FHFA Issues Final Duty to Serve Rule
On December 13, 2016, the Federal Housing Finance Agency (“FHFA”) issued a final rule (“the Rule”) implementing the “Duty to Serve” provisions mandated by the Federal Housing Enterprises Financial Safety and Soundness Act of 1992, as amended by the Housing and Economic Recovery Act of 2008 (“HERA”). The Rule requires Fannie Mae and Freddie Mac (“the Enterprises”) to submit plans for improving the distribution and availability of safe and sound residential mortgage financing in underserved markets, establishes a method for annual evaluation of the Enterprises, and awards Duty to Serve credit based on activities detailed in the reports. The Enterprises must submit their proposed plans within 90 days after FHFA posts its proposed Evaluation Guidance on its website, which is expected to occur in January 2017. The plans will become effective in January 2018.
The Rule requires the Enterprises to submit three-year draft plans, subject to public comment, detailing their planned activities and objectives for serving three underserved markets: manufactured housing, affordable housing preservation and rural housing (“the Duty to Serve categories”). The Rule specifies the scope of Enterprise activities that are eligible to receive Duty to Serve credit. These activities generally include those that facilitate a secondary market for mortgages related to: manufactured homes titled as real property or personal property; blanket loans for certain categories of manufactured housing communities; preserving the affordability of housing for renters and homebuyers; and housing in rural markets. The Rule provides a framework for FHFA’s method for evaluating and assessing the Enterprises’ compliance with the Duty to Serve each underserved market.
The Rule identifies three areas in which the Enterprises can receive manufactured housing Duty to Serve credit: 1) chattel manufactured home loans titled as personal property; 2) real property manufactured homes titled as real estate; and 3) loans to manufactured housing communities – either owned by government entities or non-profits – or to manufactured home communities with tenant lease protections. Note that the Rule explicitly gives the Enterprises credit for chattel loan purchases in complying with the Duty to Serve requirements for manufactured housing and encourages Fannie Mae and Freddie Mac to carry out a pilot program to start purchasing chattel loans for the first time in almost a decade. The Rule does not make the purchase of chattel loans mandatory, nor does it mandate any specific activity in any of the Duty to Serve categories.
In addition to the release of the Rule, FHFA has created a new informational webpage on the implementation of the Duty to Serve program, and will release further items related to the Rule for public comment in 2017. FHFA also plans to host a series of hearings to gather feedback on the Enterprises’ underserved market plans. The Rule is effective 30 days after the date of publication in the Federal Register.
