January 25, 2017
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The Federal Housing Finance Agency (FHFA) last week published a request for public input on possible Fannie Mae and Freddie Mac pilot programs that support financing for manufactured housing loans titled as real property, known as chattel loans. This request is being issued as part of FHFA’s implementation of its Enterprise Duty to Serve Rule.

As NCSHA previously reported, the Duty to Serve rule requires Fannie Mae and Freddie Mac to support lending for housing for low-income families in three underserved segments of the housing finance market: manufactured housing, affordable housing preservation, and rural areas. Regarding manufactured housing, both firms will be expected to adopt policies that help borrowers earning 100 percent of area median income or below purchase manufactured housing loans. As part of these efforts, Fannie Mae and Freddie Mac will be eligible to receive Duty-to-Serve credit for purchasing chattel loans, a market segment neither firm is currently involved with.

In order to receive credit for purchasing chattel loans, the GSEs will have to initially outline pilot programs that include consumer protections. FHFA will then review each program and, if it determines a program is structures to support chattel lending in a safe our sound manner, Fannie Mae or Freddie Mac will be eligible to receive for purchasing chattel loans. Neither firm will be able to being purchasing chattel loans, however, until their chattel loan products have also gone through a separate new product by FHFA.  In its comments on the proposed version of the Duty to Serve rule, NCSHA recommended that FHFA allow Fannie Mae and Freddie Mac to receive credit for supporting responsibly underwritten chattel loans, which, in certain circumstances, represent the only homeownership opportunity available to consumers.

In its request, FHFA notes that the chattel loan market poses unique challenges given the relatively weak performance of chattel loans compared to real property loans and the tendency of chattel loans’ collateral to depreciate quickly. Consequently, FHFA is seeking public input on how Fannie Mae and Freddie Mac can responsibly support chattel financing and what factors FHFA should consider when reviewing possible pilot programs. As part of the request, FHA list 22 specific questions that cover a variety of topics related to chattel loans, including financing sources, consumer protections standards, and underwriting standards.

FHFA will be seeking public input until February 17. NCSHA is reviewing the request to determine whether to submit comments on behalf of all FAs. If you have any input on this issue you would like NCSHA to consider, please email Greg Zagorski by Friday, February 10.