The 30-Year Home Mortgage Isn’t Designed for Climate Chaos | As house-demolishing weather becomes increasingly common, more Americans will find themselves without a safety net.

It sounds like there are several issues.

• The flood insurance covered floodwater damage to the home. In this case, the floodwater never touched the home. It doesn't cover the river changing its course and producing erosion to the terrain that renders the house unsafe, which is what happened here (albeit after a flood).

  Regardless of when the policy took effect, “USAA would have denied and FEMA upheld the denial because water didn’t enter the property or damage the foundation,” Kevin says.

  Maybe homeowners who purchase homes along a river should also be required to purchase insurance against damage from the river changing course. Rivers do change course -- I remember once reading something on property law as to how to deal with property boundary issues resulting from river course changes.
• Flood insurance apparently only becomes active after 30 days and here, apparently it didn't become active until after the flood, so even if the insurance had covered the scope of the damage, it wouldn't have been active. Having a delay might make sense -- insurance is aimed to mitigate long-term risk. You don't want someone getting into the game of doing short-term predictions based on some kind of information they have about specific flood policy and buying a bunch of insurance right before a flood. But you don't want to have someone owning a property without being covered by insurance, so maybe the transfer of ownership should also be on a 30 day delay, so that there isn't an uncovered period.

I think that those are both policy at least related to insurance. Maybe the second issue isn't insurance itself.

Then there's a separate issue they raised and which most of the article deals with, which is that purchasing houses in areas that are going to be impacted by climate change is not a great idea:

“The fundamental problem here is that you have properties that in a fixed period of time are going to have no real value because of the risk of fire or flood,”

I mean, that's maybe a perfectly reasonable issue -- maybe people need to stop buying and building beachfront property unless it's hardened against higher water levels.

The problem listed here, according to the article, is that federal mortgage subsidies apparently are not attempting to price in risk to the mortgage borrower.

Most mortgages in the U.S. are backed by the federal government, including this loan, which was backed by the Department of Veteran Affairs.

Outside of requiring flood insurance in high risk zones, the GSEs “have assiduously chosen not to price different geographies differently,” Keys says. An area at risk of extreme heat is not punished with higher interest rates and tougher lending standards.

The insurance industry is just not making money, according to the Insurance Information Institute. In 2023, insurers paid out $1.11 in claims for every dollar they made in premiums. This year is expected to be the fifth year in a row with underwriting losses, the institute determined.

When these pressures mount to an intolerable level, insurers stop writing new policies, as companies have done in California, Florida and elsewhere. Policies written by state-based last-resort insurance plans doubled to 2.7 million from 2018 to 2023.

So this isn't what affected the people here. But it's probably a fair issue to raise.

If you want to get a beachfront house that's got a high risk of being wiped out, if the government is going to subsidize mortgages, the government should probably be either saying "I'm going to require a higher interest rate from the borrower on anything I back to cover risk" or simply refuse to be in the mortgage-subsidizing game for properties in high-risk areas at all.

Honestly, I'm not completely sold that the government should subsidize mortgages in the first place. There are some arguments in favor, like maybe people care more about a neighborhood if they have a financial stake in a house, but it's also a negative for labor mobility.

kagis

Here's a CRS document saying that basically the rationale for the benefit of federal subsidy for mortgages isn't all that clear, lists the three major rationales and some problems with them:

https://crsreports.congress.gov/product/pdf/IF/IF11305