FHFA Unveils Duty-to-Serve Requirements for Fannie, Freddie

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WASHINGTON — The Federal Housing Finance Agency unveiled a new proposal Tuesday that would detail how Fannie Mae and Freddie Mac should serve three underserved markets: manufactured housing, affordable housing preservation and rural markets.

The plan comes five years after the agency's last attempt at the so-called "duty-to-serve" proposal, which was scrapped after the industry objected.

The new proposal would give the government-sponsored enterprises credit for certain activities that facilitate a secondary market for those three areas and would establish a way that both Fannie and Freddie would be graded on their efforts.

Under the plan, the GSEs would get credit for certain activities related to manufactured homes financed as real property and blanket loans for specific categories of manufactured housing communities.

Importantly, the agency would not give credit for so-called chattel loans to buyers of manufactured housing units that are not secured by land. FHFA officials said such loans are too risky to the GSEs.

"Safety and soundness concerns played a significant role in our decisions for excluding chattel loans from receiving duty to serve credit," an FHFA official told reporters during a conference call on Tuesday.

Such chattel loans have "historically performed badly," the official said.

Instead, the FHFA is simply seeking comment on whether a final rule should authorize the purchase of chattel loans.

The Housing and Economic Recovery Act of 2008 first required the FHFA to issue a duty-to-serve proposal, including specifying that it help facilitate a secondary market for manufactured housing chattel loans. But the FHFA says it has authority under the Safety and Soundness Act to void that mandate.

The FHFA would give credit to manufactured housing loans that are placed on land the borrower owns. Such loans "perform better and have lower default rates than chattel loans," the FHFA official said.

Overall, the plan would also give the GSEs credit for activities related to preserving the affordability of housing for renters and homebuyers as well as activities to help existing small multifamily rental properties, energy efficiency improvements on rental properties, and shared equity homeownership programs.

For the rural market, the agency proposed giving credit for serving the following rural regions: Middle Appalachia, the Lower Mississippi Delta, members of Native American tribes in a Native American area and migrant and seasonal agricultural workers.

The proposal is open for comment for 90 days once it is published in the Federal Register.

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Secondary market GSEs Housing