Community groups, think tanks and the residential mortgage lending industry took advantage of the Request for Input ("RFI") issued by the Federal Housing Finance Agency ("FHFA") on September 7, 2021, seeking public input and information to assist Fannie Mae and Freddie Mac (the "GSEs" or "Enterprises") in their respective preparation of the first of their three-year Equitable Housing Finance Plans (the "Plans"). The Plans must identify and address barriers to sustainable housing opportunities, including the Enterprises' goals and action plans to advance equity in housing finance. The Enterprises were scheduled to submit these Plans to FHFA by December 31, 2021.

Background on FHFA RFI

The RFI notes that ".a number of statutory and regulatory authorities that apply to FHFA and the Enterprises speak to the need to advance equity for homebuyers, homeowners, and tenants in the housing market" as part of the public purposes of the Enterprises. It itemizes many of these authorities. One statutory mandate is to provide ongoing assistance to the secondary market for residential mortgages, including mortgages for low- and moderate-income ("LMI") families involving a reasonable economic return that may be less than the return earned on other activities, and to promote access to mortgage credit in central cities, rural areas and underserved areas.1 Other authorities pertain to implementing Enterprise affordable housing goals2 and satisfying the Enterprises' statutory "Duty to Serve" affordable housing needs of certain underserved markets consisting of manufactured housing, affordable housing preservation and rural housing.3

Similarly, the RFI references Executive Order 13985, which President Biden issued on January 20, 2021. Titled "Advancing Racial Equity and Support for Underserved Communities Through the Federal Government," the executive order provides that "the Federal Government should pursue a comprehensive approach to advancing equity for all, including people of color and others who have been historically underserved, marginalized, and adversely affected by persistent poverty and inequality." 4 The Plans, according to the RFI, serve to supplement existing FHFA and Enterprise requirements, programs and plans "and are designed to ensure a continued focus on housing equity that is aligned with other critical objectives including safety and soundness and other mission activities."

Content of the Plans

The Plans, which are to become effective in February 2022 and updated annually, must include objectives, measurable goals and planned meaningful actions related to reducing:

  • The racial or ethnic homeownership gap
  • Underinvestment or undervaluation in formerly redlined areas that remain racially or ethnically concentrated areas of poverty or otherwise underserved or undervalued

Additionally, FHFA provided the Enterprises with a non-exclusive list of objectives and goals that could be undertaken in the Plans, including reducing:

  • Racial or ethnic disparities in acceptance rates for the Enterprises' respective automated underwriting systems ("AUS")
  • Racial or ethnic disparities in the share of loans acquired by the Enterprises compared to the overall mortgage market

Responses to the RFI also are expected to assist the Enterprises in their preparation and FHFA in its oversight of the Plans. The RFI posed the following questions:

  1. How should measurable goals be selected and set by the Enterprises? For example, is pursuing a small set of focused goals or a wide portfolio of goals better?
  2. What data, information or analyses would be helpful for the Enterprises to consider or use to support their plans?
  3. How should the Enterprises undertake setting objectives, measurable goals and meaningful actions to sustainably address the racial and ethnic homeownership gap?
  4. How should the Enterprises undertake setting objectives, measurable goals and meaningful actions for formerly redlined areas? How should such areas be defined?
  5. What other objectives and measurable goals should the Enterprises pursue in their plans?
  6. What constitutes a "meaningful" action, and what kinds of meaningful actions should be taken by the Enterprises under their plans?
  7. How can the Enterprises and FHFA ensure that actions taken under the plans provide sustainable housing opportunities and are consistent with safety and soundness?
  8. What should FHFA consider in overseeing the Enterprises' plans? Should FHFA provide a rating or some other public assessment? If so, how should the plans be assessed?
  9. How should the plans interact with Duty to Serve, Housing Goals or other requirements?
  10. Could special purpose credit programs (as defined in 12 CFR 1002.8) be included in the Enterprises' plans? How should such programs be structured?
  11. Are there additional or different required objectives and goals that FHFA should consider for future Enterprise plans?
  12. What communities and stakeholders should the Enterprises consult with in developing their plans?

To view the full article click here

Footnotes

1. 12 U.S.C. 1716(3) and (4) (Fannie Mae charter purposes); 12 U.S.C. 1451 note (b)(3) and (4) (Freddie Mac charter purposes).

2. See 12 U.S.C. 4561(a), 4562, and 4563; 12 CFR part 1282, subpart B.

3. See 12 U.S.C. 4565; 12 CFR part 1282, subpart C.

4. 86 Fed. Reg. 7009 (Jan. 25, 2001).

Visit us at mayerbrown.com

Mayer Brown is a global legal services provider comprising legal practices that are separate entities (the "Mayer Brown Practices"). The Mayer Brown Practices are: Mayer Brown LLP and Mayer Brown Europe - Brussels LLP, both limited liability partnerships established in Illinois USA; Mayer Brown International LLP, a limited liability partnership incorporated in England and Wales (authorized and regulated by the Solicitors Regulation Authority and registered in England and Wales number OC 303359); Mayer Brown, a SELAS established in France; Mayer Brown JSM, a Hong Kong partnership and its associated entities in Asia; and Tauil & Chequer Advogados, a Brazilian law partnership with which Mayer Brown is associated. "Mayer Brown" and the Mayer Brown logo are the trademarks of the Mayer Brown Practices in their respective jurisdictions.

© Copyright 2020. The Mayer Brown Practices. All rights reserved.

This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.