Fannie Mae and Freddie Mac have announced sweeping reform plans aimed at providing equitable access to sustainable and affordable housing, which includes helping members of underserved communities become homeowners and ensuring that minority and underprivileged buyers are able to sustain homeownership.
The three-year plans were jointly announced by the two government-sponsored enterprises (GSEs) along with the Federal Housing Finance Agency (FHFA), which supervises the agencies. The plans, developed by Fannie and Freddie after they were mandated by the FHFA late last year, are designed to supplement initiatives within the FHFA’s previously announced strategic plan for fiscal years 2022 to 2026.
“The Equitable Housing Finance Plans represent a commitment to sustainable approaches that will meaningfully address the racial and ethnic disparities in homeownership and wealth that have persisted for generations,” said FHFA director Sandra L. Thompson. “We look forward to working with the enterprises, lenders and other housing-industry participants to further develop the ideas described in these plans.”
Freddie Mac’s Equitable Housing Plan includes several initiatives, including a “commitment to fully explore the use” of the Special Purpose Credit Program (SPCP) framework, which is designed to expand mortgage funding access for underserved minority communities. SPCPs are credit-assistance programs established through the Equal Credit Opportunity Act under which lenders can offer special pricing or underwriting to cater to traditionally disadvantaged groups.
Other efforts highlighted in Freddie’s plan include leveraging public and private investments to create and preserve more affordable single-family and multifamily housing; expanding the use of its renovation products to extend the life spans of aging affordable-housing stock; expanding its multifamily tenant credit-building initiative; and improving access to capital for emerging multifamily developers that have a focus on diversity.
“Freddie Mac’s Equitable Housing Finance Plan lays out meaningful actions designed to help make home possible and sustainable for more renters, buyers and homeowners, particularly in traditionally underserved communities,” said Freddie Mac CEO Michael DeVito. “Our multipronged approach reinforces Freddie Mac’s commitment to working across the housing industry to support opportunities for more Black and Latino families to access the American dream. We are pleased to report that this work is already underway.”
Fannie’s plan, meanwhile, focuses on three key areas. The first is housing preparation, targeted at empowering minority borrowers through “a robust program” of financial and housing education, including Fannie’s new free Homeview resource that debuted in January. Second, Fannie seeks to remove the obstacles minorities face through the homebuying, mortgage and rental processes. The GSE seeks to do this through 10 specific actions, including the piloting of new SPCPs; expanding the appraiser diversity initiative; expanding access to credit for “credit-invisible” borrowers; and expanding the adoption and usage of rental reporting.
The third area, which Fannie dubbed “move in and maintain,” is aimed at buttressing services for underserved homeowners and renters so they can withstand hardships and remain housed. This includes further SPCP pilots, as well as expansion of hardship counseling services to borrowers and renters along with added oversight of forbearance and home-retention efforts.
“Our Equitable Housing Finance Plan lays the groundwork to meaningfully address housing barriers faced by Black renters and homeowners,” said David C. Benson, Fannie Mae’s president and interim CEO. “We want to knock down these barriers, one by one, doing our part to undo the legacy of discriminatory practices that perpetuate racial housing gaps in America. The plan is a solid step toward this goal and a milestone in our work to make housing stronger, fairer and more sustainable for the people and communities we serve.”
The activities outlined in the two plans are set to be evaluated and updated annually. The FHFA also has created a pilot transparency framework for the plans, requiring the GSEs to publish a list of pilot programs on their respective public websites.
The plans swiftly earned praise from industry groups, including the Mortgage Bankers Association.
“The GSEs’ plans – focused on a typical consumer’s housing lifecycle – should allow for increased opportunities for minority households to secure affordable rental housing, prepare for homeownership, and obtain access to safe and affordable mortgage credit,” said Bob Broeksmit, MBA president and CEO. “While the plans are targeted to Black and Hispanic borrowers, all low- and moderate-income borrowers and communities should benefit.”