FHFA Publishes Revised Duty to Serve Plans
Written By: Joel Palmer, Op-Ed Writer
The Federal Housing Finance Agency (FHFA) has published revised versions of the 2022-2024 Underserved Markets Plans for Fannie Mae and Freddie Mac under the Duty to Serve (DTS) Program.
The agency has informed the GSEs in January that their DTS plans, which were published in May 2021, did not meet the standard for any of the three underserved markets targeted by the DTS Program. The agency determined that the latest proposed plans do meet that standards.
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 DTS provisions were mandated by the Housing and Economic Recovery Act of 2008 and implemented by an FHFA final rule in 2016.
“Providing sustainable liquidity for affordable housing preservation, rural housing, and manufactured housing in a safe and sound manner is an integral part of the Enterprises’ responsibility to serve underserved markets,” said FHFA Acting Director Sandra L. Thompson. “The additional activities and objectives to be implemented under these Plans are important steps toward the enterprises fulfilling their Duty to Serve mandate over the coming years.”
The rejection of the first DTS plans came just over two months after a 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.
The activities outlined by the enterprises to achieve their DTS plan objectives remain subject to FHFA review and approval.
In the manufactured housing market, Fannie Mae’s DTS plan includes a goal of acquiring 28,800 purchase money mortgage (PMM) loans over next three years, compared with 24,589 over the previous three years. Fannie said it was excluding refinance loans from loan purchase targets, though it will continue to support refinance loans. The exclusion is due the volatility of the refinance business, which would place more weight on market forces and monetary policy than the enterprises actions.
Fannie’s plan to not include a chattel loan program, which are loans secured only by the home itself and not on the underlying property. Fannie said it will “continue to work with our regulator to understand safety and soundness considerations and the viability of a chattel loan pilot program.”
Freddie Mac, on the other hand, did commit to purchasing manufactured home loans not titled as real property, with a goal of 1,500 to 2,500 loans purchased by the third year of the current cycle, even though it does not currently offer a product for this market.
Freddie’s overall single-family loan purchase targets in manufactured housing are 17,100 to 19,600 over the next three years, compared with 14,625 over the previous three years.
In the area of affordable housing preservation, Fannie set a goal of 159 Section 8 loans purchased in each of the three years of the new plan. This compares with an annual average of 142 Section 8 loans purchased between 2016 and 2019.
In the rural housing market, Fannie plans to increase single-family loan purchases in high-need rural areas from 21,000 in the previous three years to a goal of 24,600 over the next three years. It will Increase multifamily loan purchases in high-need rural areas from 130 loans in the previous three years to a goal of 150 in the next three years.
Freddie set a goal of between 41,450 and 44,500 single family loan purchases in high-need rural areas, compared to 36,000 in the previous three years.
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.
