Carolina coast this Thursday at 8:00 a.m. ET with sustained winds in excess of 140 miles per hour.

Out in the Pacific, Hawaii--already bearing the brunt of volcanic eruptions--saw Tropical Storm Olivia skirt by overnight. And back in the Atlantic, Tropical Storm Isaac (expected to reach hurricane status), Hurricane Helene and two unnamed tropical depressions are lining up for what should be a busy September.

Meanwhile, in the Western U.S., dozens of wildfires, fueled by parched conditions, have burned more than 500,000 acres and caused billions in damages; the Carr Fire in California alone became the largest wildfire in U.S. history, burning 230,000 acres and destroying nearly 1,200 residential and commercial buildings.

According to the National Oceanic and Atmospheric Administration, disasters in the U.S. during the first six months of 2018 killed 36 people and caused more than $6 billion.

The National Weather Service warned that Florence could be a "Harvey-like" storm, which hit the Houston area last summer--and stayed, dumping more than 60 inches of rain and causing widespread flooding.

CoreLogic, Irvine, Calif., provided a data analysis this week estimating Florence could unleash a storm surge that could potentially damage nearly 760,000 homes in the Carolinas and Virginia, with a reconstruction cost value of $170.2 billion.

In an article appearing this week in MBA Insights (https://www.mba.org/publications/insights/articles/current-issue/prepare-for-the-next-emergency-what-to-do-for-third-party-risk-management-before-disaster-strikes), Branan Cooper, Chief Risk Officer with Venminder, Elizabethtown, Ky., a third-party risk management solutions firm, said for lenders and servicers, disaster preparation should be part of any business plan.

"Certainly, for those along the Eastern Seaboard, hurricane preparedness should be an annual event, but you'd be surprised at how many times I've felt like we're making it up as we go along," Cooper wrote. "If nothing else, Superstorm Sandy in 2012 should have been a real wakeup call for all of us, particularly those in Delaware, New Jersey and New York, who've been lulled at times into a false sense of security."

Cooper said business continuity in disaster preparation involves several steps, including planning, involvement with subject matter experts, identification of key scenarios and probabilities, communication plans, testing and updates.

"A little planning can go a long way," Cooper writes. "Ensuring your institution and operations can survive a disaster prior to it happening will help you greatly and mean less of an impact on your third parties and customers.

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