Climate risk mitigation should protect housing at all income levels

April 19, 2021

CUNA encouraged the Federal Housing Finance Agency (FHFA) to pursue climate and natural disaster risk mitigation strategies that do not abandon low- and moderate-income Americans in a letter sent Monday. The FHFA seeks information on climate and natural disaster risk management regarding its oversight of Fannie Mae, Freddie Mac, and the Federal Home Loan Banks.

CUNA urges the FHFA to not rely on risk transfer mechanisms because this will ultimately just price low- and medium-income consumers out of homeownership.

“It is tempting to think of this risk of loss as a problem to be solved through repricing or risk transfer, and certainly those mechanisms have important roles to play in maintaining stability; however, where natural disasters are increasingly intense, frequent, and geographically ubiquitous, there is ultimately no refuge where this risk can safely be borne,” the letter reads.

CUNA advocates for mitigation of these risks by improving the resiliency of housing stock through improved building codes and retrofitting, both of which can be used to protect housing at all income levels.

“For the housing finance sector, mitigation strategies for the reduction of risk includes encouraging compliance with up-to-date building codes, financing the retrofitting and improved resiliency of existing housing stock, and ensuring that those financial institutions who are able and willing to assist Americans most at risk have access to lending liquidity and support,” the letter reads. “This is the only sustainable way to manage this risk that does not ultimately abandon low- and moderate-income Americans. These combined mitigation efforts, supported by interlocking policies, would improve the resilience of housing against increasingly intense and frequent natural disasters and reduce losses to the regulated entities.”

CUNA also reiterated its concerned related to Property Assessed Clean Energy (PACE) Program loans, and urged the FHFA to work with the Consumer Financial Protection Bureau (CFPB) to “quickly promulgate a PACE financing rule that subjects PACE programs to the Truth in Lending Act (TILA) requirements.”