Under a final rule issued on Tuesday
by the Federal Housing Finance Agency (FHFA) has set forth three underserved
markets for activities the GSEs Freddie Mac and Fannie Mae can undertake to
fulfill their Duty to Serve requirements. Under the Duty to Serve provisions of
the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 as
amended by the Housing and Economic Recovery Act of 2008 (HERA) the GSEs are
required to improve the distribution and availability of mortgage financing for
residential properties that serve very low, low-and moderate income families.
The final rule in effect makes three
markets eligible for satisfying those requirements and creates a process for
the GSEs to establish plans to fulfill their Duty to Serve. FHFA will, in turn, annually evaluate, rate,
and report to Congress on the compliance of each of the GSEs.
The final rule allows the GSEs to
consider undertaking service to:
The manufactured housing market. The
GSEs can receive Duty to Serve credit for activities supporting manufactured
homes titled as real property or as personal property (or chattel). They can also provide blanket loans for
certain categories of manufactured housing communities.
- The affordable housing preservation. Also eligible is GSE activity supporting the preservation of affordable rental
housing and affordable homeownership opportunities. These categories
include activities under the programs specified in the Safety and
Soundness Act, as well as activities supporting small multifamily rental
properties, energy efficiency improvements on multifamily rental and
single-family first-lien properties, shared equity homeownership programs,
purchase or rehabilitation of certain distressed properties, and activities
under the U.S. Department of Housing and Urban Development’s Choice
Neighborhoods Initiative and Rental Assistance Demonstration program.
rural housing market. Credit can be received for GSE activity supporting housing
in high-needs rural regions and for high-needs rural populations,
financing of housing by small rural financial institutions, and activities
related to small multifamily rental properties in rural areas.
The final rule does not mandate that
the GSEs undertake any specific activities but requires them to consider ways
to better serve families in those three underserved markets. It also allows the GSEs to propose additional
Each GSE must submit a three-year plan to
FHFA describing the activities and objectives they will undertake to meet their
Duty to Serve requirements. The Plans will become effective January 2018. FHFA will evaluate compliance by taking into
consideration the following factors; development of loan products, use of more
flexible underwriting guidelines and other innovative approaches, the extent of
the GSEs’ 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.
“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 Melvin L.
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.”
FHFA and the GSEs will host public
listening sessions to obtain stakeholder input on the GSEs Underserved Markets
Plans. The sessions will be held:
- January 25 at the Federal Reserve Bank of Chicago;
- February 1 at the Federal Reserve Bank of San
- February 8 at FHFA in Washington, D.C.; and
- February 9 webinar hosted at FHFA.
Information on how to participate in
these sessions will be available on the FHFA website after December 19.
Freddie Mac’s CEO Donald H. Layton, issued
the following statement about the Duty to Service final rule. “We look forward to
working with the Federal Housing Finance Agency (FHFA) and stakeholders to
implement the Duty to Serve provisions. We’re proud to responsibly increase our
activities involving manufactured housing, affordable housing preservation and
rural housing to help more American families. This is an opportunity for the
entire mortgage industry to work together to address some of the toughest
issues in housing, including the distribution and availability of both mortgage
financing and affordable rental housing for working families.”