Borrowed time: Climate change threatens U.S. mortgage market

From Politico

“Everyone is exposed” as taxpayer-backed loans and insurance face a coming storm.


06/08/2020 04:30 AM EDT

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.

“Where catastrophe happens and physical climate really manifests itself, the public tab will end up carrying this,” said Ivan Frishberg, vice president for sustainability banking with Amalgamated Bank. “Everyone is exposed in this. I’ve had conversations with all of the big banks and we are kind of all aware of this.”

That scenario has a growing collection of finance experts, progressives and congressional Democrats pressuring financial institutions and their regulators to give more weight to the systemic risks of climate change.

To understand the risk, consider Fannie Mae and Freddie Mac, the government-sponsored, taxpayer-backed enterprises that stand behind roughly half of the nation’s $11 trillion in residential mortgages. For decades, the companies have bought and guaranteed home loans in floodplains and other places vulnerable to natural disasters.

To reduce risk, the companies rely on another government enterprise, the National Flood Insurance Program, to cover the cost of flood damage to homes with Fannie and Freddie mortgages. But the flood insurance program itself is insolvent after years of paying out more than it collects. When Congress tried to fix the program in 2012, it was forced to backtrack after flood insurance premiums billed to homeowners spiked.

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.

“Some of the varied impacts of climate change — rising sea levels, changing rainfall and flooding patterns, increasing temperatures — may not be insurable,” Becketti wrote. “As a result, some important features of housing finance may have to change.”

A Freddie executive said the company “conduct[s] significant data-driven analyses of the impacts of natural disasters.” A spokesman for the Federal Housing Finance Agency, which regulates the companies, said the companies “are proactively assessing potential risks and exposures from natural disasters.”

Fannie and Freddie have long been a deadly third rail in U.S. politics, especially after the 2008 housing collapse led to their $190 billion bailout. Since April 2019, the companies have been under the regulatory oversight of one of their biggest critics, Mark Calabria, a free-market economist who now leads the Federal Housing Finance Agency.

In January, Calabria reorganized the agency, establishing a Division of Research and Statistics that reports directly to him and will collect data on climate risk instead of relying on Fannie and Freddie to provide it themselves.

“I’d rather not be dependent on them for all of my decision-making, or even a small percentage of my decision-making,” Calabria said.

“We want to know what [the] flood risk is, for instance, on Fannie and Freddie’s book,” he said in a February interview. “We don’t have the capacity to do that today, but our capacity over time [will] get there. And this is true about any sort of risk — wildfire, flood, wind.”

Full article here.

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June 11, 2020 6:16 am

Surely, flooding existed before Fannie Mae came into existence. In any case, it does bother me that people build homes in flood zones and rebuild multiple times using government backed insurance. Bad decision making should not be rewarded.

Tom in Florida
Reply to  Scissor
June 11, 2020 8:55 am

First of all the generic use of the words “flood zones” is incorrect. Flood zones have hazard ratings, only those in zones designated as SFHA that contain an “A” in the rating require flood insurance for federal backed mortgages.
Second, any rebuilding, remodeling or changes that are more than 50% of the assessed value of the home REQUIRE the home to be raised above the base flood elevation. So no, people cannot continue to rebuild over and over again without mitigation. There are limits and restrictions to the amount of insurance coverage a home can have through the federal program.

Reply to  Tom in Florida
June 11, 2020 11:55 am

Thanks Tom for exposing the lie being perpetrated here.

a growing collection of finance experts, progressives and congressional Democrats pressuring financial institutions and their regulators to give more weight to the systemic risks of climate change.

Oh, I thought this was supposed to be an objective financial argument. Odd that it’s only an issue for “progressives” ie it’s partisan.

Clearly the “data” in question are the worthless extrapolations of failed climate models, not ACTUAL data.

Reply to  Scissor
June 11, 2020 10:45 am

In Laguna Beach, there is an area along the 133 Highway where home are built on steep mountain sides. About every ten years, we have nice rains in the Winter, leading to lush vegetation in the Spring, leading to fires in the late Summer, and finally heavy rains in the Fall leading to the houses sliding down the hillside.

