The Federal Housing Finance Agency (FHFA) released on January 14 its final rule detailing Fannie Mae and Freddie Mac's "duty-to-serve" underserved markets as required by the “Housing and Economic Recovery Act of 2008.” Under the rule, the government sponsored enterprises (GSEs or Enterprises) would be required to serve three specific underserved markets: manufactured housing, affordable housing preservation, and rural markets.
The rule requires the GSEs to submit three-year Underserved Market plans detailing the scope of activities and objectives they will pursue to increase liquidity of mortgage investments and improve the distribution of investment capital available for mortgage financing for very low, low, and moderate income families who reside in the three underserved markets. FHFA will evaluate each plan and consider: development of loan products, use of more flexible underwriting guidelines and other innovative approaches, the extent of the GSE’s outreach to qualified loan sellers and other market participants, the volume of loans purchased by the GSEs relative to available market opportunities, and the amount of investments in eligible projects. The plans will go into effect in January, 2018.
"With this final rule, which reflects extensive input from a wide variety of stakeholders, FHFA is fulfilling its statutory requirement to implement the Duty to Serve provisions in the Housing and Economic Recovery Act," said FHFA Director Mel Watt. "We look forward to working with Fannie Mae and Freddie Mac to help meet the critical housing needs for very low, low, and moderate income American families around the country in the manufactured housing, affordable housing preservation, and rural housing markets. As we do so, we of course will evaluate each Enterprise proposal to ensure that it will not compromise safety and soundness."
NLIHC submitted comments responding to the proposed rule and made several recommendations to strengthen and improve the rule, some of which were adopted by FHFA. Those include allowing the GSEs to receive duty to serve (DTS) credit for supporting new construction that preserves subsidies of existing affordable rental housing units and broadening the definition of “areas of concentrated poverty” to also include racially and ethnically concentrated areas of poverty, bettering underscoring the fair housing obligations of the GSEs. FHFA also adopted recommendations made by our partners, the Housing Assistance Council and the National Manufactured Home Owners Association, which NLIHC endorsed regarding the GSEs’ duty to serve the rural and manufactured housing markets.
Under the rule, the GSEs may receive DTS credit for an eligible activity where the property underlying the GSE mortgage purchase received national Housing Trust Fund (HTF) or Capital Magnet Fund (CMF) funding from a source other than the GSE. It is important to note that, while the GSEs provide funding for the HTF and CMF, there are no instances where they use allocations to these two accounts to fund their own mortgage purchases.
The final rule will allow the GSEs to reenter the low income housing tax credit (LIHTC) investment market, but only in rural areas. NLIHC had recommended that FHFA not allow the GSEs to reenter that market unless market conditions changed in a way that necessitated their participation.
FHFA has launched a new, dedicated webpage (www.FHFA.gov/DTS) to post updates related to the DTS program and to collect feedback from stakeholders on DTS implementation.
FHFA and the GSE will hold public listening sessions to hear input from stakeholders on the GSEs’ Underserved Market plans. Information on how to register for these sessions will be available at www.FHFA.gov/DTS after December 19, 2016.
The Duty to Serve final rule becomes effective 30 days after publication in the Federal Register.
Read the final rule at: http://bit.ly/2hy4Rcs
Read NLIHC’s comments at: http://bit.ly/1pQoyg9