Environmental Hazards and Mortgage Credit Risk: Evidence from Texas Pipeline Incidents

Minhong Xu, Yilan Xu

Research output: Contribution to journalArticlepeer-review

Abstract

This study examines the effects of pipeline hazards on credit risk using evidence from the 2005–2011 home mortgage loans in Texas. Difference-in-difference analyses show a permanently lower origination rate by 1.9% in the pipeline-present areas compared to the pipeline-free areas, which was further enlarged by 1.8% whenever pipeline incidents happened. Evidence suggests that the permanent difference in credit access reflects lenders’ concerns about collateral value and borrowers’ repayment ability. The elevated post-incident risk perceptions indicate lenders’ aversion to environmental liabilities. Lenders’ risk management strategies differed by borrowers’ income and evolved with the tightening of the securitization market.

Original languageEnglish (US)
Pages (from-to)1096-1135
Number of pages40
JournalReal Estate Economics
Volume48
Issue number4
DOIs
StatePublished - Dec 1 2020

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics

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