I still remember one father crying that this was the third time his family had lost everything from their house sliding down the hill. I would say everyone was aghast at the stupidity at rebuilding on a known unstable site… but then, the reporter was all about hos he needed Federal and State aid to rebuild his home. Unbelievably to me, I am in the minority at thinking this man is an idiot for building there, and the county is greedy for allowing him to build there.

old white guy
Reply to  ex-KalifoniaKook
June 11, 2020 11:32 am

Let him build where ever he wants. just let him pay for the cleanup and the rebuild all by himself. Stupid never learns unless stupid has pain associated with it.

old white guy
Reply to  Scissor
June 11, 2020 11:29 am

So I guess Obama and Bill Gates and the others, who recently bought oceanfront/beachfront, don’t have to worry about the water or the money.

June 11, 2020 6:34 am

“U.S. taxpayers could be on the hook…”

“Could”. OK, no need to read further.

Reply to  Disputin
June 11, 2020 2:39 pm


Read the first paragraph. Looked at the author’s names and jumped down to the comments.

Tom Abbott
Reply to  ATheoK
June 11, 2020 3:36 pm

That’s what I did, too.

Especially when I read this part: “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”

Or course, there is no evidence Human-caused climate change even exists. Something has to exist before it can worsen. It seems the authors, like nearly all alarmists, are putting the cart before the horse by assuming Human-caused climate change is real when there is no evidence for it.

Countless people have been led astray by the Climategate Charlatans and their human-caused climate change lies. Include these authors in that bunch.

June 11, 2020 6:40 am

Violent storms are not “on the rise”.

comment image

Couldn’t get through the first sentence without a lie.

Reply to  DocSiders
June 12, 2020 5:41 am

Well stated. The climate extremists are working hard to push lies at every opportunity.

T Gannett
June 11, 2020 6:45 am

Reminds me of Menken’s “sole purpose of practical politics “.

June 11, 2020 6:49 am

Bill Gates is terrified of global warming and sea level rises. His answer this year, spend $40m on a beachfront mansion. How did he do on the insurance front?

Reply to  DPP
June 11, 2020 7:29 am

There is something suspicious about that purchase or at least something more to the story.

By billionaire standards it’s a dump in a congested area. The purchase price of $43 million was $38 million more than it sold for in 2017 and apparently, according to Zillow, it was to have gone to foreclosure auction on 3/1/20 for $7 million unpaid loan balance.

If real journalists existed, by and large, there would be more reporting on it.

Reply to  DPP
June 11, 2020 10:06 am

Same with Barack Obama.
Buy a house on Martha’s Vineyard a stone’s throw away from the ocean.

Jeffery P
June 11, 2020 6:49 am

We need to quit subsidizing homes in known flood area. Much of the money for the federal flooding insurance program goes to wealthy people who own vacation homes on the oceanfront.

Just stop it. Let the market determine the risk and the costs.

Reply to  Jeffery P
June 11, 2020 7:51 am

Yes. The problem is not ‘climate change’, it’s the taxpayer subsidizing bad behaviour.

Tom in Florida
Reply to  Jeffery P
June 11, 2020 9:04 am

That is not true. There are limits to the amount of insurance coverage a property can have through the federal program. Current residential limits are $250K for the building and $100K for contents. Above that private insurance is used.
Learn more about it in this Summary of Coverage.

Frederick Curkeet
Reply to  Jeffery P
June 11, 2020 1:15 pm

Yup. And there’s a reason private sector insurance companies refuse to insure properties located in flood plains.

Gregory Woods
June 11, 2020 6:51 am

OT: More from Windy, Warmy Alarmist Bedwetters

New York Approves Largest Wind Farm Ever, But Not Everyone Is Happy About It
What is happening in the state of New York regarding the addition of more renewable energy assets is a microcosm for what is going on in many other parts of the US and around the world. Everybody supports the idea of renewable energy (Liar!), but not everyone wants it in their community.

(and the final paragraph)
Social Justice Is A Goal
In a perfect world, everyone would agree that transitioning to renewable energy is essential and would be volunteering to help in any way they could. They would be offering to move the picnic table in the backyard to make room for a few solar panels or a wind turbine. But the world doesn’t work that way. The fight for proper siting of renewable energy projects will be long and contentious.
The most important aspect of the battle is not to use the siting of renewable energy facilities as a cudgel to do more damage to poor and under-served neighborhoods the way the fossil fuel industry has done in the past. Renewable energy should bring new economic and social justice opportunities to all, not just some.

