Fannie, Freddie Should Consider Climate Change
Financial risks caused by climate change pose “a serious threat to the U.S. housing finance system,” says FHFA Acting Director Sandra Thompson.
WASHINGTON – The Federal Housing Finance Agency (FHFA), which regulates Fannie Mae and Freddie Mac, says the government-sponsored enterprises (GSEs) should take into account financial risks posed by climate change into their decision making.
The FHFA is also expanding its monitoring and supervision of climate change issues, according to FHFA Acting Director Sandra Thompson. She says climate change “poses a serious threat to the U.S. housing finance system,” and that the GSEs “have an important leadership role to play in addressing this issue.”
Each year, FHFA issues a scorecard intended to hold Fannie and Freddie accountable for fulfilling their core mission requirements – promoting sustainable and equitable access to affordable housing, and operating in a fiscally safe and sound manner. The FHFA’s 2022 Scorecard states that Fannie and Freddie will be expected to demonstrate that they have a governance structure in place “to prioritize the effects of climate change throughout ... decision making.”
A September report funded by the Mortgage Bankers Association warned of the potential for increasingly devastating natural disasters, causing the National Flood Insurance Program to be stretched thin and driving more homeowners to default on their mortgages.
A previous academic study of property records estimated that homes located in floodplains are overvalued by $43.8 billion because buyers aren’t factoring in the cost of fully insuring them. The U.S. Department of Housing and Urban Development has in the past repossessed homes in floodplains and resold them without disclosing flood risk to buyers, a probe by NPR found in September.
Source: Inman (01/03/22) Carter, Matt
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