Climate Change: The Newest Four-Letter Word in Mortgages (Besides 'Debt')

Another Day Another Disaster (for Someone Else)

Alright folks let's talk money and Mother Nature – a pairing about as stable as a Wags and Wendy Rhoades therapy session. Word on the street – and by 'street' I mean some report from First Street (whoever they are) – is that climate change is now cozying up with mortgage lenders. Apparently those guys who want every last detail of your finances before handing over a loan are now worried about floods wildfires and winds. As they should be. You can’t make money with a flooded property.

From Debt to Deluge: The New Credit Score

So how bad is it? Bad enough that these lenders are starting to factor in whether your McMansion is about to become an oceanfront property...literally. This isn't just about your debt to income ratio anymore; it's about your 'likelihood of being underwater' ratio. And if your house is deemed too risky? Well say goodbye to those sweet sweet low interest rates. Remember what I always say: 'What's the point of having fuck you money if you can't say fuck you?' Well now the climate is saying it for you.

California Florida Louisiana: The New Bermuda Triangle

The usual suspects naturally. California Florida and Louisiana are apparently ground zero for climate related mortgage mayhem. Surprise surprise. Beaches are awesome until they're washing away your investment. And let’s not forget those poor bastards in Florida. They’re not just dealing with hurricanes; they’re dealing with insurance companies fleeing faster than I run from a regulatory hearing. Makes you wonder if buying beachfront property is the new shorting subprime mortgages. Opportunity people opportunity. “Risk is like art. Just because you can't define it doesn't mean you can't feel it.”

The Foreclosure Floodgates (Pun Intended)

The numbers don't lie (usually). These First Street guys are saying that climate driven foreclosures could cost banks over a billion bucks this year. And in a decade? That number could balloon to over $5 billion. Five. Billion. Dollars. That's real money even to me. Homeowners will walk away when they can't afford the premiums. Insurance will keep going up and then the banks are on the hook again.

Fannie Mae: More Like Fannie Maybe

Of course Fannie Mae the big daddy of the mortgage world is 'looking into it'. Two years ago they were looking into it. Bureaucracy at its finest. While they hem and haw the climate keeps changing and the risks keep rising. Someone needs to light a fire under their asses or better yet short their stock. And that’s the difference between you and me I can see the storm coming.

Time to Short the Coasts?

So what's the play here? Are we talking about a massive real estate correction fueled by rising sea levels and raging wildfires? Maybe. Or maybe this is just another opportunity to make a killing by being smarter and faster than everyone else. Either way one thing's for sure: the climate is changing and so is the game. Time to adapt or get washed away. As I live by “I am not afraid of defeat. You shouldn't be either.”