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New Year’s resolutions for Fannie and Freddie

by Ethan Handelman,
National Housing Conference

In the middle of December, the Federal Housing Finance Agency (FHFA) released its final rule implementing the Duty to Serve obligation of Fannie Mae and Freddie Mac in 2008. The rule creates a process for Fannie and Freddie to create underserved market plans that lay out ways each company will try to better reach people and places not currently well-served by the mortgage market. Unlike the typical case of a final rule, this one means it’s time for you to get involved. Fannie, Freddie and FHFA are listening to your ideas for these underserved market plans, so now’s the time to propose ideas, even more so than during the rulemaking process.

Here’s my super quick version of what is to come with Duty to Serve (for more detail, FHFA has a fact sheet and the rule itself):

FHFA issues evaluation guidance, which then starts a 90-day drafting period for Fannie’s and Freddie’s underserved market plans.
Fannie and Freddie each submit draft underserved markets plans to FHFA for review and for public comment (60 days).
Comments from FHFA and the public may result in revisions, after which we can expect FHFA to issue (at its discretion) the precisely named non-objections to the three sections of each plan.
Fannie and Freddie then implement their three-year plans with periodic reporting to FHFA and opportunity to request changes.
FHFA will evaluate performance annually, and in three years the cycle begins again.

Now is the time to propose ideas for what Fannie and Freddie can do in their plans. FHFA was careful not to be prescriptive in the final rule; much of the detail will emerge in the plans. Types of activities include outreach to underserved market participants, development of loan products, purchases of loans and investments (but not grants, under conservatorship). The activities must fit into the three types of underserved markets laid out in statute: Manufactured housing, affordable housing preservation and rural housing.

There’s lots of room for interesting affordable housing work in each of those areas. Have a nifty loan product you’d like to see tested? Want to make sure Fannie and Freddie only purchase sustainable chattel loans on manufactured homes? Are there ways to preserve apartment properties you think Fannie and Freddie should expand? Do you know better ways to expand rural housing lending? Share your ideas at one of the listening sessions coming up between Jan. 25 and Feb. 9, then watch for the underserved market plans to be released and comment on what they propose.

These underserved market plans will be like New Year’s resolutions, with the essential addition of an independent federal agency making sure they are followed. Get involved to make sure the Duty to Serve makes real, positive change.

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