John the Econ
June 11, 2020 6:58 am

This is more of an argument as to why the government should not be buying/subsidizing mortgage securities than anything about climate change. Governments are notoriously bad at pricing risk.

mark from the midwest
Reply to  John the Econ
June 11, 2020 7:46 am

Governments are notoriously bad at pricing everything. The typical GS11, who’s never had their own skin in the game on anything, is always out maneuvered by corporate personnel.

June 11, 2020 7:05 am

could be……for the past 50 years

June 11, 2020 7:12 am

“When Congress tried to fix the program in 2012, it was forced to backtrack after flood insurance premiums billed to homeowners spiked.”

In other words, people objected when their subsidies were reduced, so congress caved.

Tom in Florida
Reply to  MarkW
June 11, 2020 9:08 am

People objected to the major increases all at once. As usual, it then became wholly political and ended up nowhere. Keep in mind that there are huge local property tax levies on these properties. Local governments do not want to devalue them and lose all that money.

Michael Jankowski
Reply to  MarkW
June 11, 2020 9:43 am

The system is broken and needs to be fixed. But the 2012 bill was along the lines of, “The insurance premium is going to be about the same as the mortgage. Your house might as well be worthless because nobody is going to buy it with these premiums. And since you can’t afford them yourself, you should just walk away.”

Not to mention people who bought outside the floodplain or coastal velocity zone sometimes found themselves within such a location after map revisions.

Congress has been too busy with sideshows to worry about it since.

Tom in Florida
Reply to  Michael Jankowski
June 11, 2020 12:11 pm

There was a grandfather provisions in the NFIP that could be used when the original house was built out of a SFHA that was later remapped into a SFHA that would then require you to purchase flood insurance or have an increased premium. You we able to keep the non flood requirement designation or the lower premium but I do not know it they removed that clause when they updated the NFIP law.
I was actually re-mapped OUT of a SFHA in 2016. People say “Wow, you are lucky”. I look at is having paid unnecessary flood insurance for 15 years.

The Dark Lord
June 11, 2020 7:22 am

Politico … left leaning political disaster porn site …

Bruce Cobb
June 11, 2020 8:38 am

Climate Numptyism is on borrowed time.

John K.
June 11, 2020 8:58 am

Apparently Barack & Michelle weren’t too worried when they purchased sea side on Martha’s Vinyard.

Tom in Florida
Reply to  John K.
June 11, 2020 12:22 pm

I thought they are known as Biff and Muffy on “The Island”.

June 11, 2020 9:01 am

Odd, but FEMA flood data shows no increase for the past 24 years. Must be bad data since the narrative says otherwise.

Tom in Florida
June 11, 2020 9:13 am

There is no doubt the NFIP program needs to be redone with premiums set to reflect the coverage needed.
However, every time the flood insurance program comes up, too many people comment on what they think they know about it. How about doing some research first about how the program works and what the limitations are before posting incorrect assumptions.

June 11, 2020 9:32 am

[catastrophic] [anthropogenic] Climate cooling… warming… perturbations threaten kitchen sinks.

Reply to  n.n
June 11, 2020 10:08 am

… steep rise in political hemorrhoids possible.

June 11, 2020 9:39 am

homes in the path of floods, fires and extreme weather.

Proximity and environmentalism, and Nature’s reconciliation including #HerChoice (e.g. pathogens).

Jeffery P
June 11, 2020 9:44 am

Funny about how all these organizations, corporations, cities, states and counties all support the climate change agenda and claim it’s an existential threat. But if they really believed, wouldn’t they stop ocean front development? Shouldn’t NYC, Miami, San Francisco, Seattle, Portland, etc., etc. all ban development in at risky areas?

Makes you wonder about their sincerity.

On the other the hand, they all believe they have the answers. The Green Raw Deal is the flavor-of-the-day solution. Perhaps they are counting on these programs being adopted soon.

Tom in Florida
Reply to  Jeffery P
June 11, 2020 12:15 pm

The simple answer is the local government gains too much in local property taxes to care weather waterfront property gets flooded. The local government doesn’t suffer any revenue loss in flooding of those properties, they only lose revenue if the taxable value goes down. Their first priority is to continue to collect those high taxes as long as they can before any changes in value come about.

Gordon A. Dressler
June 11, 2020 9:51 am

What’s the problem here? . . . we have been told repeatedly that the world will end/be disastrously unrecoverable by 2030, if not earlier.

