The 20–30x Difference in Climate Risk to Agency CRT Pools is Measured in $Billions

  • On a %UPB basis, the highest risk CRT pools have 5.9% of loans with a risQ Score greater than 4.0, amounting to $1.3 billion, while the lowest risk pools have only 0.3% in this very high risk cohort, or less than $30 million in UPB within those pools.
  • Kicking that up a notch to the extremely high risk cohort of loans with a risQ Score greater than 4.5, the highest risk pools have greater than 3% of loans to worry about, versus only 0.1% for the least risky pools.
  • Fannie Mae, Freddie Mac, the Federal Home Loan banks and credit risk transfer bond investors are facing potential losses approaching USD 50bn based on their exposures to hurricanes, floods and wildfires, DeltaTerra founder David Burt wrote in a 19 April letter answering the Federal Housing Finance Agency’s January request for input on climate risks. Those losses would exceed USD 107bn in DeltaTerra’s “bear loss” scenario.
  • Investors and the government-sponsored enterprises aren’t properly accounting for rising climate risks, in light of the storms that have walloped parts of the US in recent years and expectations around increasingly severe weather.
  • A report this month from the Climate Cost Project put a spotlight on the under-appreciated costs of climate risks. Among the findings, the authors discovered that 81% of 127 Horry County, South Carolina, properties surveyed flooded at least two times between 2016 and 2020, and a third of those were in flood zones designated as low-risk areas by FEMA flood maps. Nearly two-thirds of homeowners surveyed had to go into debt to cover losses, according to the report.

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We quantify climate risk, carbon transition risk and social impact for US Fixed Income, covering the full municipal bond and MBS universes

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risQ, Inc.

risQ, Inc.

We quantify climate risk, carbon transition risk and social impact for US Fixed Income, covering the full municipal bond and MBS universes

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