Review of Financial Studies· 2026Q1
Who Bears Flood Risk? Evidence from Mortgage Markets in Florida
- 73citations
- Q1SCImago
- 2026year
Short summary
Mortgage lenders reduce credit availability and shift borrowers towards wealthier, higher credit quality individuals in flood zones by requiring lower loan-to-value ratios, effectively screening for uninsurable flood risk.
AI-generated from the title and abstract; the full text is not read.
Key points
- Lenders require lower loan-to-value ratios in flood zones to screen for uninsurable flood risk.
- This credit rationing equalizes delinquency rates between flood and non-flood zones.
- Flood zones see a compositional shift towards wealthier, higher credit quality mortgage borrowers.
- Lenders reduce credit supply when retaining uninsured flood risk exposures.
AI-generated from the title and abstract; the full text is not read.
Abstract
Abstract Government-provided flood insurance contracts have strict coverage limits, leaving some households underinsured against flood risk. This paper exploits these strict coverage limits as well as staggered flood map updates to show that mortgage lenders screen for uninsurable flood risk by requiring lower loan-to-value ratios at origination. This credit rationing leads delinquency rates to equalize inside and outside of flood zones, and shifts the composition of mortgage borrowers in flood zones toward richer and higher credit quality individuals. I conclude that lenders reduce credit supply when they retain residual uninsured exposures to flood risk, which has distributional consequences for flood zones.
The authors' abstract, as published at the source. Review of Financial Studies, 2026 · DOI ↗
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Field: Economics and Econometrics
Economics and EconometricsEconomics, Econometrics and Finance