California Wildfires, Property Damage, and Mortgage Repayment

Siddhartha Biswas, Ethan Hossain and David Zink

No 23-05, Working Papers from Federal Reserve Bank of Philadelphia

Abstract: This paper examines wildfires’ impact on mortgage repayment using novel data that combines property-level damages and mortgage performance data. We find that 90-day delinquencies were 4 percentage points higher and prepayments were 16 percentage points higher for properties that were damaged by wildfires compared to properties 1 to 2 miles outside of the wildfire, which suggests higher risks to mortgage markets than found in previous studies. We find no significant changes in delinquency or prepayment for undamaged properties inside a wildfire boundary. Prepayments are not driven by increased sales or refinances, suggesting insurance claims drive prepayment. We provide evidence that underinsurance may force borrowers to prepay instead of rebuild.

Keywords: wildfires; mortgage; prepayment risk; climate risk; physical risk; underinsurance (search for similar items in EconPapers)
JEL-codes: G21 G51 Q54 (search for similar items in EconPapers)
Pages: 37
Date: 2023-03-20
New Economics Papers: this item is included in nep-env and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
https://www.philadelphiafed.org/-/media/frbp/asset ... ers/2023/wp23-05.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedpwp:95860

Ordering information: This working paper can be ordered from

DOI: 10.21799/frbp.wp.2023.05

Access Statistics for this paper

More papers in Working Papers from Federal Reserve Bank of Philadelphia Contact information at EDIRC.
Bibliographic data for series maintained by Beth Paul ().