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The Federal Housing Finance Agency (FHFA) recently released a Request for Input to the public regarding proposed modifications to the Enterprises’, Freddie Mac and Fannie Mae, Duty to Serve (DTS) program. These proposed modifications will the purchase or rehabilitation of distressed properties activity, chattell loan pilot, investment in LIHTC properties and financing by small financial institutions, as included in the 2018-2020 Underserved Markets Plans.
These modifications follow a final rule in December 2016 by the FHFA, which implemented the DTS provisions mandated by the Housing and Economic Recovery Act of 2008. According to the FHFA’s official document, “The statue requires the Enterprises to serve three specified underserved markets—manufactured housing, affordable housing preservation, and rural housing—in a safe and sound manner by increasing liquidity for mortgage investments and improving the distribution of investment capital available for residential financing for very low-, low-, and moderate-income families in those markets.”
To meet this goal, the Enterprises are required to have Underserved Markets Plans detailing their objectives and activity, which went into effect in the beginning of this year. Fannie Mae has recently submitted a request to modify its plan, so the FHFA is requesting public input to review the potential efficacy of these changes and to achieve transparency with the nation’s citizens.
The modifications requested by Fannie Mae include
- Modifying the baseline and target for the purchase or rehabilitation of certain distressed properties activity to reflect market condition changes from actual inventory;
- Modifying the chattel loan pilot to include options, such as participating in a debt structure or guaranteeing a security containing these loans;
- Modifying actions for investment in LIHTC properties reflect revised rural investment targets based on enhanced market insight and experience re-entering the equity market; and
- Including a new objective to understand more about small financial institutions in rural areas.
The deadline for submitting public input to the FHFA is November 2, 2018. Learn more about the modifications and process for submitting input here.