So, take out the longest-term mortgage possible (at least 30 years, 50 years if you can find one) at the lowest interest rate possible, and you won’t have to worry . . . it’s a side benefit of CAGW, don’t ya know.

And yes, you can forget about paying for mortgage guarantees and flood insurance . . . they won’t matter in the end.

/sarc off

June 11, 2020 10:11 am

At last, I can understand why Seattle has become the armpit of the Northwest.
Governor Jay Inslee knows that Seattle will be under water, so why try to save it from political unrest.

June 11, 2020 12:39 pm

This is evidence that the Climate Crusades are now running on autopilot AI robots. They left the robot running with a key word dictionary to pair up with climate change and it’s now running with all the word combinations. Next up is quantum robots to fling them all at once while the operators fly off to conferences at the beach resorts.

Elle Webber
June 11, 2020 12:56 pm

Wait, wait, wait. I’m confused. Are we supposed to feel sorry for rich folks with the stress of oceanfront properties? Or is this about taxpayers being expected to cough up money to compensate rich people for not enjoying their waterfront properties fully? The rich people who travel via private jet to tell us peons to avoid air travel so as not to possibly harm their waterfront beaches?
The left is very confusing these days! I’m old enough to remember when the left stood up for good jobs for average families, not making life easier for the ultra rich. I guess that dates me.

Tom in Florida
Reply to  Elle Webber
June 11, 2020 3:32 pm

Another with no understanding of flood insurance posting false assumptions. I posted this earlier, I will do it again. Read it, it is only 8 pages.

John F. Hultquist
June 11, 2020 1:00 pm

Did they use Representative Concentration Pathway 8.5, or is this just “common knowledge” of climate change?

The idea of an ‘urban hydrograph’ has been studied for years. Urban growth (streets, parking spaces, houses, and other) hardens the surface and …
Rainfall runs off the land faster, the peak is higher, and time of peak is shorter.
See – from 1968:
Hydrology for Urban Land Planning-
A Guidebook on the Hydrologic
Effects of Urban Land Use
by Luna B. Leopold
Geological Survey Circular 554

June 11, 2020 1:50 pm

“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”


old construction worker
June 11, 2020 2:02 pm

Fannie and Freddie has a flood insurance scam. Regardless of where your house you are buying is located Fannie and Freddie require you to buy flood insurance.

Tom in Florida
Reply to  old construction worker
June 11, 2020 3:10 pm

That is false. Where do you get your information?

Jeff Alberts
Reply to  Tom in Florida
June 11, 2020 6:14 pm

I would go further, Tom, and say it’s not even wrong.

No one in the US is required to buy flood insurance. If you want to be covered, then you buy it.

I live less than a mile from the waters of Puget Sound. But I’m at 220′ elevation. The only flooding I need to worry about would be an IMMENSE tsunami, and at that point, I’d just say screw it.

Tom in Florida
Reply to  Jeff Alberts
June 11, 2020 6:59 pm

Only those with mortgages that are federally backed require flood insurance IF you are in a designated SFHA. Even then, each property is individually rated how the building sits compared to the base flood elevation. So if you buy a piece of land in an AE zone but you build your lowest living level above the base flood elevation, you are not required to have flood insurance. All homes built in my area are now built this way because it is required by building codes.
I will say this though. If you are not in a SFHA but are near large retention ponds, streams or drainage ditches you should buy it anyway as a precaution because it is very inexpensive for those cases.

Reply to  Tom in Florida
June 12, 2020 3:23 am

You will actually have to purchase Flood insurance no matter the elevation of your property if you are still n a flood zone. It will be lower cost but you will still purchase it.

Tom in Florida
Reply to  Tom in Florida
June 12, 2020 5:18 am

Flood insurance is not required when you are in flood zones designated as Zones B, C, and X.

Reply to  old construction worker
June 12, 2020 3:26 am

I ld construction worker, if someone told you that, they are trying to scam you. The claim you are making is false. Flood Insurance is offered through the National Flood Insurance Program, NFIP. That is part of FEMA. FNMA and FMAC have no flood policy to either offer or force anyone to purchase.

June 12, 2020 3:21 am

Climate change- the quasi-religious fascistic
anti-science extremist movement sweeping the workd- threatens everything, not just mortgages.

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