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.
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Working Paper
California Wildfires, Property Damage, and Mortgage Repayment
March 2023
WP 23-05 – This paper examines wildfires’ impact on mortgage repayment using novel data that combines property-level damages and mortgage performance data.
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