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Hurricane Season Recap, Flood Compliance, and Loan Diligence Updates

Brian Murray • 11/6/2019
With the 2019 hurricane season winding down, it seems a good time to look back and start assessing the damages and impacts we’ve seen this year on the residential and commercial property market along with its regulators, insurers, and lenders.

Flood Compliance and Loan Diligence Updates

The knowledge of recent weather impacts and catastrophic damage is critical to loan diligence and underwriting for all lenders and insurers throughout the country.

We are in the last month of the 2019 Hurricane season, and it has been the fourth consecutive year of above normal activity with at least one Cat 5 storm (Hurricanes Dorian and Lorenzo). This was also the record-setting fifth year in a row with a named storm before the start of the season with Subtropical Storm Andrea organizing on May 20th in the Atlantic.

Hurricane Dorian was the most intense tropical storm of the season and a record to strike the Abaco Islands and Bahamas at sustained winds of 185 mph, creating the worst natural disaster in the country’s history. The result to Grand Bahama was that most structures were flattened or swept to sea, at least 70,000 people were left homeless, and an estimated $7 billion in residential and commercial property damage. As the storm continued westward the states of Florida, Georgia, South Carolina, North Carolina, and Virginia all declared a state of emergency. The storm then weakened moving parallel to the east coast avoiding one of the worst natural disasters in our nation’s history.

The impact of this season continues to be on the minds of our elected officials in Washington, DC as we once again face a vote on the renewal of the National Flood Insurance Program (NFIP). The program faces another countdown to November 21st, when they will vote on the renewal of the program that has consistently run in the red since Hurricane Sandy in 2012. Whether Congress will reshape the NFIP, or simply re-approve the current model is anyone’s guess—what we do know is that property owners are seeing higher premiums, while banks and lenders are still working on compliance issues to meet flood compliance standards.

On the bright side, we’ve continued to be very successful in bringing several of our bank clients through a rigorous loan diligence process that assesses lending activity, property risk, collateral review, and insurance documentation that brings borrowers (and therefore the bank) into Regulation H: Flood Compliance. There are constant challenges to compliance, including changes that started July 1, 2019 to accept private flood insurance policies that meet the statutory definition of insurance in the Biggert-Waters Act. We have been actively building these changes into our flood review process to assist our bank and lending clients in addressing new risk and compliance objectives quickly and effectively.

The major storms this year have ranged from severe flooding to catastrophic hurricane activity. We have witnessed all kinds of impact some seen and dramatic, and others that lie hidden to arise during unforeseen activity. We’re working hard to ensure due diligence is complete and our clients meet flood compliance standards prior to the end of the hurricane season.

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