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Comment by missedthecue | Hacker News Reader

If this is true why will any bank give me a 40 year mortgage on beachfront property today?

Because the money train is still running ... until it stops. As with most systemic problems the vested interests in the status quo will prop something up as long as possible, ignoring the underlying failures until all at once a domino effect kicks off and years of collapse appear to hit all at once.

I'd imagine it'll be around insurance underwriting for the structures and the financial instruments attached to them.

Because they package up your loan with a bunch of others and sell it to another company within a year, no sweat off their back. What does flood insurance cost?

Flood insurance is immaterial to the arguments here considered. You buy it year by year, not in 40 year contracts. They will stop selling to you once your house is about to go underwater. Who would insure a house at the bottom of the ocean?

If your expected return from an insurance isn't negative, don't expect it to exist next year.

If an insurance company is guaranteed to have an $800,000 claim filed on their policy within the next 12 months because your house is already flooded, they won't sell you the policy.

That would work in an economic free market. Instead, the Feds force everyone else to subsidize flood insurance. https://www.floodsmart.gov/

Go get an insurance policy on a house that is currently underwater and tell me who gives you a quote. I'll send you $1000 if you do this.

The increasing number and intensity of disasters is causing many types of insurance, particularly flood and fire, to become scarcely available. We are beyond basic cost accounting at this point.

Because the people issuing those mortgages will be long retired by the time it comes home to roost and also they are probably banking on a federal govt bailout.

Who cares about tomorrow when the bonus pays out today

If you mortgage a property and the property is destroyed, you are still on the hook to repay the loan. If you have insurance that will cover it, then great. If not, you still owe the note. Sound like sound logic for the banker types.

Except that you don't buy insurance in 40 year contracts. Once the water gets too close, it will become uninsurable. It would be like selling insurance on a house that is burning.

Nah, some insurance company will continue to take people's money, but when it comes time to make a claim, they will come back with this was not an act of god event, but a malicious man made event. Claim denied!

That's not the case in NON recourse states, such-as California. https://www.legalmatch.com/law-library/article/what-is-a-rec...

"As long as the music is playing, you’ve got to get up and dance." https://en.wikipedia.org/wiki/Charles_Prince#Credit_crisis

Publicly traded banks have an obligation to their shareholders to make money. Nobody wants to be the first to abandon a profit center. A classic multipolar coordination trap that, theoretically, governments are here to fix.

Why will my credit union do this? Why will state run banks in other countries do it?

By the time your home will be worthless you’ll at least have paid back the principal. Add in the uncertainty of so many too big to fail bailouts of bad mortgages probably happening and large scale engineering projects to save homes probably happening and you’ve still got a decent bet by the bank.

Why wouldn't they? You still owe the money even after your house washes away into the ocean.

Because greed.

I don't buy this. There are plenty of things a bank will not lend you money for. I can't get a 2 million mortgage for instance. I can't get a mortgage to buy undeveloped land. I can't get a loan to start a business. I can't get a loan to buy a business. Why is this very specific circumstance one where all risk parameters fly out the window? Why aren't they recklessly greedy in the other situations I list?

I feel like you've asked a good question. I don't doubt the conclusions of the report, and I don't think the banks do either.

Why, then, would they make what the facts indicate are bad loans?

Greed is a partial answer, sure. This is hardly the only place where corporations trade risk in the distant future for revenue today.

But my instinct is that the greater part of it is inertia. They make the loans because they've always made the loans and it will take a good deal of energy to change that.

My guess is that it's an area where change will come as a short, very sharp shock. One year all the banks will make these loans and the next year none of them will.

And why did Obama buy beach front property on Long Island and Hawaii.

Just keep an eye on the rich people.

which banks give out 40 year mortgages?

all of them

It's not an option from mine. A 40 year mortgage sounds so much better than a 30.

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