FHFA Issues Final Rule on GSE Duty to Serve Underserved Markets
The Federal Housing Finance Agency yesterday issued a final rule to implement Duty to Serve provisions mandated by the Federal Housing Enterprises Financial Safety and Soundness Act and the SAFE Act.
The statute requires Fannie Mae and Freddie Mac to serve three specified underserved markets–manufactured housing, affordable housing preservation and rural housing–by improving distribution and availability of mortgage financing in a safe and sound manner for residential properties that serve very low-, low- and moderate-income families in these markets.
“With this final rule, which reflects extensive input from a wide variety of stakeholders, FHFA is fulfilling its statutory requirement to implement the Duty to Serve provisions in the Housing and Economic Recovery Act,” said FHFA Director Melvin Watt.
The final rule creates complementary processes for the Enterprises to establish plans for their Duty to Serve activities to submit to FHFA, and for FHFA to annually evaluate, rate, and report to Congress each GSE’s compliance with its Duty to Serve obligations as required by the statute.
The final rule (https://www.fhfa.gov/SupervisionRegulation/Rules/Pages/Enterprise-Duty-to-Serve-Underserved-Markets-Final-Rule.aspx) sets forth specific activities that the GSEs can consider undertaking, at their discretion, to receive Duty to Serve credit, and provides that they can propose additional activities. The final rule does not mandate any particular activities, but requires the GSEs to consider ways to better serve families in the three underserved markets.
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 Plans will become effective January 2018.
For the manufactured housing market, the final rule provides eligibility for Duty to Serve credit for GSE activity supporting manufactured homes titled as real property, manufactured homes titled as personal property (also known as chattel) and blanket loans for certain categories of manufactured housing communities.
For the affordable housing preservation market, the final rule provides eligibility for Duty to Serve credit for Enterprise activity supporting the preservation of affordable rental housing and affordable homeownership opportunities. These categories include Enterprise activities under the programs specified in the Safety and Soundness Act, as well as activities supporting small multifamily rental properties, energy efficiency improvements on multifamily rental and single-family first-lien properties, shared equity homeownership programs, purchase or rehabilitation of certain distressed properties, and activities under HUD’s Choice Neighborhoods Initiative and Rental Assistance Demonstration program.
For the rural housing market, the final rule provides eligibility for Duty to Serve credit for Enterprise activity 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.
FHFA will evaluate the Enterprises’ compliance with their Underserved Markets Plans by taking into consideration the following factors for each underserved market: development of loan products, use of more flexible underwriting guidelines and other innovative approaches, the extent of the Enterprises’ outreach to qualified loan sellers and other market participants, the volume of loans purchased by the Enterprise relative to available market opportunities and the amount of investments in eligible projects.
A Fact Sheet on the Duty to Serve program can be accessed at https://www.fhfa.gov/Media/PublicAffairs/PublicAffairsDocuments/DTS-Fact-Sheet-12132016.pdf.
