How Do Banks Lend in Inaccurate Flood Zones in the Fed’s Second District?

Kristian Blickle, Katherine Engelman, Theo Linnemann and Joao Santos

No 20231113, Liberty Street Economics from Federal Reserve Bank of New York

Abstract: In our previous post, we identified the degree to which flood maps in the Federal Reserve’s Second District are inaccurate. In this post, we use our data on the accuracy of flood maps to examine how banks lend in “inaccurately mapped” areas, again focusing on the Second District in particular. We find that banks are seemingly aware of poor-quality flood maps and are generally less likely to lend in such regions, thereby demonstrating a degree of flood risk management or risk aversion. This propensity to avoid lending in inaccurately mapped areas can be seen in jumbo as well as non-jumbo loans, once we account for a series of confounding effects. The results for the Second District largely mirror those for the rest of the nation, with inaccuracies leading to similar reductions in lending, especially among non-jumbo loans.

Keywords: FEMA; floods; flood insurance (search for similar items in EconPapers)
JEL-codes: Q54 (search for similar items in EconPapers)
Date: 2023-11-13
New Economics Papers: this item is included in nep-ban, nep-env and nep-ure
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fednls:97305

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