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FHFA to GSEs: Back to the drawing board on Duty to Serve

Affordable housing groups had urged FHFA to reject plans designed to add liquidity in affordable housing

A federal law mandates that Fannie Mae and Freddie Mac help households on moderate, low, or very low incomes. The government-sponsored enterprises must do this by setting a plan every three years, dubbed Duty to Serve, that provides lending liquidity and preservation goals for manufactured, rural, and affordable housing.

But according to the Federal Housing Finance Agency, which has oversight power over Fannie and Freddie, the GSE’s must go back to the drawing board when it comes to their 2022-2024 Duty to Serve plan.

In fact, according to an FHFA spokesperson, neither Fannie nor Freddie’s plan is sufficient for any of the three underserved markets in question. The spokesperson declined to say what changes FHFA requested, or whether the GSEs had received warning the Duty to Serve plans might fall short. A spokesperson said that discussing the plans shortcomings would not be productive for the resubmission process.

As the GSE’s revamp their 2022-2024 Duty to Serve plans, the rejected plans will be used on an interim basis, the FHFA said.

A spokesperson for Freddie Mac said that the company has implemented “innovative solutions” for rural housing, manufactured housing and affordable housing preservation since 2018 through the Duty to Serve program.


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“We are committed to providing even more impactful support for these underserved markets in our 2022-2024 plan,” a Freddie Mac spokesperson said.

A spokesperson for Fannie Mae said its commitment to serve the needs of homeowners and renters in underserved markets has “never been stronger.”

“We welcome the opportunity to enhance our DTS Plan with input from FHFA and we will continue our ongoing work to serve these underserved markets,” a Fannie Mae spokesperson said.

FHFA’s rejection is the culmination of a seven-months long feedback process that included fierce criticism from affordable housing advocates.

In May, the GSEs submitted the three-year outline to the FHFA, then under the leadership of Mark Calabria. The process which followed included a formal request for input on the proposed plans and several listening sessions with stakeholders.

One stakeholder is affordable housing advocates, and in October twenty such groups — including the National Housing Conference, the National Community Stabilization Trust and the Lincoln Institute of Land Policy — implored FHFA to hit pause on the proposed plans. The proposals, they wrote in a letter, did not meet the “spirit or the letter” of the Duty to Serve regulation.

The groups specifically found fault in Fannie and Freddie seeking to eliminate programs to purchase chattel loans, which are manufactured housing loans titled as personal property. They also blasted the GSEs for reducing loan targets for manufactured housing, affordable housing preservation and rural housing.

Additionally, affordable housing advocates asked FHFA to make changes to its capital requirements, which they called “overly cautious.” Regulations should encourage, not discourage, new program pilots to reach underserved markets, the groups argued. Further, the advocates called a legal interpretation preventing GSEs from making targeted Duty to Serve equity investments “dubious.”

Jim Gray, now a nonresident senior fellow at the Lincoln Institute of Land Policy, helped stand up and lead the Duty to Serve program at the FHFA. Reached Wednesday, Gray applauded FHFA Acting Director Sandra Thompson’s decision to reject the plans.

“It’s a bold move,” Gray said.

David Dworkin, president of the National Housing Conference, said the rejection is a great opportunity for GSEs to develop a robust plan that “stretches their capabilities.”

“The GSEs’ obligations to serve underserved markets can be much more robust, and these plans don’t do that,” Dworkin said.

Editor’s note: This story has been updated to include a statement from Fannie Mae.

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