When American Bankers Are Worried About Global Warming, You KNOW Things Are Really Fucked Up [View all]

[hatrack]

An unexpected constituency is sounding the alarm on climate change: U.S. mortgage bankers. Their predictions are dire: As climate change worsens and natural disasters wreak havoc on America’s housing stock, homeowners increasingly default on their mortgages. The ballooning financial losses force lenders to ratchet up interest rates. Fannie Mae and Freddie Mac, the massive government-backed companies charged with supporting affordable housing, continue issuing loans in risky areas, subsidizing homes in harm’s way. Private sector investors in the housing market back away from communities facing severe climate risks, like rising sea levels, repeated flooding, and more severe wildfires. The economic losses, which could easily number in the billions of dollars, are shouldered by the federal government — and ultimately taxpayers.

That’s all according to a new report by the Research Institute for Housing America, a think tank founded by the Mortgage Bankers Association, a trade group representing the real estate finance industry. “Climate change will impact all governments, industries, and individuals,” the report notes. “Housing and housing finance will not be spared.”

The U.S. housing market consists of a vast panoply of stakeholders, including homeowners, renters, lenders, insurers, government-backed entities, loan servicers, and the federal government itself. As climate-fueled disasters continue to wreak havoc, each group faces different risks and consequences, according to the report. Homeowners in the path of hurricanes and other climate disasters may see their home values plummet. If homeowners weathering ever more severe flooding and wildfires increasingly default on their mortgages, it will ricochet through the entire financial ecosystem. Both lenders and investors could see major losses as a result. The federal government stands in the middle of it all: It runs the National Flood Insurance Program, which is responsible for 5.1 million residential flood insurance policies nationwide, and backstops Fannie Mae and Freddie Mac. The specter of massive bailouts looms large.

It is not a far-off scenario. The National Flood Insurance Program is already deep in debt. The program is currently more than $20 billion underwater, and research from The Pew Charitable Trusts, a public policy nonprofit, found that about 1 percent of the properties enrolled in the program are responsible for 25 to 30 percent of the claims. The cost of paying out claims from properties that repeatedly flood is more than $12 billion.

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https://grist.org/housing/housing-market-climate-risk-mortgage-bankers-report/