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

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  • Minhong Xu
  • Yilan Xu

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.

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  • Minhong Xu & Yilan Xu, 2020. "Environmental Hazards and Mortgage Credit Risk: Evidence from Texas Pipeline Incidents," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 48(4), pages 1096-1135, December.
    • Handle: RePEc:bla:reesec:v:48:y:2020:i:4:p:1096-1135
    DOI: 10.1111/1540-6229.12213
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    1. Robert Forster & Destan Kirimhan & Xiaojin Sun, 2022. "Deepwater Horizon and Mortgage Lending," Working Papers 202219, University of Liverpool, Department of Economics.
    2. Xu, Minhong & Xu, Yilan, 2023. "Do non-damaging earthquakes shake mortgage lenders' risk perception?," Journal of Environmental Economics and Management, Elsevier, vol. 117(C).
    3. Tahsin, Salman, 2022. "Home price growth and minority access to mortgage credit," Journal of Economics and Business, Elsevier, vol. 120(C).

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