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FHFA tells GSEs to prioritize affordability in 2022

Updating pricing, planning for climate change, transferring risk away from taxpayers also high priorities for next year

Federal Housing Finance Agency (FHFA) Acting Director Sandra Thompson has put affordability at the top of the annual to-do list for the government-sponsored enterprises.

In its 2022 Scorecard, the conservator also tasked the GSEs with updating their pricing framework to “increase support for core mission borrowers.” Affordable housing advocates have said loan-level price adjustments — risk-based fees for borrowers — increase the cost of homeownership for those who need it the most.

The scorecard, the FHFA’s mechanism to communicate its annual priorities and expectations for the GSEs, gave equal weight to both equity and affordability, and safety and soundness. It also directed the GSEs to transfer a significant amount of risk to private investors. During the pandemic, Fannie Mae had put its credit risk transfer program on hold before restarting it in September.

“The 2022 Scorecard will better position the enterprises to support the housing market throughout the economic cycle,” said FHFA Acting Director Sandra Thompson. “Key to the enterprises fulfilling their statutory mandates is their ability to advance sustainable and affordable homeownership and rental housing opportunities, and to improve their capital position by transferring credit risk away from the taxpayer.”

The agency also set a number of specific goal posts for its regulated entities. The GSEs should work to increase the availability of small-balance mortgages, the scorecard instructed, and make recommendations to facilitate greater affordable housing supply. The FHFA also said the GSEs should finish the validation and approval of credit score models and move to implement those changes.

How Freddie Mac is addressing affordable housing challenges

As part of Freddie Mac’s mission to provide liquidity, stability, affordability and equality to the housing market, Freddie Mac created its Housing Solutions team in 2020 to reduce barriers to homeownership and provide solutions to some of the nation’s toughest housing challenges. 

Presented by: Freddie Mac

The 2022 scorecard is a notable departure from the previous year’s, which continued the drumbeat for moving the GSEs out of conservatorship. There was no mention of “equity” or “equitable” in the 2021 scorecard. Its only mention of affordability was in reference to rental housing, not homeownership.

In contrast, the first assessment criteria in the 2022 scorecard is whether the GSEs “foster sustainable and equitable housing finance markets that support safe, decent, and affordable homeownership and rental opportunities.”

Jim Gray, a senior fellow at the Lincoln Institute of Land Policy, called the emphasis on affordable housing a “welcome change.”

The FHFA also tasked the GSEs with planning for climate change as part of their safety and soundness mandate. It’s the first mention of climate change in the conservator’s annual epistle since the scorecard was introduced, in 2012.

The scorecard is one of several tools the FHFA has to shape the priorities at the GSEs. Earlier this year, the FHFA proposed affordability goals which would set higher requirements for Fannie Mae and Freddie Mac loan purchases in minority and low-income Census tracts. Those goals would take effect starting in 2022.

Another mechanism at the FHFA’s disposal are the GSEs’ three-year Duty to Serve plans, which directs the enterprises to support mortgages for very low-, low-, and moderate-income borrowers in the underserved markets of manufactured housing, affordable housing preservation and rural housing.

But affordable housing groups have said the latest Duty to Serve plans, which the GSEs proposed for 2022 to 2024 while Mark Calabria was FHFA director, are insufficient. Twenty affordable housing advocacy organizations banded together in October to ask the FHFA to postpone the proposals.

The coalition said the plans don’t meet the “spirit or the letter” of the Duty to Serve regulation because they would eliminate programs to purchase manufactured housing loans titled as personal property and reduce, rather than increase, loan targets for manufactured housing, affordable housing preservation and rural housing.

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