Duty to Serve – Fannie Mae’s Neighborhood Stabilization Efforts Need Your Input!

(Jan. 2018) On December 18, 2017, the Federal Housing Finance Agency (FHFA) published the final versions of Fannie Mae’s and Freddie Mac’s Underserved Markets Plans, which lay out the companies’ efforts to meet their obligations under the Duty to Serve Rule. These Plans went into effect on January 1, 2018, and cover the period from 2018-2020.

Although both Enterprises had the option of incorporating neighborhood stabilization efforts into their plans, only Fannie Mae included this important issue. What’s more, Fannie Mae listened to thoughtful feedback provided during the public comment period by NCST and other stakeholders who know this work and significantly improved its plan of action from the original draft of its plan. We are disappointed that Freddie Mac declined to include neighborhood stabilization as one of its Duty to Serve activities, but we hope future plans will include it.

The neighborhood stabilization section of Fannie Mae’s final plan includes two objectives:

  1. Increase affordable capital through industry outreach and developing loan financing solutions.
  2. Increase the purchase of mortgage loans that finance the purchase or rehabilitation of certain
    distressed properties.

Integral to achieving the first objective is building strategic partnerships with key industry stakeholders, including non-profit housing developers, CDFIs, and community groups. Fannie Mae is looking to target its engagement in 2018 with ten organizations “that represent a cross-section of size, geography, and type of assistance.” More organizations will come on board in 2019 and 2020.

This is where NCST’s community buyers come in. Fannie Mae will depend heavily on these partnerships to discuss, analyze and solve for the challenges in accessing affordable capital to acquire and rehab distressed properties, to improve its own rehab-related products, and to increase its rehab loan purchases. NCST buyers who are interested in these efforts can try to become a part of this process to provide Fannie Mae with the insight it needs to better serve this important underserved market.

Another critical component of Fannie Mae’s plan is to evaluate opportunities to “make investments in institutions that support the financing of the purchase or rehabilitation of distressed properties,” subject to FHFA approval. Fannie Mae has not made direct investments in CDFIs since it entered conservatorship in 2008, and NCST is encouraged that Fannie Mae appears to have taken seriously the numerous public comments in support of a return to direct investment as a way to increase the availability of affordable capital from lending institutions that are already committed to community development.

By the end of September 2018, Fannie Mae plans to target engagement with five non-profit, tribal, and/or government-related organizations and three CDFIs representing different sizes and diverse geographies to provide important input on investment and bulk loan purchases. Those of us here at NCST know that many of our buyers could provide Fannie Mae’s team with precisely the input they are looking for, and we hope to facilitate this engagement for those of you willing to participate.

If you have comments or questions, please email those to Julia Gordon.

This column was originally published in January 2018.