Search Results
Working Paper
Flood Risk Exposures and Mortgage-Backed Security Asset Performance and Risk Sharing
The distribution of risks for residential real estate, including flood risk, depends largely on how these risks are allocated across individual mortgages and within mortgage-backed securities (MBS). This paper is the first to document how flood risks relate not only to individual mortgage performance and underwriting, but also how flood risks correlate to MBS performance and structure. Across residential mortgages we find that defaults are concentrated among the most flood-prone properties and this risk is somewhat offset by larger down payments and slightly higher mortgage rates. Even when ...
Discussion Paper
Flood Risk and Flood Insurance
Recent natural disasters have renewed concerns about insurance markets for natural disaster relief. In January 2025, wildfires wreaked havoc in residential areas outside of Los Angeles. Direct damage estimates for the Los Angeles wildfires range from $76 billion to $131 billion, with only up to $45 billion of insured losses (Li and Yu, 2025). In this post, we examine the state of another disaster insurance market: the flood insurance market. We review features of flood insurance mandates, flood insurance take-up, and connect this to work in a related Staff Report that explores how mortgage ...
Report
Unintended Consequences of "Mandatory" Flood Insurance
We show that the National Flood Insurance Program inadvertently concentrated flood risk among households least able to bear it. Using nationwide flood map data, HMDA records, and credit panel data, we show: (i) insurance mandates reduce mortgage lending, particularly for low-income applicants, (ii) these households disproportionately sort into areas immediately adjacent to flood zones, where credit is still available to them but actual flood risk remains, (iii) following disasters, households in these areas experience sharp increases in debt and delinquency rates. Our results show that binary ...
Financial Hardship Following Hurricane Harvey
Financial constraints before the hurricane, homeownership status and the likelihood of having flood insurance altered the financial effects of flooding on families.