Latest news with #JeremyPorter
Yahoo
3 days ago
- Business
- Yahoo
Home insurance protects against climate change. But report finds millions are missing out.
In the housing market, homeowners insurance has become the embodiment of the effects of climate change. Over the past several years, more frequent and more expensive severe weather events have strained insurance companies, even as skyrocketing premiums punish homeowners' wallets. Now, new research proves what many observers have assumed but rarely quantified: Insurance does shield homeowners from financial trouble in the wake of weather disasters, but existing guidelines for coverage are nowhere near adequate for the scale and scope of potential perils. Even more concerning, insurance costs may soon become too much for homeowners to afford. More: Homeownership used to mean stable housing costs. That's a thing of the past. The research comes from a report called "Climate, the Sixth 'C' of Credit," released May 19 by First Street, a climate risk financial modeling organization. 'I really wanted to prove that insurance is working, where homeowners have insurance,' Jeremy Porter, head of climate implications for First Street, said in an interview with USA TODAY. To do that, First Street looked at dozens of severe weather events since 2000. In incidences of wildfire and severe wind, few homeowners faced distress. Floods are a different story, however. Homeowners' insurance does not cover flood damage, so any property that's considered at risk of flood needs to carry flood insurance. But FEMA, the federal agency tasked with assessing what parts of the country are at risk, drastically underestimates the number of properties that should be covered, Porter said. First Street reckons there are 17.7 million properties that should be covered by mandatory flood insurance – more than double the 7.9 million that lie in FEMA's 'Special Flood Hazard Areas.' The discrepancy, Porter said, is because FEMA does not account for severe precipitation in its models. The states with the most of these additional properties are Texas, Pennsylvania, California, New York and Ohio. While First Street's analysis found a vast majority of counties across the country has a greater number of properties in a flood risk area than what has been defined by FEMA, the most striking findings are the places where the gap between the assessments is the biggest. For example, Letcher County in Kentucky has about 11.4% of its properties in FEMA's special flood hazard area. First Street puts that figure at 60.6%. That difference of nearly 50 percentage points is the widest margin of any county, according to a USA TODAY analysis of the report's data. Kentucky contains six of the top 10 counties with the biggest gaps between the assessments. Some in Virginia and West Virginia complete the ranking. In two-thirds of the floods First Street examined, uninsured homeowners were found to have experienced so much financial distress that damage from extreme weather eventually led to foreclosures. A foreclosure is the most extreme outcome of housing market distress, but it's also the easiest to track, Porter said. That means that all the various steps along the way – from mortgage delinquencies to defaults to cures – may also be occurring in storm-damaged areas, without being recorded. First Street uses Hurricane Sandy, which battered New York City in 2012, as an example of this phenomenon. There were nearly 400 more foreclosures in the area hit hardest by Sandy, the report shows. The areas hardest hit by Sandy had suffered during the subprime crisis – when some homeowners were charged exorbitant mortgage interest rates – and subsequent recession, and home prices had not yet started to rise again. That's another important component of the foreclosures First Street tracked: areas where home prices are rising tend to avoid falling into distress. But it's important to note that where foreclosures are seen, undamaged properties are at risk just as much as damaged ones are. That's partially because a bad storm will impact a community overall, Porter said – services like transportation will go down, people will be unable to get to work, businesses will stay closed. Insurance costs will also likely rise, and the value of even undamaged homes may increase more slowly. 'It's almost like insurance not only protects the property, but it protects the community in a lot of ways,' Porter told USA TODAY. For all the benefits that insurance can provide, the key challenge is that it's expensive – and getting more so. From 2000 to 2013 or so, homeowners' insurance made up about 3% to 4% of the average monthly mortgage bill for Americans, First Street data show. But premiums have skyrocketed since that time, and now account for over 10% of mortgage payments.'There's an indirect effect of additional cost of homeownership that people didn't expect to have when they first took out their mortgage, which is being indirectly driven up because of the increasing severity and frequency of climate risk,' Porter said. First Street's analysis of homeowner costs found that every 1% increase in an insurance premium is associated with a 1% increase in likelihood of foreclosures. As the researchers write, 'the only thing proven to prevent foreclosure is getting so expensive that it is causing foreclosures.' First Street isn't focused on policy implications in the research report, Porter said, but given the political climate in Washington and the threats to many of the agencies that help Americans rebuild in the aftermath of disasters, it's hard not to draw conclusions. 'Any reduction in resources is only going to exacerbate the problems that we're seeing today,' he said. This article originally appeared on USA TODAY: Home insurance protects against climate change. But millions miss out.
