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HousingWire Magazine: December 2021/ January 2022

AS WE ENTER A NEW YEAR, let’s look at some of the events that we can look forward to in 2022. But what about what’s next for the housing industry?

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Politics & MoneyMortgage

Housing groups to FHFA: Hit pause on Duty to Serve plan

Groups criticized legal interpretation barring GSEs from making targeted Duty to Serve equity investments


Twenty affordable housing groups teamed up to tell the Federal Housing Finance Agency (FHFA) its requirements for the government sponsored enterprises to support manufactured and rural housing, and preserve affordable housing don’t make the grade.

The coalition, dubbed the “Underserved Mortgage Markets Coalition,” includes the Center for Community Progress, the National Housing Conference, the National Council of State Housing Agencies, the National Community Stabilization Trust and the Lincoln Institute of Land Policy, which convened the effort.

The government sponsored enterprises in May submitted their 2022 to 2024 Duty to Serve plans to their regulator, under the leadership of then-FHFA Director Mark Calabria. In a letter to FHFA Acting Director Sandra Thompson, the groups asked that the effective date of the plans be put on hold to allow for public input.

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

The groups also say they want the FHFA to make changes to its capital requirements, which they said are “overly cautious.” Regulations should encourage, not discourage, new program pilots to reach underserved markets, the groups argued. They also criticized a legal interpretation that prevents Fannie Mae and Freddie Mac from making targeted Duty to Serve equity investments.

Targeted equity investments are needed to reach underserved markets, the Lincoln Institute Jim Gray, a senior fellow at the Lincoln Institute, and Lincoln Institute CEO George McCarthy argued in an April working paper.

Gray and McCarthy said that the FHFA’s current “dubious interpretation” of limits on equity investment stem from Fannie Mae’s abuse of that authority in the 1990s, with risky equity investments in America’s Community Fund.

“This overreach created long-lasting resentment of Enterprise equity investment authority and resulted in FHFA’s good faith, if misguided, effort to rein in investment overreach,” Gray and McCarthy wrote.

But targeted equity investments to reach underserved communities have little in common with the abuses from 25 years ago, Gray and McCarthy argue.

“Moreover, in creating this new limited investment authority, Congress likely understood that many of the [Duty to Serve] markets are so far from producing a reliable pipeline of profitable mortgage loans that equity investments are essential to reach some of these markets.”

But the group’s letter wasn’t all faultfinding. The coalition commended the FHFA’s recent decision to start a “racial equity strategic planning process,” though they hope it will yield results. The groups said they hope the process “leads to robust implementation, and ultimately, new housing opportunities for families.”

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