Tasked with ensuring Fannie Mae and Freddie Mac meet a requirement to serve underserved markets, the Federal Housing Finance Agency (FHFA) proposed a rule that will allow the GSEs to earn Duty to Serve credit activities related to several Department of Housing and Urban Development housing programs. A public comment period on the proposed rule is open for 90 days.

Fannie Mae and Freddie Mac receive credit for activities that facilitate a secondary market for mortgages related to affordable housing preservation, rural housing and manufactured housing. For affordable housing preservation, FHFA seeks to provide Duty to Serve credit for Statutory Activities that Fannie Mae and Freddie Mac undertake related to preservation of affordable housing funded under the following programs:

  • U.S. Department of Housing & Urban Development (HUD) Section 8 Rental Assistance Program;
  • HUD Section 236 Interest Rate Subsidy Program;
  • HUD Section 221(d)(4) FHA Insurance Program;
  • HUD Section 202 Housing Program for Elderly Households;
  • HUD Section 811 Housing Program for Disabled Households;
  • McKinney-Vento Homeless Assistance Programs;
  • USDA Section 515 Rural Housing Programs;
  • Federal Low-Income Housing Tax Credits; and
  • Other comparable state and local affordable housing programs

Duty to Serve credit would also be provided for:

  • Regulatory Activities that Fannie Mae and Freddie Mac undertake related to purchasing loan pools from small banks and community-based lenders on small multifamily rental properties of 5 to 50 units;
  • Activities related to public housing properties that use HUD’s Rental Assistance Demonstration Program;
  • Activities related to properties in designated areas under HUD’s Choice Neighborhoods Initiatives Program;
  • purchasing energy efficiency retrofit loans on multifamily rental properties;
  • and purchasing energy retrofit loans on single-family properties with Fannie Mae or Freddie Mac first mortgage liens.

 

Under the proposed rule, the Enterprises would each be required to submit to FHFA a draft Underserved Markets Plan covering a three-year period, and the public would be invited to provide input on the draft Plans.

FHFA would annually evaluate and rate Fannie Mae and Freddie Mac’s performance under their Underserved Markets Plans by allocating points for each Activity performed and translating the composite scores to overall ratings for each of the three underserved markets.  FHFA would report those results to Congress on an annual basis.

The rule proposed on December 15, 2015 builds on a rule proposed in 2010 to establish a system for evaluating and rating the performance of Fannie Mae and Freddie Mac in serving the underserved markets.