Government LendingRegulatory

With strategic plan, FHFA charts new course

Key affordability elements of the plan remain up in the air

The Federal Housing Finance Agency (FHFA), in its new strategic plan, indicated it is heading in a different direction than under the Trump administration.

The conservator of Fannie Mae and Freddie Mac on Wednesday laid out three broad strategic goals for 2022 to 2026: safety and soundness, equitable access to affordable and sustainable housing, and responsibly managing FHFA’s infrastructure.

The plan differs greatly from the one issued in 2020 under then-FHFA Director Mark Calabria, which made ending the GSE conservatorship a top priority. That plan also left out expanding credit to underserved markets, and the only mention of serving low- and moderate-income borrowers was in the context of preserving the GSEs’ stability.

Under FHFA Acting Director Sandra Thompson, affordability, and expanding credit to those who are not well-served by the current mortgage market, is now a top strategic goal.

“Improving affordable housing opportunities and supply for homebuyers and renters – particularly the underserved – is an Agency priority,” the plan reads.

But the status of the agency’s efforts to accomplish that goal is less clear.

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One way the FHFA proposed is through the government-sponsored enterprises’ duty to serve plans, which set goals for lending liquidity and preservation for manufactured, rural, and affordable housing. But Fannie Mae and Freddie Mac have yet to announce new revised plans, since the FHFA rejected their proposed plans in December.

Another tool the FHFA says it will use to spur affordability is through its equitable housing finance plans. FHFA announced in September it would require Fannie Mae and Freddie Mac to submit plans by year-end — and implement them by the start of 2022. By April 2023, according to the announcement, the GSEs would be expected to report their progress on the 2022 plan.

But the equitable housing finance plans have also yet to materialize. A spokesperson for FHFA in January said the agency was reviewing the plans submitted by the GSEs, and would “finalize them/make them public as soon as possible.” Now, more than a month later, a spokesperson for FHFA could still not provide a timeframe for the plans.

Affordable housing advocates say the plan is reasonable. David Dworkin, CEO of the National Housing Conference, which represents a broad swath of mortgage industry and affordable housing stakeholders, hopes the FHFA will be less conservative in its interpretation of the GSEs’ charter. Dworkin said the GSEs must “not be in the risk avoidance business, but in the risk management business.”

“Not taking any risk has its own set of consequences, which we are seeing now,” Dworkin said.

To further the goal of affordability, the FHFA also said it would “explore modernizing the single-family appraisal process to foster efficiency in mortgage markets, and address barriers to equitable valuation.”

FHFA has already taken steps to make appraisals more efficient, although many in the appraisal industry take issue with cutting costs for appraisals. In March, Fannie Mae will start accepting desktop appraisals — appraisals without an on-site inspection requirement — for some loans.

A FHFA spokesperson said making the appraisal process more efficient, particularly through technology and data, will boost affordable and sustainable housing, especially in rural areas.

FHFA also plans to continue a multi-year process “on the validation and approval of third-party credit scores model(s) that can be used by the Enterprises.”

Affordable housing advocates, as well as firms that offer alternative credit score models, have long been hopeful that the enterprises will update the credit score models they use. The current models their underwriting relies on do not factor in crucial data points — such as rent and phone payments — that could help those with little credit history qualify for a mortgage.

The agency wants the public to weigh in during the next month, which some say is too little time.

“The strategic plan looks on a first-read like it addresses the most important things that they need to focus on,” said Jim Gray, a nonresident fellow at the Lincoln Institute. “But it would be better if there was a more fulsome opportunity for public comment than 30 days.”

While 30 days might seem like a quick turnaround to comment on a strategic plan for the top mortgage regulator, for the FHFA, it’s a relatively wide window. In 2020, Calabria gave the public less than two weeks.

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