A final rule has been issued that requires the Federal National Mortgage Association and the Federal Home Loan Mortgage Corp. to support home financing in underserved markets.
The Housing and Economic Recovery Act of 2008 amended the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 and required lending in underserved markets.
The statute requires Fannie Mae and Freddie Mac to improve the distribution and availability of home financing for manufactured housing, affordable housing preservation, and rural housing.
The law is intended to benefit very low-, low-, and moderate-income borrowers.
On Tuesday, the regulator of the pair of government-sponsored enterprises, the Federal Housing Finance Agency, issued a final rule specifying
activities Fannie and Freddie can choose to undertake to receive duty-to-serve credit. It also provides that the GSEs can propose additional activities.
No activities, though, are mandated by the final rule.
“Under the final rule, Fannie Mae and Freddie Mac will each submit to FHFA a three-year underserved markets plan that describes the activities and objectives they will undertake to meet their duty-to-serve requirements,” the regulator stated. “The plans will become effective January 2018.”
On manufactured housing loans, the GSEs can receive credit with financing for homes titled as real property, homes titled as personal property or “chattel,” and
blanket loans on certain categories of manufactured housing communities.
A statement issued by the
Manufactured Housing Institute noted that the trade group is optimistic given that Fannie and Freddie haven’t purchased chattel loans for nearly a decade. But the statement noted much more needs to be done.
“The bottom line: done right, this could make becoming a manufactured home owner more affordable,” MHI Chairman Tim Williams said in the statement.
Dr. Lesli Gooch, senior vice president for government affairs and chief lobbyist for Arlington, Virginia-based association, noted that while MHI would have preferred a broad and immediate duty-to-serve chattel
requirement, it recognizes that the GSEs need time to work through risk and operational issues.
Fannie and Freddie can also receive credit for supporting the preservation of affordable rental housing and affordable homeownership opportunities. This category includes multifamily financing, financing for
energy efficiency improvements, and shared-equity homeownership programs. It also includes support of the purchase or rehabilitation of certain distressed properties as well as activities under the Department of Housing and Urban Development’s Choice Neighborhoods Initiative and Rental Assistance Demonstration program. In addition, it includes activities under the programs specified in the Safety and Soundness Act.
Finally, the two secondary lenders can receive credit for
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
rule establishes a three-part evaluation and rating process. This includes a quantitative assessment, a qualitative assessment and an assessment of extra-credit eligible activities
In evaluating Fannie’s and Freddie’s compliance with the final rule, FHFA will consider
development of loan products, use of more flexible underwriting guidelines and other innovative approaches, and extent of the outreach to qualified loan sellers and other market participants. It will additionally consider the volume of loans purchased relative to available market opportunities and the amount of investments in eligible projects.
The final rule takes effect 30 days after it is published in the Federal Register.
