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Green Mortgages and Green Mortgage-Backed Securities

In: HANDBOOK OF ENVIRONMENTAL AND GREEN FINANCE Toward a Sustainable Future

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  • K. Thomas Liaw

Abstract

Energy-efficient mortgages (EEMs) provide incentives for homeowners to reduce carbon footprints to fight climate change. The chapter surveys recent developments in EEMs (also called green mortgages) and green mortgage-backed securities. The chapter examines the association between green mortgages and default risks and property prices. In addition, the chapter discusses the supply of private capital through securitization of green mortgages to modernize houses to reduce energy consumption. For borrowers, the benefits include savings in energy costs, a lower mortgage rate, a larger loan amount, and a higher house value. For banks, the key factor is about risk reduction. We discuss the benefits of such a green movement in the housing sector and document the evidence that green mortgages reduce credit risk for lenders. We also discuss measures by governments, bank regulators, mortgage lenders, homeowners, and investors to move toward the green transitioning of the housing sector.

Suggested Citation

  • K. Thomas Liaw, 2024. "Green Mortgages and Green Mortgage-Backed Securities," World Scientific Book Chapters, in: Sabri Boubaker & Thai-Ha Le (ed.), HANDBOOK OF ENVIRONMENTAL AND GREEN FINANCE Toward a Sustainable Future, chapter 6, pages 175-191, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9781800614451_0006
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    More about this item

    Keywords

    Green and Impact Bonds; Green Banking and Financing; Green Finance in Europe; ESG Performance; Climate Change; Climate Justice; Green Mortgages; Sustainable Transition; Renewable Energies; Green Transition in The EU;
    All these keywords.

    JEL classification:

    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • Q01 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Sustainable Development

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