A new report from climate risk financial modeling firm First Street reveals that lenders may face significant financial risks due to climate change, as current creditworthiness assessments often neglect the impact of extreme weather. This omission may lead to increased mortgage defaults in high-risk areas like California, Florida, and Louisiana. The analysis suggests potential lender losses could grow from $1.2 billion today to $5.4 billion annually by 2035, driven by rising foreclosure rates linked to an escalating insurance crisis and increasing flood occurrences.
If climate risk were to be taken into account by lenders...then the next time someone goes to get a home loan their credit score could be knocked down (or adjusted upward) due to their climate risk exposure.
This growing share of foreclosure losses is largely driven by the escalating insurance crisis and the increasing frequency and severity of flooding anticipated in the next decade, the report states.
First Street finds weather-driven mortgage foreclosures could cause $1.2 billion in lender losses in today's climate...over the next decade, this could increase to up to $5.4 billion per year by 2035.
The analysis from the climate risk financial modeling firm First Street is a groundbreaking nationwide look at the ties between the growing risks from extreme weather such as floods and wildfires, and a long-suspected spike in mortgage defaults.
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