We find that 90-day delinquencies were 4 percentage points higher and prepayments were 16 percentage points higher for properties that were damaged by wildfires compared to properties 1 to 2 miles outside of the wildfire, which suggests higher risks to mortgage markets than found in previous studies. We find no significant changes in delinquency or prepayment for undamaged properties inside a wildfire boundary. Prepayments are not driven by increased sales or refinances, suggesting insurance claims drive prepayment. We provide evidence that underinsurance may force borrowers to prepay instead of rebuild.View the Full Working Paper
California Wildfires, Property Damage, and Mortgage Repayment
WP 23-05 – This paper examines wildfires’ impact on mortgage repayment using novel data that combines property-level damages and mortgage performance data.