Neither the Federal Housing Finance Agency or the banking industry “currently have the expertise to recommend or make changes to enhance the supervisory and regulatory framework” of Fannie Mae, Freddie Mac and the Federal Home Loan Banks with regard to climate-related factors, ABA said in a letter to FHFA today.
Responding to a recent request for information on how climate change and natural disasters could pose risks to these entities and the housing finance system, the association reiterated the principles put forth by the U.S. Climate Finance Working Group—of which ABA is a member—and noted that these principles should guide FHFA as it weighs potential regulations to address climate and natural disaster risk. ABA also emphasized the need for regulators to coordinate on any new regulatory approaches to climate risk.
“All stakeholders, including financial regulators, should work together to create a framework to identify, evaluate and mitigate the risks of climate change on the housing system and financial system more broadly,” the association said. “FHFA must also recognize that any potential assessment or regulation imposed on or required by the regulated entities frequently becomes the ‘industry standard’ for mortgage lenders in the United States. This can be a positive development, providing the mortgage industry with a common set of standards or requirements, but only if those standards are not in conflict with, or duplicative of, other requirements.”