Yahoo
19-05-2025
- Business
- Yahoo
Climate change could drive flood of foreclosures, study finds
Extreme weather linked to climate change could spell financial ruin for many American homeowners and lead to billions in losses for lenders, a new study finds. First Street, a research firm that studies the impact of climate change, projects in an analysis released Monday that foreclosures across the U.S. caused by flooding, wind and other weather-related incidents could soar 380% over the next 10 years. By 2035, climate-driven events could account for up to 30% of all foreclosures by 2035, up from roughly 7% this year. Low- to moderate-income households are particularly vulnerable to the effect of severe weather on their homes, First Street noted. Much of Americans' wealth is tied up in the value of their properties. A cascade of foreclosures, driven by the mounting costs of repairs and rising insurance premiums stemming from extreme weather, wouldn't only hurt homeowners. First Street estimates lenders will lose $1.2 billion a year in 2025 — and up to $5.4 billion in 10 years — as they are forced to absorb the cost of mortgage defaults. Such losses represent the "hidden risks" of climate change that lenders often fail to account for in their underwriting practices, Jeremy Porter, head of climate implications at First Street, told CBS MoneyWatch. Lenders consider factors including a borrower's income, debt and credit score in issuing mortgages, but not the potential impact of extreme weather on a property or how it could raise premiums. !function(){"use strict"; 0!== e= t in r,i=0;r=e[i];i++)if( d= First Street also looked at how indirect factors, like rising insurance premiums, are already shaping foreclosure trends. For every 1% increase in insurance costs, the firm projects a roughly 1% increase in the foreclosure rate nationwide. The findings comes as insurers are jacking up the cost of homeowners policies and in some cases exiting markets around the U.S. altogether, leading to spottier coverage in disaster-prone areas like California. That could leave more individual homeowners on the hook for damage from extreme weather. First Street said integrating climate risk into loan assessments could help lenders – and homeowners – be better prepared for weather-related disasters. But it could also tighten lending conditions, Porter said, putting potential homebuyers at a disadvantage. "It's going to increase the price of homes. It's going to increase interest rates," he said. Where climate foreclosures could rise According to First Street, the communities around the U.S. at greatest risk for climate-related foreclosures in the years to come are densely populated areas with high property values and large numbers of underinsured homeowners. That includes coastal areas vulnerable to storm surge and hurricane winds. For example, Florida's Duval County in the northeastern corner of the state, home to the city of Jacksonville, could see up to $60 million in credit losses resulting from 900 foreclosures in a "severe weather" year, according to CBS MoneyWatch's analysis of First Street's data Florida is home to 8 of the top 10 counties with the highest projected credit losses due to extreme weather, the data shows. Louisiana, California and swaths of the northeast are also projected to see high climate-related mortgage losses this year. But the impact won't just be felt in coastal areas: First Street also expects extreme rainfall and riverine flooding to drive up foreclosures in inland states. "We do expect foreclosures to rise in those areas because the predominant driver is a lack of insurance," Porter said. !function(){"use strict"; 0!== e= t in r,i=0;r=e[i];i++)if( d= According to First Street, flooding events in particular is likely to drive up foreclosure rates, as gaps in insurance coverage put more people at risk of defaulting on their mortgages. Unlike homeowners insurance, flood insurance is only required for people who have federally-backed mortgages in FEMA's Special Flood Hazard Areas. As of August 2023, that amounted to roughly 3.1 million policies, according to National Flood Insurance Program data. But far more people could be at risk. FEMA's 100-year flood zone maps include just under 8 million properties. But First Street estimates that nearly 18 million homes are at risk of flooding. That's because while the agency takes flooding from major river channels and coastal storm surge into account for its maps, it does not consider extreme precipitation, Porter said. "We already know that about half the people with significant flood risk aren't mapped into [FEMA's] Special Flood Hazard Area," he said. "So it leads to a state where we have a lot of underinsurance across the country, in particular from flooding." !function(){"use strict"; 0!== e= t in r,i=0;r=e[i];i++)if( d= Meanwhile, whether or not you live in an official FEMA flood zone can make a difference when it comes to the likelihood of foreclosure, First Street found. That's because people outside flood zones often lack insurance. "If you don't protect yourselves, then when the event does occur it's completely on you. You end up having to pay out of pocket and you may go into foreclosure," Porter said. In an analysis of 29 historical flood events from 2002-2019, First Street found that damaged properties outside of those FEMA-designated zones experienced foreclosure increases at an average of 52% higher than properties inside the zones. FEMA did not respond to a request for comment on if and how it plans to update its flood maps. According to one estimate by the Association of State Floodplain Managers, it could take up to $11.8 billion to complete updated flood mapping in the U.S. Raw Video: Mexican navy training ship hits Brooklyn Bridge Italy's Trulli: From Past to Present Judge weighing throwing out Sean "Diddy" Combs trial testimony
CNBC
19-05-2025
- Business
- CNBC
Need a home mortgage? Here's how climate change could hit your credit score
