With Florida targeted by three hurricanes, the housing industry grinds to a halt, refusing to write insurance policies or close on sales.
By JEFF HARRINGTON
Published September 12, 2004
Talk about being unable to close the deal.
Florida's monthlong nightmare inside hurricane alley has wreaked unprecedented havoc on the state's long-flourishing business of buying, selling and refinancing homes.
Insurers have refused to write policies for much of the past month - whenever Hurricanes Charley or Frances were in the vicinity. Property appraisers, surveyors and termite inspectors have been thwarted from examining properties. Some refinancings have closed, only to have lenders hold back money because the dwellings were damaged by a storm before the funds were disbursed.
The end result: Title insurance companies say that roughly half of the home sales and refinancings scheduled over the past month have either been canceled or postponed indefinitely. With Hurricane Ivan threatening, the long wait continues.
"The general consensus among all managers I've talked to is that about 50 percent of their transactions were affected within the time periods that defined the two hurricanes," said Barry Flavin, who runs Florida operations for The Talon Group, a title insurer that typically handles about 1,500 closings a month statewide. Talon's parent company, First American, has up to 10,000 closings a month, a figure chopped roughly in half because of the storms, Flavin said.
Part of the problem is that insurers often do not write policies if a property falls within a 500-square-mile area surrounding a looming hurricane.
The Tampa Bay area moved into that no-write zone, known simply as "the box" in insurance lingo, on the Tuesday before Hurricane Charley's Friday the 13th tear through Florida's midsection in August. It didn't exit the box until the following Tuesday. Then it re-entered the box the Thursday before Hurricane Frances' arrival. Even though the state was technically out of the box early last week, many insurers have not begun writing again since Frances.
There's nothing mandated by law regarding whether insurers write policies when properties are located within the box. State Farm, for instance, doesn't even use the box, spokesman Tom Hagerty said. It simply doesn't write policies whenever a hurricane/tropical storm watch or warning has been issued for an area.
Actually, insurers have wide leeway to determine when they want to write policies.
Lately, not many have been in the mood.
"I've been in business since 1999 and I've never seen anything like it," said Bill Holloway, executive vice president of Consumer Select Insurance, a general lines insurance agent based in Winter Haven.
Since Hurricane Frances swept through a week ago, only two of 10 homeowners' insurers that Holloway deals with have begun writing again.
One is Florida Select; the other is Citizens Property Insurance, the latter being the state-run insurer of last resort for property owners who cannot find coverage in the open market. Under state law, they have to write policies.
Encompass, a wholly owned subsidiary of Allstate, stopped writing when Hurricane Charley threatened Florida nearly a month ago and has not yet started again.
The biggest insurer, State Farm, started writing policies again for some counties Tuesday. But that's a moot point for many in the bay area since the insurance giant has not written new homeowners' business in Hillsborough or Pinellas counties since 1995.
"We had one day this week you could get insurance. That's been it," said Bruce Tigert, chief executive of Bayshore Title Insurance.
Not that his Tampa company has been swamped with real estate transactions, anyway. "It's just been real quiet," Tigert said. "The phones aren't ringing. People are preoccupied with their own safety and well-being."
Among the hardest-hit borrowers, not surprisingly, are those located in areas most affected by the two storms.
"We lost 10 to 15 closings when Charley went through Charlotte County, just with houses damaged," said Jarrell Britts, president of Eagle Title in St. Petersburg.
Some refinancings have closed only to fall apart during the three-day recision period after a closing in which a borrower with second thoughts can back out before money is wired to them. Appraisers are examining homes across the state that were damaged during the recision period and canceling some transactions that have already closed.
Consider the case of Jennifer and Pedro Verge, who closed on refinancing their Spring Hill home Aug. 31.
As standard policy, the Verges were told they had to wait for the three-day recision period before the money pulled out of the refinancing would be wired into their account. Ten days later, as of Friday afternoon, they were still waiting.
The lender, 1st Regency Funding in Jupiter, didn't answer its phone all week after Hurricane Frances. Then, when it began operating again Friday, it was making no promises of a payout.
"When I called over there, they said, "We're not able to give you any of your money. We have to wait until Hurricane Ivan rolls around,"' Jennifer Verge said Friday.
"I said, "We have insurance on our home so there is no need to reduce anything we did on the loan. You guys need to put out your end of the bargain."'
The company referred calls to spokeswoman Carol Talvy, who could not be reached Friday afternoon. Christi Panek of Home Mortgage Corp., a title insurance company involved in the closing, said her company has been frustrated by the lender's inactivity. The Verges were among several homeowners left in the lurch by 1st Regency, she said.
"They've said they will not fund at all until they see what's going on with Ivan," Panek said. "As far as I know, that's against the law."
Panek (pronounced "panic") joked that she has an appropriate name given the current heightened anxiety in her industry. It's especially suitable given her maiden name, Buyers. "If I would have had a hyphenated name, it would have been Buyers-Panek," she noted, with a laugh.
