Many things, such as an economic downturn, can impact a homeowner's ability to pay a mortgage and prevent a foreclosure. Climate change may become another obstacle for Florida homeowners and the latest complication for a foreclosure defense.
An expert from the Woods Hole Research Center argued that financial institutions are going to destroy the state's economy if they do not deal with the risk to coastal real estate and slow down their lending. He claimed that home buyers should not receive 30-year mortgages.
Insurance protection is the major potential problem. A 30-year mortgage normally requires that a borrower keep insurance, which is renewed each year. However, insurers may elect to stop offering insurance at any time or raise prices to an exorbitant rate. This would cause homeowners to violate their debt. Additionally, home prices would drop and lenders would stop lending.
Many parts of Florida have faced greater risks of flooding and erosion of infrastructure. A 5% risk generally makes regions uninsurable and coastal regions of the states have already exceeded this threshold. Insurance and reinsurance companies have expressed concerns over this and warned that they will not work in real estate markets in the state in upcoming years.
The chairman of the Florida Association for Insurance Reform, however, argues that banks are unlikely to stop lending in the state within the foreseeable future. He compared this situation to the risk of earthquakes in California, where banks continue to provide mortgages. Nonetheless, he also argued that more needs to be done address the rise of sea-levels in southeast Florida.