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Climate risk in mortgage markets: Evidence from Hurricanes Harvey and Irma

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dc.contributor.authorGete, Pedro
dc.contributor.authorTsouderou, Athena
dc.contributor.authorWachter, Susan
dc.contributor.funderMinisterio de Ciencia e Innovación
dc.contributor.funderAgencia Estatal de Investigación
dc.contributor.rorhttps://ror.org/02jjdwm75
dc.date.accessioned2024-10-23T11:41:12Z
dc.date.available2024-10-23T11:41:12Z
dc.date.issued2024-02-27
dc.description.abstractUsing the Credit Risk Transfers (CRTs) issued by Fannie Mae and Freddie Mac, we study how, absent government intervention, mortgage markets would price hurricane risk. Currently, such risk is priced equally across locations even if it is location-specific. We hand collect a novel and detailed database to exploit CRTs' heterogeneous exposure to Hurricanes Harvey and Irma. Using a diff-in-diff specification, we estimate the reaction of private investors to hurricane risk. We use the previous results to calibrate a model of mortgage lending. We simulate hurricane frequencies and mortgage default probabilities in each US county to derive the market price of mortgage credit risk, that is, the implied guarantee fees (g-fees). Market-implied g-fees in counties most exposed to hurricanes would be 70% higher than inland counties.
dc.description.peerreviewedyes
dc.description.statusPublished
dc.formatapplication/pdf
dc.identifier.citationGete, P., Tsouderou, A., & Wachter, S. M. (2024). Climate risk in mortgage markets: Evidence from Hurricanes Harvey and Irma. Real Estate Economics, 52, 660–686. https://doi.org/10.1111/1540-6229.12477
dc.identifier.doihttps://doi.org/10.1111/1540-6229.12477
dc.identifier.issn1540-6229
dc.identifier.urihttps://hdl.handle.net/20.500.14417/3296
dc.issue.number3
dc.journal.titleReal Estate Economics
dc.language.isoen
dc.page.final686
dc.page.initial660
dc.page.total26
dc.publisherWiley
dc.relation.departmentFinance
dc.relation.entityIE University
dc.relation.projectIDPID2021-125359NB-I00
dc.relation.schoolIE Business School
dc.rightsAttribution-NonCommercial-NoDerivatives 4.0 International
dc.rights.accessRightsinfo:eu-repo/semantics/openAccess
dc.rights.urihttp://creativecommons.org/licenses/by-nc-nd/4.0/
dc.subject.keywordClimate risk
dc.subject.keywordCredit risk
dc.subject.keywordCRT
dc.subject.keywordGSEs
dc.subject.keywordHurricanes
dc.subject.keywordMortgages
dc.titleClimate risk in mortgage markets: Evidence from Hurricanes Harvey and Irma
dc.typeinfo:eu-repo/semantics/article
dc.version.typeinfo:eu-repo/semantics/publishedVersion
dc.volume.number52
dspace.entity.typePublication
relation.isAuthorOfPublication627e06b8-d61f-4611-96fe-15cf32670e9f
relation.isAuthorOfPublication.latestForDiscovery627e06b8-d61f-4611-96fe-15cf32670e9f
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