June 02, 2010
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On June 1, the Federal Housing Finance Agency (FHFA) issued a press release announcing it had sent to the Federal Register a proposed rule implementing provisions of the Housing and Economic Recovery Act of 2008 (HERA) that establish a duty for Fannie Mae and Freddie Mac (the GSEs) to serve very low-, low- and moderate-income families in manufactured housing, affordable housing preservation, and rural markets.  The proposed rule requires the GSEs to increase liquidity and improve the distribution of investment capital for these purposes and in these areas. 

Comments are due 45 days from the date of publication in the Federal Register, which is likely to occur in the next few days.  To have your views included in NCSHA’s comments, please submit them to Garth Rieman by July 2.  When FHFA solicited comments last year to help it develop the proposed rule it announced June 1, NCSHA submitted comments urging FHFA to develop strong duty to serve obligations for the GSEs and to recognize GSE efforts to support HFA affordable housing efforts in underserved markets.

The proposed rule states that while the GSEs are in conservatorship they are expected to continue to fulfill their core statutory purposes, including affordable housing.  The rule also states that GSE efforts to meet its duty to serve underserved markets will be limited to existing core business activities and requires that they not engage in new lines of business.

The proposed rule states that FHFA will evaluate the GSE’s performance in each underserved market for 2010 and subsequent years by assessing:

  • The development of loan products, more flexible underwriting guidelines, and other innovative approaches to providing financing;
  • The extent of outreach to qualified loan sellers and other market participants;
  • The volume of loans purchased relative to the market opportunities available, subject to the statutory condition that FHFA not establish specific quantitative targets; and
  • The amount of investments and grants in projects that assist in meeting the needs of the underserved markets.


Under the proposed rule, each GSE would be required to provide an underserved markets plan against which it would be evaluated and rated “satisfactory” or “unsatisfactory” for assessment factors in each underserved market on an annual basis.  FHFA would then rate each GSE’s overall duty to serve performance for each underserved market as “in compliance” or “noncompliant.”  Enforcement provisions for the duty to serve requirement would be similar to the enforcement provisions applicable to the GSEs’ housing goals.

The rule states that GSE purchases of HFA-issued Housing Bonds will receive credit under the loan purchase factor to the extent the GSE has sufficient information to determine whether the underlying mortgages or mortgage-backed securities serve very low-, low- or moderate-income families in a particular underserved market.