What Happened?
If you have a mortgage in Puerto Rico, a federal report found that about 63 percent of mortgages had no insurance or government guarantee behind them. The U.S. Government Accountability Office (GAO), the federal agency that audits how well government programs work, examined mortgage performance in Puerto Rico after the hurricane struck in September 2017.
When Maria hit, the share of Puerto Rico mortgages that were past due roughly tripled by November 2017. The Department of Housing and Urban Development, the Federal Housing Administration, Fannie Mae, Freddie Mac, and the U.S. Department of Agriculture imposed a foreclosure moratorium from the fourth quarter of 2017 through the third quarter of 2018.
Why Does it Matter to Me?
About 63 percent of mortgages in Puerto Rico carried no federal or private insurance backstop when the storm hit.
The delinquency rate returned to pre-Maria levels about one year after the hurricane, and most foreclosures in 2019 involved mortgages that were already troubled before the storm.
The GAO also could not answer whether the crisis attracted new housing investment, because data on rates of return for housing developers in Puerto Rico were not available.
Both Sides, Now
Supporters of the federal response point to the GAO report finding that the foreclosure moratorium worked as intended: despite the spike in delinquencies, foreclosures continued to fall during the pause, and the market stabilized within a year.
Critics argue the response left too many borrowers behind. In December 2017, Black Knight data showed about 90,000 Puerto Rico borrowers had become delinquent because of Hurricane Maria, a figure the New York City Bar Association cited in a letter urging a foreclosure moratorium. The Federal Housing Administration (FHA) extended its foreclosure moratorium a third time after Hurricane Maria, but only for borrowers with FHA-insured mortgages, not all mortgage holders.
Congress directed the GAO to conduct this review through a law requiring examination of foreclosure trends and housing developer returns in Puerto Rico before and after Maria.
What Happens Next?
The GAO could not analyze rates of return for housing developers in Puerto Rico because the data were not available, so that part of the recovery remains unexamined.
Policymakers are now weighing how to structure disaster relief and mortgage protections for future hurricanes and climate events.
Congress holds the power to act, whether by requiring better data collection on developer activity or by expanding the share of mortgages that carry federal protections before the next disaster strikes.
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