Flood risk in mortgage lending
Climate risk is one of the most frequent keywords in the finance journals, yet only 5 of 82 recent mortgage papers carry a flood, climate-risk or disaster keyword. Do lenders price flood risk into mortgages, and do they pass the riskiest loans to government-backed buyers?
What prompted this
Since October 2025, 82 papers carry a mortgage keyword (54 in finance journals, 26 in economics), and only 5 of them also carry a flood, climate-risk, physical-risk, wildfire or natural-disaster keyword. "Climate risk" alone appears on 242 papers, so the two literatures exist side by side without meeting.
Questions
- Do mortgages on homes in flood zones carry higher rates or lower loan-to-value ratios, after controlling for borrower risk?
- Do lenders keep low-risk loans and sell flood-exposed ones to Fannie Mae and Freddie Mac, shifting the risk to taxpayers?
- When flood maps are updated, do lending and house prices in newly mapped areas change?
Data that could help
Loan-level mortgage data (HMDA, Fannie Mae and Freddie Mac loan files), flood zone maps and their revision dates, and house transaction records (CoreLogic, Zillow).
Next step
Compare the share of mortgages sold to the government-sponsored enterprises inside and outside flood zones, before and after a flood map update in one state.