THE CHANGING CLIMATE Climate change is a big issue today. Is it caused by nature, human activity, or both? Regardless of the answer, the reality is that climate change is here. Melting glaciers, ris- ing seas, stronger hurricanes, “king tides” in Miami, flooded cherry trees along DC’s Tidal Basin, floods in Nebraska, massive hurricane dam- age in Puerto Rico, and huge fires in California are all real. Does climate change impact lend- ing? You bet it does! The most immediate climate-re- lated challenge faced by lenders is on Capitol Hill. Lenders will origi- nate mortgages in high-risk flood zones on the condition that borrow- ers maintain proper insurance. For most borrowers, this means partic- ipating in the National Flood Insur- ance Program (NFIP). Unfortunately, the program is so broke that in 2017 Congress forgave $16 billion in NFIP debt owed to the Treasury. As this article is written, the program has been re-authorized, but only until May 31st. “Congress must now reauthorize the NFIP by no later than 11:59 pm on May 31, 2019,” explains the Federal Emergency Management Agency (FEMA). While it would make sense for the program to be extend- ed until September 30th, the end of the government’s fiscal year, there’s
no requirement that Congress “must” do so.
climate change. “This,” says Gibbas, “has happened a bit, mostly due to the influence from the insurance side. What has happened is insurance companies are, in some cases, refusing to in- sure a property after multiple claims have occurred. The lack of insurance then stalls the mortgage process. I have not seen any cases where mort- gage companies refuse to underwrite the loan on their own.” He adds, “I’m also aware of new technologies coming to market that will provide insurance and/or mort- gage companies the ability to drill down on to a property to get details of past weather events and weather event probabilities. With these new tools, mortgage companies will gain insight into how to prioritize their lending opportunities.” Institutional investors are already considering climate change when evaluating financing and purchase op- tions. No doubt the same is true, less formally, among residential buyers. “Climate change and, more partic- ularly, rising sea levels are espe- cially urgent issues along American coastlines,” according to the law firm of Hinshaw & Culbertson LLP., which in April organized the Third Annual Sea Level Rise & Climate Change Conference. “In the next twenty-five years, absent radical remediation and technical breakthroughs, the sea level along the coasts is an- ticipated to rise by up to three feet (0.91 meters), inundating major portions of the cities of New York, Miami, and coastal areas worldwide. Rising sea levels will result in major changes not only to developments and infrastructure (privately-owned structures, roads, utilities, etc.) but
The NFIP is riddled with problems. The most basic is that, with changing weather patterns, we’re not so sure which areas flood and which don’t. “Even if you live outside a high-risk flood zone, called a Special Flood Hazard Area, it’s a wise decision to buy flood insurance,” according to FEMA. “In fact, statistics show that people who live outside high-risk ar- eas file more than 25 percent of flood claims nationwide.” As much as anything, this is an indictment of the federal flood map- ping system, a system which appears to miss a lot of potential flood zones. Mark Gibbas, President and CEO of WeatherSource.com, notes that changing weather patterns are a matter of concern both for mortgage lenders and insurance providers. According to Gibbas, a Task Force on Climate-Related Financial Disclo- sures (TCDF) has been formed. “The TCDF is working to provide a framework for how lenders and borrowers will develop safeguards for doing business in a changing climate,” Gibbas told the “Housing News Report.” “This work is being done mostly at the big banking level, but it will trickle down to mortgages.” We’re now beginning to see loan applications falling through in cer- tain geographic areas because of
What has happened is insurance companies are, in some cases, refusing to insure a property after multiple claims have occurred. The lack of insurance then stalls the mortgage process. I have not seen any cases where mortgage companies refuse to underwrite the loan on their own.”
> Continued on :: PG 80
Peter G. Miller is a nationally syndicated newspaper columnist, the author of seven books published orig- inally by Harper & Row (one with a co-author), and for many years a Washington-based journalist.
22 | think realty housing news report :: june / july 2019
Made with FlippingBook Online newsletter