FHFA Publishes Modified Fannie Mae Duty-to-Serve Plan
The Federal Housing Finance Agency (FHFA) earlier today published Fannie Mae’s modified Underserved Market Plan for 2018-2020. Fannie Mae pledges in the new plan to substantially increase its Housing Credit equity investments for properties located in rural areas over the three-year period.
The Underserved Markets Plan outlines how Fannie Mae intends to fulfill its obligations under the Federal Housing Finance Agency’s (FHFA) Enterprise Duty-to-Serve Rule. As NCSHA previously reported, the Duty-to-Serve Rule requires Fannie Mae and Freddie Mac (the GSEs) to support lending for housing for very low-, low-, and moderate-income families (those earning 100 percent of area median income or below) in three underserved segments of the housing finance market: manufactured housing, affordable housing preservation, and rural areas. For each underserved market segment, the rule outlines a number of activities the GSEs may support to fulfill their Duty-to-Serve obligations.
As part of FHFA’s implementation and oversight of the Duty-to-Serve Rule, each GSE is required to draft an Underserved Markets Plan every three years. The plans are subject to public comment and final review and approval from FHFA. Once the Underserved Markets Plans are in effect, Fannie Mae and Freddie Mac may modify their plans each year, subject to FHFA approval. Such modification requests may be subject to public comment at FHFA’s discretion.
In October, Fannie Mae proposed 22 modifications to its plan, of which FHFA sought public comment on four and deemed the others to be technical changes. Freddie Mac submitted one modification to its plan this year, which FHFA determined did not require public comment. After reviewing the comments, FHFA has approved all of Fannie Mae’s proposed changes.
Increased Housing Credit Investments
The Duty-to-Serve Rule allows Fannie Mae and Freddie Mac to receive Duty-to-Serve credit for Housing Credit equity investments in rural areas. In its initial plan, Fannie Mae committed to researching the Housing Credit market in 2018, including outreach to at least 10 HFAs with rural regions. It then intended to make at least five Housing Credit investments on projects in rural areas in 2019 and at least 10 such investments in 2020.
The modified plan substantially increases Fannie Mae’s Housing Credit equity investments to reflect what Fannie Mae characterizes as its enhanced market insight and the strong syndicator relationships it has developed since reentering the Housing Credit equity market this year. According to the modifications, Fannie Mae expects to make equity investments in 20 Housing Credit projects, through either proprietary or multi-investor syndicated funds, in rural areas by the end of 2018. Fannie Mae also proposes to increase its goals for Housing Credit investments for projects in rural areas to 30 for both 2019 and 2020.
NCSHA expressed support for the increased Housing Credit investment targets in our comments to FHFA on the modified plans and commended Fannie Mae for so quickly reentering the Housing Credit investment market.
In addition, Fannie Mae is increasing its loan purchase targets for single-family loans in rural areas that are originated by small financial institutions. Overall, Fannie Mae will increase its purchase of such loans by 6,869 to 8,569 from 2018-2020, up from an increase of 4,873 to 6,623 called for in its initial plan. Fannie Mae says that, when putting together its initial plan, it underestimated its historical level of support for such loans. NCSHA expressed support for this proposed change in its comments. Fannie Mae is also reducing its targets for loan purchases financing the purchase or rehabilitation of certain distressed properties, arguing that updated industry reports show there is currently a lower inventory of distressed properties than when the initial plan was developed.
Finally, Fannie Mae is modifying its pilot program supporting manufactured housing loans titled as personal property, known as chattel loans. The Duty-to-Serve Rule allows the GSEs to receive credit for setting up such pilots. Specifically, Fannie Mae will now receive credit for purchasing or guaranteeing securities backed by chattel loans and not just for purchasing chattel loans wholesale. Fannie Mae says that, through its research and industry outreach, it has learned there is very little lender interest in selling chattel loans wholesale.