Wildfires Pose Hidden Threat to Mortgage Lenders and Investors

Above and beyond the obvious damage, wildfires levied a hidden cost on the finance industry: Mortgage lenders and investors lost more than $30 billion between 2020 and 2022, due to both accelerated defaults and prepayments following disastrous blazes.

Researchers from the University of Southern California, Rutgers and Concordia University studied $1.7 trillion of originations and more than 300,000 mortgages from 2000 to 2021. Within a year following a wildfire, they found, the likelihood of homeowners failing to make their payments increases by 1%. At the same time, borrowers are 4% more likely to pay off their loans early.