How can GSEs succeed in helping underserved markets?

by Francis Monfort04 Aug 2017
With the forthcoming implementation of Fannie Mae and Freddie Mac’s “Duty to Serve Underserved Markets Plans,” a panel of housing finance leaders shared their views on how the government-sponsored enterprises (GSEs) can achieve their missions.

The plans are part of a Federal Housing Finance Agency rule that addresses mortgage access issues among low- and moderate-income families in the underserved manufactured-housing, affordable-housing-preservation, and rural-housing markets.

To maximize the impacts of their plans, housing-finance leaders said during a July 19 panel discussion at the Urban Institute that Fannie and Freddie should:
  • expand involvement in manufactured housing
  • incorporate federal programs to support rural housing
  • invest in community development financial institutions (CDFIs)
  • provide accessible reporting
  • collect and disseminate data
  • include other underserved markets
Ann Kossachev, regulatory affairs counsel for the National Association of Federally-Insured Credit Unions, said GSEs should become more involved in manufactured housing, including chattel lending, to support standardization to this market. Lending for manufactured homes, which comprise 9% of new single-family starts, faces financial, legal, and regulatory issues. Specifically, chattel lending in this market has greater risk because of weaker consumer protections and the lack of reliable data on which loan pricing is based. She said standardization brought about by GSE involvement will lower costs and lead to better borrower protections.

Although the GSEs’ plans already highlight federal programs like the Low-Income Housing Tax Credit and existing loans programs of the Department of Agriculture, Fannie Mae and Freddie Mac may see benefits from incorporating these into their plans, said Corianne Scally, senior research associate with the Metropolitan Housing and Communities Policy Center of the Urban Institute. Scally said rural areas usually find it hard to compete for funding against urban areas and these federal programs provide them a source of affordable housing. In addition, GSEs should also tap small lenders and maximize their deep market knowledge.

Doug Ryan, director of affordable homeownership at Prosperity Now, said Fannie Mae and Freddie Mac should help CDFIs have better access to capital to support the preservation of existing affordable housing. CDFIs and other nonprofits already serve the markets targeted by the GSE plans and have specialized local market knowledge.

The GSEs should be transparent in terms of program implementation, monitoring, and evaluation as they implement finals plans. According to Ethan Handelman, vice president for policy and advocacy with the National Housing Conference, potential program partners may be barred from involvement as the plans only represent objectives for one year of the plan’s three-year coverage.

The panel also suggested that the GSEs should help researchers and policymakers analyze the programs by publishing implementation data and in effect help make the programs scalable and sustainable. The experts also said that the GSEs can improve their plans by sufficiently addressing the underserved markets of single-family rentals, small-dollar loans, and farm worker assistance.

Related stories:
Fannie, Freddie release three-year plan on serving underserved markets
GSE reform must include affordable housing – civil rights groups



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