The Underserved Mortgage Markets Coalition (UMMC), a coalition of 32 housing groups initially convened by the Lincoln Institute of Land Policy, published a report on Wednesday that recommended actions for the government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac.
Described as a “blueprint” for the GSEs’ 2025–2027 “Duty to Serve” plans, the publication aims to highlight a more important role that Fannie and Freddie are set to play in facilitating access to the U.S. mortgage finance system.
In addition to the Lincoln Institute of Land Policy, the coalition includes groups like Enterprise Community Partners, NeighborWorks America, the National Housing Conference (NHC), the National Consumer Law Center (NCLC) and the National Community Stabilization Trust (NCST).
Mission and publication intent
The Duty to Serve plans for the GSEs lay out how the agencies and their regulator, the Federal Housing Finance Agency (FHFA), will comply with a federal law that requires them “to prioritize and improve affordable housing finance opportunities in three historically neglected markets: manufactured housing, rural housing, and affordable housing preservation,” the UMMC stated.
The Housing and Economic Recovery Act of 2008 (HERA) “codified housing goals and added a Duty to Serve, which gives FHFA the tools to ensure that Fannie and Freddie stay focused on affordable housing and serving the housing needs of low- and moderate-income families instead of using a federal backstop to just cherry-pick the most lucrative loans.”
This is according to a 2023 HousingWire op-ed written by Former Federal Housing Administration (FHA) Commissioner and Mortgage Bankers Association (MBA) President David Stevens, Former Ginnie Mae President Ted Tozer and Scott Olson, executive director of the Community Home Lenders of America (CHLA).
The publication, entitled “Blueprint 2024,” makes three key recommendations. The GSEs should “increase certain loan purchases” in Duty to Serve markets; develop new and accessible loan products and programs; and evaluate new business partnership opportunities.
By “centering” the perspectives of affordable housing experts and “synthesizing the most critical action steps,” the UMMC aims to “expand and enhance” the GSEs’ performance in underserved housing markets. The coalition will also actively track plan progress and publish a scorecard that will evaluate “the success of the GSEs in adhering to the blueprint and implementing their plans.”
“Duty to Serve is one of the most important affordable housing regulations this country has,” said George McCarthy, president and CEO of the Lincoln Institute of Land Policy, in a statement accompanying the publication. “The Underserved Mortgage Markets Coalition’s new blueprint equips Fannie Mae and Freddie Mac with the guidance they need to comply with this federal regulation and expand housing finance opportunities in unprecedented, potentially revolutionary ways.”
Select manufactured, rental housing proposals
The document offers proposed guidance for elements of underserved markets, including manufactured housing and rural housing, as well as separate sections for preserving affordability in both single-family and multifamily housing.
For manufactured housing, the UMMC proposes outreach to increase loan purchases and achieve increased manufactured housing infill. It also recommends that the GSEs launch a “Home-Only loan pilot, [and to] consider adding any additional consumer protections, include a standardized land lease, and homebuyer education and counseling,” the document explains.
In the realm of rural housing, the coalition recommends that the GSEs address what it calls the “Section 515 preservation crisis,” referring to the rural rental housing loan program established by the Housing Act of 1949. This program serves to offer “direct, competitive mortgage loans made to provide affordable multifamily rental housing for very low-, low-, and moderate-income families, elderly persons, and persons with disabilities.”
“The GSEs should purchase mortgage products that increase liquidity in the Section 515 market,” the publication recommends. In the first year, each agency should implement a Section 515 loan product while providing additional equity investments to Community Development Fund Institutions (CDFIs) that are engaged in Section 515 financing.
Better loan products to serve “high-needs rural regions” should also be developed. And special attention should be paid to Native American housing markets, which would include an increase in “conventional lending on trust land and secondary market sales of trust land mortgages.”
Single-family, multifamily lending
For single-family lending, the GSEs should “prioritize shared equity homeownership by continuing to increase their loan purchase targets and expanding understanding of the field.” They also should “prioritize the sales of nonperforming and reperforming loans, including real estate owned, to mission-driven nonprofits and/or government entities to ensure that properties remain in the hands of owner occupants and on the homeownership market.”
Additionally, the GSEs should develop “better loan products” to serve the single-family market.
In the multifamily arena, the GSEs should adopt a measure already in place at the FHFA and implement a Duty to Serve (DTS) credit for low-income housing tax credit (LIHTC) investments.
“The FHFA provides DTS credit for LIHTC equity investments in rural markets, but there is a critical need to rehabilitate and recapitalize existing affordable multifamily properties in nonrural settings,” the publication stated.
