Fannie Mae and Freddie Mac, which backstop most U.S. mortgages, know floods and fires are a growing problem. But little action has been taken.The New York Times reports that Fannie Mae and Freddie Mac, the two government-sponsored enterprises that back a significant portion of U.S. mortgages, are aware of the increasing threat of floods and fires. However, little action has been taken to address this issue. As sea levels rise and natural disasters become more severe, homes in vulnerable areas are losing value. This poses a problem for Fannie Mae and Freddie Mac, as they play a crucial role in keeping the residential real estate market stable by purchasing mortgages from banks and packaging them into securities.
In the first year of the Biden administration, financial regulators acknowledged the risk of climate change on the mortgage market. However, since then, there have only been reports, comments, and summits held, with no concrete steps taken to protect Fannie Mae, Freddie Mac, and borrowers from climate-related disasters. The Federal Housing Finance Agency, which regulates these enterprises, has only provided vague guidance on the matter.
This issue also poses a risk for taxpayers, as the government took Fannie Mae and Freddie Mac into conservatorship in 2008 after the financial crisis. While they do have reserve capital buffers, significant losses could lead to government intervention. It is crucial for action to be taken to mitigate the impact of climate change on the mortgage market and protect both Fannie Mae and Freddie Mac and taxpayers.
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