FHFA Requires Revisions to GSEs Duty to Serve Plans
Written By: Joel Palmer, Op-Ed Writer
The Federal Housing Finance Agency (FHFA) has informed Fannie Mae and Freddie Mac that their Duty to Serve plans are insufficient and will need to be revised.
The agency said that neither enterprise’s plans, which were published in May, meet the standard for any of the three underserved markets targeted by the Duty to Serve Program.
Under the DTS Program, Fannie Mae and Freddie Mac prepare and submit 3-year underserved markets plans detailing their activities to serve the manufactured housing, rural housing and affordable housing preservation markets.
“The agency has directed both enterprises to submit additional revisions to improve the plans’ impact on all three DTS underserved markets,” FHFA said in a brief statement. “In the meantime, however, DTS implementation will continue without interruption based on objectives in the Enterprises’ current proposed Plans.
Under the DTS Program, Fannie Mae and Freddie Mac prepare and submit 3-year underserved market plans detailing their activities to serve the manufactured housing, rural housing and affordable housing preservation markets. FHFA reviews and issues non-objections to those plans, based on the intended impact in each market. The first plan cycle concluded in 2021.
The proposed plans rejected by FHFA were to cover the period from January 1, 2022, to December 31, 2024.
The rejection of the Duty to Serve plans comes just over two months after a newly formed coalition of housing organizations expressed concern with the enterprises’ proposals.
In October 2021, the Underserved Mortgage Markets Coalition, comprised of 20 affordable housing organizations, sent a letter to FHFA Acting Director Sandra Thompson, urging the agency to require Fannie and Freddie to “substantially improve” their Duty to Serve proposals before the regulator approved them.
"Amid a housing affordability crisis that requires bold and aggressive action, Fannie Mae and Freddie Mac have set forth plans that fail to effectively reach those not served or not served well by the conventional mortgage market,” the letter said.
“Among other concerns, we believe these three-year plans do not fully articulate a strategic vision for meeting the spirit or the letter of the Duty to Serve Regulation; they inappropriately propose to drop highly touted and much needed programs such as purchasing manufactured housing loans titled as personal property without explanation; and they propose to reduce loan purchase targets for all three target areas—manufactured housing, affordable housing preservation, and rural housing.”
The coalition said in October that in addition to advocating for stronger regulations, it will use a new tracking tool to closely monitor the performance of Fannie and Freddie related to Duty to Serve and racial equity. They also plan to research how the enterprises compare with the broader U.S. mortgage market.
“Solving our housing affordability crisis requires multiple actions by all levels of government and the private sector, and an invigorated role for Fannie Mae and Freddie Mac is one of them,” said George W. “Mac” McCarthy, president of the Lincoln Institute, one of the new coalition’s member organizations. “The Underserved Mortgage Markets Coalition seeks to hold Fannie Mae and Freddie Mac accountable and uphold their founding purpose: to bring housing finance opportunities to American families not traditionally served by the private market.”
About the Author
As an NAMP® Opinion Editorial Contributor, Joel Palmer is a freelance writer who spent 10 years as a business and financial reporter and another 10 years in marketing for the insurance and financial services industries. He regularly writes about the mortgage industry, as well as residential and commercial real estate, investments, and retirement income planning. He has also ghostwritten books on starting a business, marketing, and retirement income planning.
