GSEs Release ‘Duty To Serve’ Plans For Public Comment


Government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac have released their Duty to Serve (DTS) Underserved Markets Plans to the Federal Housing Finance Agency (FHFA) for public comment.

Each plan aims to address the needs of America’s three most underserved markets: manufactured housing, affordable housing preservation and rural housing.

The Housing and Economic Recovery Act (HERA) of 2008 assigns both Fannie Mae and Freddie Mac with a “Duty to Serve” each of these markets by increasing the liquidity of mortgage investments and improving the distribution of mortgage investment capital for families of modest means.

At the end of 2016, the FHFA adopted implementing regulations, or goals, requiring the GSEs to submit three-year plans for each DTS market.

The GSEs, in turn, can earn points for achieving the goals within their three-year plans, which are to commence on Jan. 1, 2018.

However, each GSE is being left to its own creativity in determining how to improve these markets. That’s why the GSEs and the FHFA are asking for public input on the draft plans that have been developed thus far.

With regard to the manufactured housing market, the GSEs can get DTS credits for work accomplished in four regulatory areas, including the following: 1) manufactured homes titled as real property; 2) manufactured homes titled as personal property (chattel); 3) manufactured housing communities owned by government instrumentalities, nonprofits or their residents; and 4) manufactured housing communities with specified minimum tenant pad lease protections.

With regard to affordable housing preservation, there are nine statutory activities available for DTS credit, including activities related to what is known as the following: 1) the Section 8 rental assistance program; 2) the Section 236 rental and cooperative housing program; 3) the Section 221(d)(4) moderate-income and displaced families program; 4) the Section 202 housing for the elderly program; 5) the Section 811 housing for persons with disabilities program; 6) the McKinney-Vento permanent supportive housing projects (homeless assistance); 7) the U.S. Department of Agriculture’s Section 515 rural rentals program; 8) debt financing of low-income housing tax credits; and 9) comparable state and local programs.

The FHFA has also identified seven regulatory activities available for DTS credit in affordable housing preservation related to the following: 1) financing of small multifamily rental properties; 2) financing of multifamily energy-efficiency improvements; 3) financing of single-family energy-efficiency improvements; 4) affordable housing preservation (shared equity) financing; 5) the Department of Housing and Urban Development’s (HUD) Choice Neighborhoods Initiative; 6) HUD’s Rental Assistance Demonstration program; and 7) financing of the purchase or rehabilitation of distressed properties.

For the Rural Housing Market, the FHFA has identified four regulatory activities for which DTS credit is available, including the following: 1) housing in high-needs rural regions (Middle Appalachia, the Lower Mississippi Delta, colonias and rural persistent poverty counties); 2) housing for high-needs rural populations (Native Americans in Indian areas and agricultural workers); 3) financing of rural housing by small financial institutions; and 4) small multifamily rental properties.

“Fannie Mae welcomes the opportunity to create housing opportunities that are affordable, and we are prepared to bring all our experience, knowledge and capabilities to bear in fulfilling our Duty to Serve,” says Jeffery Hayward, executive vice president and head of multifamily for Fannie Mae, in a release. “We recognize that there are no easy solutions to the tough and often long-standing challenges that characterize underserved markets. It will take research, education and innovative partnerships to make housing more affordable in all markets. We are excited that the Duty to Serve rule aligns with our mission to increase access to mortgage credit and housing options for all Americans as we find new ways and new partners to support underserved markets that need help.”

“Duty to Serve presents a welcome opportunity to lead the mortgage industry and help more American families with their housing needs,” says Danny Gardner, vice president of affordable lending and access to credit for Freddie Mac. “Our plan includes increased loan purchases in these underserved markets, new offerings, market research, increased home buyer education, community engagement and local outreach. We intend to work with our customers and the many dedicated organizations that are deeply knowledgeable about these markets at the local, regional and national levels.”

“We are deeply committed to improving access to quality affordable housing. Public comments – combined with our extensive research and data collection strategies – will help shape our future activities,” adds David D. Leopold, vice president of multifamily affordable housing products for Freddie Mac. “We believe that, over time, we can address the needs of these communities in sustainable ways that will benefit our country for generations to come.”

“I strongly encourage stakeholders to submit feedback on Fannie Mae and Freddie Mac’s proposed Duty to Serve Underserved Markets Plans,” says Melvin L. Watt, director of the FHFA.  “[The] FHFA will evaluate stakeholder input as part of our review process to ensure that the plans help the enterprises meet their statutory obligations in a safe-and-sound manner.”

In many respects, the DTS plans bring the GSEs back to their core mission of serving underserved markets.

To access the plans, as well as to comment, click here.

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