Flood Risk Outside Flood Zones — A Look at Mortgage Lending in Risky Areas
Kristian Blickle,
Evan Perry and
João A. C. Santos
Additional contact information
João A. C. Santos: https://www.newyorkfed.org/research/economists/santos
No 20240925, Liberty Street Economics from Federal Reserve Bank of New York
Abstract:
In support of the National Flood Insurance Program (NFIP), the Federal Emergency Management Agency (FEMA) creates flood maps that indicate areas with high flood risk, where mortgage applicants must buy flood insurance. The effects of flood insurance mandates were discussed in detail in a prior blog series. In 2021 alone, more than $200 billion worth of mortgages were originated in areas covered by a flood map. However, these maps are discrete, whereas the underlying flood risk may be continuous, and they are sometimes outdated. As a result, official flood maps may not fully capture the true flood risk an area faces. In this post, we make use of unique property-level mortgage data and find that in 2021, mortgages worth over $600 billion were originated in areas with high flood risk but no flood map. We examine what types of lenders are aware of this “unmapped” flood risk and how they adjust their lending practices. We find that—on average—lenders are more reluctant to lend in these unmapped yet risky regions. Those that do, such as nonbanks, are more aggressive at securitizing and selling off risky loans.
Keywords: floods; climate change; mortgages (search for similar items in EconPapers)
JEL-codes: G21 Q54 (search for similar items in EconPapers)
Date: 2024-09-25
New Economics Papers: this item is included in nep-ban, nep-env, nep-ipr and nep-ure
References: Add references at CitEc
Citations:
Downloads: (external link)
https://libertystreeteconomics.newyorkfed.org/2024 ... ding-in-risky-areas/ Full text (text/html)
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:fednls:98848
Ordering information: This working paper can be ordered from
Access Statistics for this paper
More papers in Liberty Street Economics from Federal Reserve Bank of New York Contact information at EDIRC.
Bibliographic data for series maintained by Gabriella Bucciarelli ().