Both Fannie Mae and Freddie Mac announced updates Wednesday to their three-year Equitable Housing Finance Plans, which are intended to promote sustainable homeownership and rental opportunities for underserved communities of color nationwide.
Fannie Mae said it’s plan focuses on two objectives that address common obstacles faced by many Black and Latino renters and homeowners:
- Reducing up-front rental and homeownership costs and eliminating outdated barriers related to insufficient credit to directly drive measurable improvements in housing access and stability, and
- Improving the chances for long-term success for underserved borrowers and renters by focusing on education and counseling, successfully navigating the mortgage process, and housing stability.
The GSE said its Equitable Housing Finance Plan for 2023 includes 25 separate actions to advance these objectives, including:
- Developing and expanding new ways to help first-time homebuyers, such as down payment assistance programs, mortgage underwriting innovations, and special purpose credit programs.
- Supporting five 2022 Innovation Challenge winners who are building local solutions to increase affordable housing supply and assist people with credit and housing access.
- Using Fannie Mae’s role in the secondary mortgage market to expand access for underserved borrowers through its mortgage-backed securities activities, and
- Expanding financial and housing counseling and consumer education to empower more people to both achieve and maintain housing stability.
“Since the launch of our plan in 2022, we have made considerable progress in identifying meaningful ways to address historical challenges faced by underserved communities, particularly for Black and Latino people,” said Katrina Jones, vice president of racial equity strategy & impact for Fannie Mae. “When you add the present-day challenges of inadequate affordable housing supply and high housing costs, overcoming barriers to housing can seem harder than ever. But we are committed to making a fundamentally fairer and more equitable future for housing.”
Freddie Mac, meanwhile, touted the success of its 2022 plan, stating it had helped more than 488,000 minority borrowers buy or refinance a home, accounting for more than 30% of the GSE’s single-family acquisitions.
“The actions laid out in this year’s Equitable Housing Finance Plan build upon the work we started last year to give families in underserved communities a more equitable chance to have a quality, affordable place to call home,” said Freddie Mac CEO Michael DeVito. “We have made meaningful progress over the last year, and we know there is much more to do. The update … illustrates our commitment to help more families in the years to come.”
Freddie Mac said the updates to the plan for 2023 contain adjustments and enhancements to activities that advance equitable and sustainable housing and rental opportunities, while preserving safety and soundness. The updated plan includes:
- Using Special Purpose Credit Programs (SPCP) to make homeownership possible for underserved communities. Under the Plan, Freddie Mac will continue purchasing loans originated through both lender SPCPs and its own SPCP, BorrowSmart Access program. BorrowSmart Access provides down payment assistance and financial education to eligible families. To help even more borrowers overcome the down payment challenge, Freddie Mac’s DPA One, a down payment assistance digital platform, will be made available broadly this year.
- Continuing to help renters achieve homeownership in two ways: Establishing and improving credit scores and considering a history of on-time rent payments in loan purchase decisions. To date, more than 184,000 renters have enrolled in Freddie Mac’s renter credit building initiative, and more than 27,000 participants have also established credit scores for the first time, the GSE said. The GSE said its goal is to make on-time rent reporting an industry standard.
- The company will also continue to advance housing equity by reaching those who may not have qualified for homeownership with traditional underwriting. This includes making additional enhancements to Loan Product Advisor (LPA), Freddie Mac’s automated underwriting system, which is used to verify assets, income, employment, and a history of positive cash flow activity.
- Supporting the creation, preservation, and rehabilitation of affordable housing by increasing the availability of accessory dwelling units (ADUs), manufactured homes and land trust mortgage offerings. The plan also commits Freddie Mac to further expanding the use of multifamily forward commitments to facilitate ground-up construction and adaptive reuse of affordable and workforce housing and to rehabilitate and preserve affordable rentals. In 2022, the company enhanced its policies to increase the availability of ADUs, committed to funding more than 20,000 units through forward commitments and preserving more than 4,200 units without the use of government subsidy.
- Launching multiple initiatives to increase diversity across the housing finance industry. This includes a targeted correspondent lending program to help small financial institutions access Freddie Mac’s multifamily financing. To increase the number of minority-owned businesses in underserved areas, Freddie Mac will expand its “Develop the Developer” program in both the single-family and multifamily markets. To date, the company has trained more than 70 developers, of which more than half are minority, women-owned businesses. The company also continues its support for diverse-owned capital markets firms, which so far have acquired credit protection of approximately $833 million on more than $50 billion in unpaid principal balance of mortgage loans.
- Educating the industry and consumers by providing outreach, resources, and research to expand housing opportunities, particularly for diverse homebuyers. This effort includes a new Spanish learning module for CreditSmart, Freddie Mac’s free online financial literacy curriculum. In 2022, Freddie Mac reached over 300,000 consumers through education and counseling, with 79% self-identifying as people of color.
“We were able to make measurable headway on our Equitable Housing goals in year one by working closely with FHFA and other industry participants,” said Freddie Mac President Michael Hutchins. “Our 2023 plan incorporates new thinking and lessons learned to ensure we are as effective and impactful as possible.”
