HousingWire Annual: CoreLogic says climate change should be factored into financial analytics

So far in 2023, an all-time high of 24 billion-dollar natural disasters have struck the U.S., highlighting the need for climate risk awareness

CEDAR CREEK, Texas — Natural disasters are becoming more severe and more frequent. So far in 2023, 24 billion-dollar natural disasters have struck the United States, according to data from the National Centers for Environmental Information at the National Atmospheric and Oceanic Administration (NOAA).

This marks the all-time highest number of natural disasters causing $1 billion or more in losses in a year — and the year isn’t even over yet.

The alarming data underscores why housing professionals need to understand the financial impact of climate change on the real estate industry, George Gallagher, senior leader and principal of ESG, climate risk, natural hazard and spatial solutions at CoreLogic told attendees during a session at HousingWire Annual on Wednesday.

In an industry that is always looking for more data and more insights, CoreLogic’s financial analytics around climate change can offer “a path to clarity,” Gallagher said.

For instance, CoreLogic provides housing professionals with portfolio studies that have a special focus on climate risk. These studies help locate a concentration of risk (i.e. flooding or wildfires) in a loan portfolio to address potential problems.

A number of players in the industry benefit from the risk data, including real estate investors who need additional insights to make informed decisions. For example, if a property is exposed to high climate risk, its market value may decline. This may give investors pause as to whether a particular real estate investment is a sound one.

Loan servicers can use predictive analytics that map natural disasters to prepare for a wave of mortgage delinquencies after a natural disaster strikes. 

“As professionals are underwriting loans, servicing them or investing in loan portfolios, there is a big increase in the price of homeowners insurance,” Gallagher highlighted.  “And this has to be factored into the calculus for underwriting, the profit potential  for servicing, as well as how those loans are packaged into a security.”

The CoreLogic presentation at HousingWire Annual is timely with the anticipated release of the Securities and Exchange Commission’s climate-disclosure rule.

Started in March 2022, the SEC proposal seeks to amend disclosure law to better account for climate risk among public companies. If finalized this fall, the rule requires public companies to disclose items like greenhouse gas emissions or the physical risk posed by any entity they might control, among other items.

If adopted, the rule might have a ripple effect on housing agencies such as the U.S. Department of Housing and Urban Development (HUD), the Federal Housing Finance Agency (FHFA) and Federal Housing Administration (FHA), which might enforce similar requirements.

Gallagher also pointed to growing concern about the threat uninsured climate-related losses pose to the broader financial system and economy.

In January 2021, the FHFA issued a request for information focused on climate and natural disaster risk management at Fannie Mae, Freddie Mac and the Federal Home Loan Banks

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