The Federal Housing Finance Agency (FHFA) has sent to the Federal Register a proposed rule implementing provisions of the Housing and Economic Recovery Act of 2008 (HERA) that establish a duty for Fannie Mae and Freddie Mac to serve very low-, low- and moderate-income families in three specified underserved markets - manufactured housing, affordable housing preservation and rural markets.
The proposed rule, implementing HERA's pre-conservatorship provisions, would require the government-sponsored enterprises (GSEs) to take actions to increase the liquidity of mortgage investments and improve the distribution of investment capital available for mortgage financing for underserved markets while adhering to the requirements of conservatorship.
As described in the proposed rule, while the GSEs remain in conservatorship, they are expected to continue to fulfill their core statutory purposes, which include their support for affordable housing. The FHFA says its approach to implementing the "duty to serve" provisions of HERA is to limit the proposed rule to existing core business activities at Fannie and Freddie and to require that they not engage in new lines of business as a result of the "duty to serve" proposed rule.
The proposed rule would also establish a method for evaluating and rating GSE performance in each underserved market this year and in subsequent years, and it describes the transactions and activities that would be considered for compliance.
The enterprises would be evaluated on the following four statutory assessment factors:
the development of loan products, more flexible underwriting guidelines, and other innovative approaches to providing financing; the extent of outreach to qualified loan sellers and other market participants; the volume of loans purchased relative to the market opportunities available, subject to the statutory condition that the FHFA not establish specific quantitative targets; and the amount of investments and grants in projects that assist in meeting the needs of the underserved markets.
Under the proposed rule, Fannie and Freddie would each be required to provide a plan for underserved markets against which the GSE would be evaluated and rated “satisfactory” or “unsatisfactory” for assessment factors in each underserved market on an annual basis.
Comments on the proposed rule are due 45 days from the date of publication in the Federal Register.
SOURCE: Federal Housing Finance Agency
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