Climate change is affecting the viability of the classic 30-year mortgage, a keystone of the American housing market. Borrowers and lenders are changing their calculus when it comes to mortgages, according to The New York Times. Both sides are looking for more flexibility and certainty in the face of the unknown. Borrowers are increasingly using mortgages that give them an out in the event of a flood or other event related to climate change that reduces
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.
Homebuyers 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.
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.
The trends foreshadow a broader reckoning. The question that matters, according to researchers, isn’t whether the effects of climate change will start to ripple through the housing market. Rather, it’s how fast those effects will occur and what they will look like.
The change has already begun. It’s not only along the nation’s rivers and coasts where climate-induced risk has started to push down home prices. In parts of the West, the growing danger of wildfires is already making it harder for homeowners to get insurance.
But the threat that climate change poses to the 30-year mortgage is different, striking at an American social institution that dates from the Great Depression. Before that, many home loans required owners to pay lenders back just a few years after buying a house, which led to waves of defaults and homelessness.
But now, as the world warms, that long-term nature of conventional mortgages might not be as desirable as it once was, as rising seas and worsening storms threaten to make some land uninhabitable. A retreat from the 30-year mortgage could also put homeownership out of reach for more Americans.
Changes to the housing market are just one of the myriad ways global warming is disrupting American life, including spreading disease and threatening the food supply. It could also be one of the most economically significant. During the 2008 financial crisis, a decline in home values helped cripple the financial system and pushed almost 9 million Americans out of work. What will the death of the 30-year mortgage cause