As sea levels rise and natural disasters become more intense, homes in low-lying coastal areas or tinder-dry mountains are starting to lose value. This impacts the finances of Fannie Mae and Freddie Mac, the government-sponsored enterprises that back half of the nation's outstanding mortgages. Financial regulators acknowledged these risks in the Biden administration's first year, identifying the mortgage market as a potential channel through which climate change could destabilize the financial system.
After extensive discussions and reports, the guidance issued by the Federal Housing Finance Agency concerning the insulation of Fannie Mae and Freddie Mac from climate-related catastrophes was vague at best. Carlos Martin of the Harvard Joint Center for Housing Studies expressed disappointment, stating, 'It came out and I thought, where's the rest of it?' This highlights the concern for inadequate responses to escalating climate risks.
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