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How climate change could spark the next home mortgage disaster

POLITICO’s Zack Colman outlines how climate change could spark the next home mortgaged disaster.

The C3 Take
  • Mortgages for homes do not accurately reflect flood risk because of outdated flood mapping. This has resulted in homes being built in high flood risk areas.
  • The National Flood Insurance Program relies on outdated flood maps and is about $20 billion in debt, debt that taxpayers are on the hook for.
  • Rather than ignoring the problem of flooding and continuing to use a broken system, we must implement better housing policies that accurately reflect flood risk, updated flood mapping, and lower barriers for private sector insurance.

    “In areas where flood insurance is required for federally backed homes— known as the 100-year floodplain — taxpayers are more insulated from mortgage losses if homeowners are current on their insurance. But federal floodmaps are outdated. That means many homes are vulnerable without being required to maintain flood insurance, leaving taxpayers on the hook for mortgage defaults. Census tracts with a high rate of federally backed mortgages exist in areas considered outside the current floodplain but are adjacent to the floodplain, worrying many that a combination of old floodmaps and new climate-fueled risk leaves people and federally backed mortgages in the crosshairs.”

    “And if the bank ever becomes convinced of the inevitability of climate change in certain places, it could simply flip any loans in those places to Fannie Mae and Freddie Mac, which would be obligated to buy them. That means taxpayers would be guaranteeing the risk rather than private lenders.”

    Read the full article here.

    The views and opinions expressed are those of the author’s and do not necessarily reflect the official policy or position of C3.

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