How the mortgage industry is adapting to climate change
January 18, 2023 9:00 AM
Christina Mendenhall/Bloomberg
White House sets aside $369B to draw private-sector investment to combating climate change
The White House has opted for carrots over sticks in the Inflation Reduction Act, setting aside $369 billion in funding for environmentally focused programs that are designed to attract private-sector investment to combat climate change.
Rather than punish corporations for emissions or carbon-intensive energy production, the law offers tax incentives and grants to be disbursed by 'green' banks and other lenders for climate friendly projects, such as renovating buildings for energy efficiency or developing clean technologies.
"This federal funding only scratches the surface of the law's transformative impact on our economy," said Nicole Buell, director for federal climate innovation at the Environmental Defense Fund, which estimates that climate finance programs could unlock ten times as much in private-sector funding.
Read more:'Almost purely opportunity': Banks prep for historic climate investment
Rather than punish corporations for emissions or carbon-intensive energy production, the law offers tax incentives and grants to be disbursed by 'green' banks and other lenders for climate friendly projects, such as renovating buildings for energy efficiency or developing clean technologies.
"This federal funding only scratches the surface of the law's transformative impact on our economy," said Nicole Buell, director for federal climate innovation at the Environmental Defense Fund, which estimates that climate finance programs could unlock ten times as much in private-sector funding.
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Geolocation data becomes key to real estate investor decision-making
Geolocation data is set to have an important impact on commercial and residential real estate financing and investment, as the risks associated with climate change increase.
Leveraging data from smartphones and other digital devices, the technology provides vital information remotely. "It's like you're doing a boots-on-the-ground site visit, but you're doing it with data," said Sara Maffey of Local Logic, which analyzes climate-related location data for real estate businesses.
While investors in commercial real estate are leading the charge for climate-related geolocation data to help them make more informed business decisions, the slower-moving residential sales and lending side of the business is likely to soon follow.
Read more:Geolocation plays key role in assessment of climate risk
Leveraging data from smartphones and other digital devices, the technology provides vital information remotely. "It's like you're doing a boots-on-the-ground site visit, but you're doing it with data," said Sara Maffey of Local Logic, which analyzes climate-related location data for real estate businesses.
While investors in commercial real estate are leading the charge for climate-related geolocation data to help them make more informed business decisions, the slower-moving residential sales and lending side of the business is likely to soon follow.
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Andrew Harrer/Bloomberg
Climate change resistance grows in low-income housing tax credit programs
Climate change mitigation is a key element in more than half of low-income housing tax credit programs in states across the country, with hazard-resistant and recovery features noted as the most common in the Freddie Mac report.
"Our findings highlight a variety of property-level measures that may help multifamily properties mitigate disaster risk and improve recovery," said Corey Aber, vice president of mission, policy and strategy for Freddie Mac's multifamily division.
The report was commissioned to better understand the impact of climate change and identify how it could impact Freddie's work in relation to LIHTC programs.
Read more:Climate change protections found in over half of state LIHTC plans
"Our findings highlight a variety of property-level measures that may help multifamily properties mitigate disaster risk and improve recovery," said Corey Aber, vice president of mission, policy and strategy for Freddie Mac's multifamily division.
The report was commissioned to better understand the impact of climate change and identify how it could impact Freddie's work in relation to LIHTC programs.
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Scott Dalton/Bloomberg
Secondary market specialists discuss the need for a proactive approach to climate change
The mortgage industry has been more reactive than proactive on climate change, but that needs to change, said panelists at the MBA's Secondary & Capital Markets Conference in New York.
Although the risks of climate change have been evident for a while and coming up with solutions is a challenging task, the industry must act now, even if it doesn't get it right the first time.
"Once we fail, it's not really a fail," said Christopher Joles, enterprise risk officer at Planet Home Lending. "It's a learn-and-we-readjust. We constantly have to be doing that."
Read more:Mortgage industry needs climate plan sooner than later: panel
Although the risks of climate change have been evident for a while and coming up with solutions is a challenging task, the industry must act now, even if it doesn't get it right the first time.
"Once we fail, it's not really a fail," said Christopher Joles, enterprise risk officer at Planet Home Lending. "It's a learn-and-we-readjust. We constantly have to be doing that."
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CoreLogic rolls out climate risk analytics for real estate
CoreLogic has announced the full rollout of analytics aimed at helping government agencies and enterprises model physical risks to real estate from climate change.
In addition to incorporating climate risk scores forhurricanes , storms, floods, fires and earthquakes, the cloud-based technology includes overlays for delinquencies, average median household income and other data. Its projections to date extend out through at least 2050 , approximating a 30-year mortgage term.
The analytics, which were built on CoreLogic'sspatial data /analytics platform and include property-level financials, are in line with a growing trend toward quantifying climate risk as policymakers in the housing finance industry , and more broadly , have become focused on it.
Read more:CoreLogic rolls out climate risk analytics for real estate
In addition to incorporating climate risk scores for
The analytics, which were built on CoreLogic's
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FHA to accept private flood insurance
Over two years and a change in administration later, the Federal Housing Administration has finally issued a rule stating that it will insure mortgages that use private flood insurance.
The rule went into effect on Dec. 21, but not all private flood insurance policies offered in the marketplace will be eligible for inclusion with FHA loans, the agency warned.
Before this change, the FHA would only insure mortgages on properties in special flood hazard areas that obtained coverage through the government's National Flood Insurance Program.
The Biggert-Waters Insurance Reform Act passed in 2012 required the government-sponsored enterprises and federal agencies to accept private flood insurance policies. But the mortgagee letter announcing the rule change said Biggert-Waters did not apply to FHA.
Read more:FHA to accept private flood insurance
The rule went into effect on Dec. 21, but not all private flood insurance policies offered in the marketplace will be eligible for inclusion with FHA loans, the agency warned.
Before this change, the FHA would only insure mortgages on properties in special flood hazard areas that obtained coverage through the government's National Flood Insurance Program.
The Biggert-Waters Insurance Reform Act passed in 2012 required the government-sponsored enterprises and federal agencies to accept private flood insurance policies. But the mortgagee letter announcing the rule change said Biggert-Waters did not apply to FHA.
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