Anyone shopping for a mortgage knows how far into your finances lenders like to dive in order to determine your credit-worthiness. But here's a new factor: climate change. Given how quickly climate disasters are increasing, both in frequency and in resulting costs, lenders are paying far more attention now to how those costs could hit them. Insurers are also struggling to keep up and more often pulling out of the most risk-prone areas, making the losses even steeper. Add to that, FEMA is in a state of flux under the Trump administration, with both cuts to staff and potential disaster funding. Climate has therefore become an increasingly important consideration in assessing credit score risk, right along with a consumer's debt, income and collateral in the home, according to a new report from First Street, a climate risk assessment firm. The risks includes flood, wildfire and wind. In a severe-weather year, projected annualized climate-driven foreclosures could result in $1.21 billion in bank losses this year, or 6.7% of all foreclosure credit losses, according to the report. Just 10 years from now, as weather events grow more frequent and more destructive, those credit losses could increase to $5.36 billion, representing nearly 30% of foreclosure losses. If lenders start factoring climate into their underwriting, then a consumer's credit score could fall or even rise depending on the risk to their property. The former would result in higher borrowing costs. The study notes that lender losses today are primarily in just three states: California, Florida and Louisiana. "Mortgage markets are now on the front lines of climate risk," said Jeremy Porter, head of climate implications at First Street. "Our modeling demonstrates that physical hazards are already eroding foundational assumptions of loan underwriting, property valuation, and credit servicing—introducing systemic financial risk." When a property is flooded in an extreme weather event, it has a higher foreclosure rate than its unflooded neighbors. That historically translates to an average 40% surge in post-flood foreclosures among damaged homes, according to the report. Consumers in high-risk areas, like the Florida coasts, are already seeing huge jumps in insurance premiums due to recent storms. The First Street report was able to link those increases to a rise in foreclosures. Some homeowners simply can't afford the increases and are walking away, again, leaving lenders on the hook. Some lenders may require flood insurance on homes that are in government-designated flood plains, but overall lenders do not factor the effects of future climate change into their underwriting models. Fannie Mae, which is not a lender but funds much of the mortgage market, was looking at doing this two years ago, but has yet to announce any changes. The annual costs of climate-related disasters have jumped 1,580% over the last four decades, according to the First Street report, which looked at the National Oceanic and Atmospheric Administration's billion-dollar weather and climate disaster database. That resource will no longer be updated, due to staffing cuts by the Trump administration. The increase in cost is due not only to greater storm severity, but also to inflation, as well as higher populations and more real estate development in riskier areas. Americans love the coasts and, in most areas, are increasingly paying a premium to live there. But the jump in those climate-related costs, and the consequent risk, is affecting households, financial institutions and investment portfolios alike. "There is a significant amount of credit loss risk related to climate that is currently hidden from traditional credit loss models. This reports the systemic effect weather disasters are having in the mortgage market from both direct damages, but also indirect impacts like increasing insurance costs," Porter added.
CBS News
19-05-2025
- Business
- CBS News
Climate change could drive surge in foreclosures and lender losses, new study finds
Extreme weather linked to climate change could spell financial ruin for many American homeowners and lead to billions in losses for lenders, a new study finds. First Street, a research firm that studies the impact of climate change, projects in an analysis released Monday that foreclosures across the U.S. caused by flooding, wind and other weather-related incidents could soar 380% over the next 10 years. By 2035, climate-driven events could account for up to 30% of all foreclosures by 2035, up from roughly 7% this year. Low- to moderate-income households are particularly vulnerable to the effect of severe weather on their homes, First Street noted. Much of Americans' wealth is tied up in the value of their properties. A cascade of foreclosures, driven by the mounting costs of repairs and rising insurance premiums stemming from extreme weather, wouldn't only hurt homeowners. First Street estimates lenders will lose $1.2 billion a year in 2025 — and up to $5.4 billion in 10 years — as they are forced to absorb the cost of mortgage defaults. Such losses represent the "hidden risks" of climate change that lenders often fail to account for in their underwriting practices, Jeremy Porter, head of climate implications at First Street, told CBS MoneyWatch. Lenders consider factors including a borrower's income, debt and credit score in issuing mortgages, but not the potential impact of extreme weather on a property or how it could raise premiums. First Street also looked at how indirect factors, like rising insurance premiums, are already shaping foreclosure trends. For every 1% increase in insurance costs, the firm projects a roughly 1% increase in the foreclosure rate nationwide. The findings comes as insurers are jacking up the cost of homeowners policies and in some cases exiting markets around the U.S. altogether, leading to spottier coverage in disaster-prone areas like California. That could leave more individual homeowners