The Federal Housing Finance Agency published the 2021 plans for Fannie Mae and Freddie Mac to serve the most vulnerable communities through their Duty to Serve plans.
While these plans normally encompass three years – and would need to lay out the plan for years 2021 to 2023 – due to disruptions caused by the COVID-19 pandemic, the FHFA announced the government-sponsored enterprises would be releasing just one year – an extension of their 2018 to 2020 plans.
Back in 2016, the FHFA issued a final rule that implemented the DTS provisions as mandated by the Housing and Economic Recovery Act of 2008. The statute requires the enterprises to serve three specified underserved markets – manufactured housing, affordable housing preservation and rural housing – by increasing the liquidity of mortgage financing for very low-, low- and moderate-income families.
These are the areas the Duty to Serve plans target:
- Manufactured housing: Exploring financing options for one of the largest affordable housing opportunities
- Affordable housing preservation: Helping keep established affordable properties available as low-cost housing alternatives
- Rural housing: Supporting the financing of housing for targeted high-needs rural regions and populations
In order to put together the priorities for their plans, the GSEs engaged in activities such as requests for comment, public roundtables, conferences, listening sessions and direct research.
How the mortgage industry is working together to make housing more affordable
The issue of housing affordability has no one solution, but with collaboration across the entire housing industry, together we can create more opportunity for more people to achieve sustainable, long-term homeownership.
Presented by: Fannie Mae
A category is assigned for each goal laid out by Fannie Mae including:
- Analyze: A time to research and analyze the needs of a particular market or challenge
- Test and Learn: The GSEs test and evaluate various adjustments to its products and programs in order to gain a better understanding of how best to serve that market
- Partner and Innovate: The GSEs will form partnerships with governmental entities, non-profits and resident owners to increase its outreach capabilities
- Do What We Do Best: The GSEs will move forward with their plan of action to achieve its goal
Just a few of Fannie Mae’s goals laid out in its Duty to Serve plan include:
- Increase the purchase volume of conventional manufactured housing secured by real estate each year (in the Do What We Do Best phase for manufactured housing)
- Develop an enhanced manufactured housing loan product for quality manufactured housing and purchase loans (in the Partner and Innovate and Do What We Do Best phases for manufactured housing)
- Purchase loans secured by properties served by the Section 8 program (in the Do What We Do Best phase for affordable housing preservation)
- Develop a data visualization tool to provide rural affordable housing practitioners better insight into the social and economic conditions of high-needs rural regions (in the Analyze and Test and Learn phases for rural housing)
To read the plan in full, click here.
Freddie Mac has its own classification names to list its developmental stages: Loan Purchase, Loan Product, Outreach and Investment.
“At Freddie Mac, we see Duty to Serve as more than a program—it is a central piece of our mission to make home possible for more Americans,” said Danny Gardner, Freddie Mac senior vice president and client and community engagement for single-family business. “Our efforts directly support the availability of mortgage financing and affordable rental housing during a challenging time for many families. In the face of continued uncertainty, we believe our work within the mortgage ecosystem to support manufactured housing, affordable housing preservation and rural housing has never been more important.”
A few of Freddie Mac’s Duty to Serve objectives for 2021 include:
- Develop a new offering to preserve properties with USDA Section 515 debt (in the Loan Product phase for rural housing – an objective that hasn’t been in place since 2017)
- Engage in LIHTC equity investment in all rural in five- to 50-unit properties (in the Investment phase for rural housing and a goal that is new to 2021)
- Develop offering for loan credit enhancement for secondary market transactions “SMART CE” (in the Loan Product phase for affordable housing preservation and a new goal for 2021)
- Conduct and publish research on zoning practices that further residential economic diversity (in the Outreach phase for affordable housing preservation and a new goal to 2021)
To read Freddie Mac’s plan in full, click here.
Overall, the GSEs are indicating they will continue to have a strong presence in affordable housing and other areas not as well served by the private markets. At the end of 2020 the FHFA released the affordable housing goals for this year, showing 24% of mortgages purchased by the GSEs must be for low-income borrowers, and the low-income refinancing goal is 21%. The goals require 14% of mortgages to be for homes in low-income areas, and 6% of mortgages must be for very-low-income borrowers.
