GSE Equitable Housing financing plans: stakeholders respond to FHFA RFI – Finance and Banking

GSE Equitable Housing financing plans: stakeholders respond to FHFA RFI - Finance and Banking

Mayer Brown

07 January 2022

Highlights


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Background on FHFA RFI

Community groups, think tanks and the residential mortgage
lending industry took advantage of the Request for Input
(“RFI”) issued by the Federal Housing Finance Agency
(“FHFA”) on September 7, 2021, seeking public input and
information to assist Fannie Mae and Freddie Mac (the
“GSEs” or “Enterprises”) in their respective
preparation of the first of their three-year Equitable Housing
Finance Plans (the “Plans”). The Plans must identify and
address barriers to sustainable housing opportunities, including
the Enterprises’ goals and action plans to advance equity in
housing finance. The Enterprises were scheduled to submit these
Plans to FHFA by December 31, 2021.

The RFI notes that “.a number of statutory and regulatory
authorities that apply to FHFA and the Enterprises speak to the
need to advance equity for homebuyers, homeowners, and tenants in
the housing market” as part of the public purposes of the
Enterprises. It itemizes many of these authorities. One statutory
mandate is to provide ongoing assistance to the secondary market
for residential mortgages, including mortgages for low- and
moderate-income (“LMI”) families involving a reasonable
economic return that may be less than the return earned on other
activities, and to promote access to mortgage credit in central
cities, rural areas and underserved areas.1 Other
authorities pertain to implementing Enterprise affordable housing
goals2 and satisfying the Enterprises’ statutory
“Duty to Serve” affordable housing needs of certain
underserved markets consisting of manufactured housing, affordable
housing preservation and rural housing.3

Similarly, the RFI references Executive Order 13985, which
President Biden issued on January 20, 2021. Titled “Advancing
Racial Equity and Support for Underserved Communities Through the
Federal Government,” the executive order provides that
“the Federal Government should pursue a comprehensive approach
to advancing equity for all, including people of color and others
who have been historically underserved, marginalized, and adversely
affected by persistent poverty and inequality.” 4
The Plans, according to the RFI, serve to supplement existing FHFA
and Enterprise requirements, programs and plans “and are
designed to ensure a continued focus on housing equity that is
aligned with other critical objectives including safety and
soundness and other mission activities.”

Content of the Plans The Plans, which are to become effective in February 2022 and
updated annually, must include objectives, measurable goals and
planned meaningful actions related to reducing:

The racial or ethnic homeownership gap

Underinvestment or undervaluation in formerly redlined areas
that remain racially or ethnically concentrated areas of poverty or
otherwise underserved or undervalued
Additionally, FHFA provided the Enterprises with a non-exclusive
list of objectives and goals that could be undertaken in the Plans,
including reducing:

Racial or ethnic disparities in acceptance rates for the
Enterprises’ respective automated underwriting systems
(“AUS”)

Racial or ethnic disparities in the share of loans acquired by
the Enterprises compared to the overall mortgage market
Responses to the RFI also are expected to assist the Enterprises
in their preparation and FHFA in its oversight of the Plans. The
RFI posed the following questions:

Footnotes 1. 12 U.S.C. 1716(3) and (4) (Fannie Mae charter
purposes); 12 U.S.C. 1451 note (b)(3) and (4) (Freddie Mac charter
purposes).

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How should measurable goals be selected and set by the
Enterprises? For example, is pursuing a small set of focused goals
or a wide portfolio of goals better?

What data, information or analyses would be helpful for the
Enterprises to consider or use to support their plans?

How should the Enterprises undertake setting objectives,
measurable goals and meaningful actions to sustainably address the
racial and ethnic homeownership gap?

How should the Enterprises undertake setting objectives,
measurable goals and meaningful actions for formerly redlined
areas? How should such areas be defined?

What other objectives and measurable goals should the
Enterprises pursue in their plans?

What constitutes a “meaningful” action, and what
kinds of meaningful actions should be taken by the Enterprises
under their plans?

How can the Enterprises and FHFA ensure that actions taken
under the plans provide sustainable housing opportunities and are
consistent with safety and soundness?

What should FHFA consider in overseeing the Enterprises’
plans? Should FHFA provide a rating or some other public
assessment? If so, how should the plans be assessed?

How should the plans interact with Duty to Serve, Housing Goals
or other requirements?

Could special purpose credit programs (as defined in 12 CFR
1002.8) be included in the Enterprises’ plans? How should such
programs be structured?

Are there additional or different required objectives and goals
that FHFA should consider for future Enterprise plans?

What communities and stakeholders should the Enterprises
consult with in developing their plans?