on the hook for damage from extreme weather. First Street said integrating climate risk into loan assessments could help lenders – and homeowners – be better prepared for weather-related disasters. But it could also tighten lending conditions, Porter said, putting potential homebuyers at a disadvantage. "It's going to increase the price of homes. It's going to increase interest rates," he said. Where climate foreclosures could rise According to First Street, the communities around the U.S. at greatest risk for climate-related foreclosures in the years to come are densely populated areas with high property values and large numbers of underinsured homeowners. That includes coastal areas vulnerable to storm surge and hurricane winds. For example, Florida's Duval County in the northeastern corner of the state, home to the city of Jacksonville, could see up to $60 million in credit losses resulting from 900 foreclosures in a "severe weather" year, according to CBS MoneyWatch's analysis of First Street's data Florida is home to 8 of the top 10 counties with the highest projected credit losses due to extreme weather, the data shows. Louisiana, California and swaths of the northeast are also projected to see high climate-related mortgage losses this year. But the impact won't just be felt in coastal areas: First Street also expects extreme rainfall and riverine flooding to drive up foreclosures in inland states. "We do expect foreclosures to rise in those areas because the predominant driver is a lack of insurance," Porter said. According to First Street, flooding events in particular is likely to drive up foreclosure rates, as gaps in insurance coverage put more people at risk of defaulting on their mortgages. Unlike homeowners insurance, flood insurance is only required for people who have federally-backed mortgages in FEMA's Special Flood Hazard Areas. As of August 2023, that amounted to roughly 3.1 million policies, according to National Flood Insurance Program data. But far more people could be at risk. FEMA's 100-year flood zone maps include just under 8 million properties. But First Street estimates that nearly 18 million homes are at risk of flooding. That's because while the agency takes flooding from major river channels and coastal storm surge into account for its maps, it does not consider extreme precipitation, Porter said. "We already know that about half the people with significant flood risk aren't mapped into [FEMA's] Special Flood Hazard Area," he said. "So it leads to a state where we have a lot of underinsurance across the country, in particular from flooding." Meanwhile, whether or not you live in an official FEMA flood zone can make a difference when it comes to the likelihood of foreclosure, First Street found. That's because people outside flood zones often lack insurance. "If you don't protect yourselves, then when the event does occur it's completely on you. You end up having to pay out of pocket and you may go into foreclosure," Porter said. In an analysis of 29 historical flood events from 2002-2019, First Street found that damaged properties outside of those FEMA-designated zones experienced foreclosure increases at an average of 52% higher than properties inside the zones. FEMA did not respond to a request for comment on if and how it plans to update its flood maps. According to one estimate by the Association of State Floodplain Managers, it could take up to $11.8 billion to complete updated flood mapping in the U.S. Mary Cunningham Mary Cunningham is a reporter for CBS MoneyWatch. Before joining the business and finance vertical, she worked at "60 Minutes," and CBS News 24/7 as part of the CBS News Associate Program. contributed to this report.
Axios
19-05-2025
- Business
- Axios
How climate change screws up mortgage markets
Extreme weather worsened by climate change and insurance market gaps together create systemic jeopardy for mortgage providers, the risk modeling group First Street finds. Why it matters: Its granular new report is the "first national-scale analysis of the relationship between physical climate risk and mortgage defaults," First Street said. Threat level:"Climate-driven foreclosures" could bring $5.36 billion in annual bank credit losses by 2035 during "severe weather years" — nearly 30% of all foreclosure losses, the report finds. Climate change can worsen many kinds of threats, such as wildfires. But flooding is the "leading climate driver of foreclosure risk," as many insurance policies don't cover it. FEMA's method for creating its Special Flood Hazard Areas, where insurance is required, leaves out millions of properties facing risk, First Street said. Friction point: Another problem is that rising premiums are becoming an economic burden for more homeowners, which itself boost chances of missed mortgage payments or loan defaults. "The one thing proven to prevent foreclosures is getting so expensive that it is causing foreclosures," states the report. While wind and wildfires are typically covered, that insurance is getting costlier. Zoom in: Florida, Louisiana, and California are projected to account for 53% of all climate-related mortgage losses in 2025, First Street finds. What we're watching: The report calls for financial institutions and regulators to integrate this kind of data into credit models and risk management. While Trump 2.0 regulators are backing away from climate, First Street's Jeremy Porter said the group's data is already used by parties like Fannie Mae and Freddie Mac, as well as various Wall Street giants and mid-sized banks. "Their questions to us were actually the impetus for the research," he said via email. "Ultimately, the climate folks at financial institutions see climate as an emerging risk and are pivoting from integrating the data for regulatory compliance to thinking about how the impacts might link back to mortgage and investment performance," Porter, head of climate implications at First Street, tells Axios.
