Politico discusses how climate change threatens U.S. mortgage market. “Everyone is exposed” as taxpayer-backed loans and insurance face a coming storm.
U.S. taxpayers could be on the hook for billions of dollars in climate-related property losses as the government backs a growing number of mortgages on homes in the path of floods, fires and extreme weather.
Violent storms and sunny-day flooding are on the rise, and more houses are being built on at-risk land. But fewer people are buying federally backed flood insurance despite requirements that homeowners in flood plains be insured if their mortgage is backed by taxpayers.
In short, the government’s biggest housing subsidies — mortgage guarantees and flood insurance — are on course to hit taxpayers and the housing market as the effects of climate change worsen, a POLITICO analysis finds. A series of disasters in a single region could trigger a full-blown housing crash.
Despite public reassurances that the risk of climate-related loss was minimal and insured, Fannie Mae sounded an alarm at least as early as 2017, according to a confidential document obtained by POLITICO.
“[O]ur potential exposure to flooding-related risk may not be fully captured under NFIP insurance coverage,” the company wrote in a request for proposals that sought to put a dollar value on its flood-related risk. The previously unreported solicitation set a deadline of April 2017 for vendors to submit a report, according to a consultant who received the request but was not chosen for the job.
Freddie Mac chief economist Sean Becketti had acknowledged as much in a report a year earlier.