When Climate Change Leads to Mortgage Defaults
Simple steps to make sure lenders and homebuyers — not taxpayers — bear the risk.
Rising risk of default.
Photographer: Chip Somodevilla/Getty ImagesThis article is for subscribers only.
Climate change poses risks to real estate that homebuyers may not be able to predict. As sea level rises, coastal properties, for example, may be subject to increased flooding and intensifying storm surges. First-time homebuyers often lack the expertise to evaluate these new risks, and thus tend to underestimate them and overpay for increasingly exposed properties.
Unfortunately, the risks they accept are not borne by themselves alone. Rather, our research has found, it is shared by mortgage lenders and, through the operations of Freddie Mac and Fannie Mae, American taxpayers.