FHFA asks for input on GSEs' exposure to climate change

WASHINGTON — The Federal Housing Finance Agency is seeking feedback on potential climate risks to Fannie Mae, Freddie Mac and the Federal Home Loan Banks and how the agency should account for global warming in its supervisory framework.

In a request for information issued Tuesday, the FHFA asked for public comment on how climate risks could affect the safety and soundness of the government-sponsored enterprises, and what risk management strategies the industry currently uses to address climate change and natural disaster risks.

The move, which could precede a future rulemaking, comes almost a year after several Senate Democrats sent a letter to Fannie and Freddie asking how the companies factor extreme weather into their risk modeling. The incoming Biden administration has pledged to address climate change as one of its top priorities, a goal that has been echoed by Janet Yellen, Biden’s nominee to serve as Treasury secretary.

“Natural disasters can adversely affect the regulated entities. Historically, the ability to assess the scale, timing, location, and impact of such risks has been limited,” FHFA Director Mark Calabria said in a statement. “Today’s RFI will help FHFA better understand and address the regulated entities’ exposure to climate and natural disaster risk.”

The agency is also asking for input on how it should evaluate the ability of the GSEs to assess and account for climate risk, as well as how it should prioritize climate and natural disaster risks as part of its supervision of Fannie, Freddie and the Federal Home Loan Banks.

The FHFA also asked whether it should impose climate stress tests or scenario analyses on Fannie and Freddie and if so, how those should be designed.

The public can submit comments to the FHFA for 90 days after the request for information is published.