Mortgage Finance and Climate Change: Securitization Dynamics in the Aftermath of Natural Disasters / Amine Ouazad, Matthew E. Kahn.

Format:

Book

Author/Creator:

Ouazad, Amine.

Contributor:

National Bureau of Economic Research.

Kahn, Matthew E.

Series:

Working Paper Series (National Bureau of Economic Research) no. w26322.

NBER working paper series no. w26322

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2019.

Summary:

Using the government-sponsored enterprises' sharp securitization rules, this paper provides evidence that, in the aftermath of natural disasters, lenders are more likely to approve mortgages that can be securitized, thereby transferring climate risk. The identification strategy uses the GSEs' time-varying conforming loan limits at which mortgages bunch. Natural disasters increase bunching, suggesting an increased option value of securitization. The increase is lower where flood insurance is required. A model identified using indirect inference simulates increasing disaster risk without GSEs. Mortgage credit supply would decline in flood zones and lenders would have a greater incentive to screen mortgages.

Notes:

Print version record

September 2019.