The 30-Year Mortgage Faces an Unprecedented Threat: Climate Change

The climate crisis will present more of an existential crisis to the traditional U.S. mortgage market than any previous financial crisis, according to some of the experts cited in the article.

June 23, 2020, 7:00 AM PDT

By James Brasuell @CasualBrasuell


Aerial views during an Army search and rescue mission show damage from Hurricane Sandy to the New Jersey coast, Oct. 30, 2012.

Master Sgt. Mark C. Olsen / Wikimedia Commons

"Up and down the coastline, rising seas and climate change are transforming a fixture of American homeownership that dates back generations: the classic 30-year mortgage."

An article by Christopher Flavelle for The New York Times documents that transformation, opening with the words quoted above. As for what that transformation looks like, Flavelle writes:

Home buyers are increasingly using mortgages that make it easier for them to stop making their monthly payments and walk away from the loan if the home floods or becomes unsellable or unlivable. More banks are getting buyers in coastal areas to make bigger down payments — often as much as 40 percent of the purchase price, up from the traditional 20 percent — a sign that lenders have awakened to climate dangers and want to put less of their own money at risk.

And in one of the clearest signs that banks are worried about global warming, they are increasingly getting these mortgages off their own books by selling them to government-backed buyers like Fannie Mae, where taxpayers would be on the hook financially if any of the loans fail.

As noted in the article, the 30-year mortgage is a U.S. social institution dating back to the Great Depression, but as the world changes, so too does the risk of long-term financial commitments. According to the article, the decline of mortgages might not only put taxpayer money at risk, it might also put homeownership out of reach of more taxpayers.

Friday, June 19, 2020 in The New York Times

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