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Duty to Serve: Tackling Today’s Housing Challenges

January 11, 2018

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The United States faces a housing affordability crisis today that affects around 40 million households, and that number is expected to grow. Coupled with rising housing prices is the historically low level of available housing inventory, with the volume of lower- and mid-valued homes shrinking by more than 38 percent between 2010 and 2015.

Low inventory has been exacerbated by a slow recovery in new construction. Indeed, a steady increase in new construction is critical to restoring balance in the market. While the 2018 outlook on household income growth is looking positive, it may not be enough to offset other factors − such as shifts in homebuyer demographics − affecting housing affordability for very low-, low- and moderate-income families.

One of the ways Freddie Mac will address the affordability issue in 2018 and beyond is through Duty to Serve, an initiative mandated by the Federal Housing Finance Agency (FHFA) that brings Freddie Mac and Fannie Mae, the government-sponsored enterprises (GSEs), back to the low-income housing tax credit equity market.

Both GSEs were tasked with developing their own three-year Duty to Serve plan to address the housing shortage in three underserved markets: Manufactured housing, rural housing and affordable housing preservation. Through our plan, Freddie Mac aims to improve the distribution of investment capital and bring greater liquidity to the small financial institutions that are best positioned to serve their own communities.

Here are some ways in which we’re addressing each of the three underserved markets mentioned above:

1. Manufactured Housing

While Freddie Mac has programs in place to purchase loans on manufactured homes titled as real property, we plan to address the need for additional resources to increase financing, including enhanced product offerings, homebuyer education and technical training for lenders.

Additionally, we plan to address the challenges facing the chattel market by conducting thorough data-gathering and analysis prior to developing and initiating a pilot program to support chattel purchases. To build support for secondary market activities in this market, we’ll also focus on standardizing data collection, documentation and underwriting, as well as education and consumer protections.

The plan’s multi-pronged actions include:

  • Leveraging partnerships with public, private and governmental entities
  • Engaging with community and local outreach activities
  • Increasing homebuyer education
  • Raising lenders’ awareness of available programs (e.g., shared-equity structures)
  • Increasing industry technical expertise
  • Developing new offerings
  • Enhancing existing offerings
  • Assisting with energy efficient financing
  • Conducting and publishing market research

2. Rural Housing

To support socially, economically and geographically diverse rural areas, we plan to engage directly with appraisers, lenders, non-profits, housing finance agencies, small financial institutions and title companies. That engagement will include research projects, enhanced product offerings, homebuyer education and lender training, as well as collaboration with U.S. Department of Agriculture (USDA) and the U.S. Department of Housing and Urban Development (HUD).

3. Affordable Housing Preservation

We plan to expand our strong support for affordable housing preservation through loan purchases, new offerings and new partnerships that will channel private capital to the communities that need it most.

Our plan demonstrates our effort to develop innovative and creative solutions that responsibly increase access to homeownership in some of the more difficult-to-serve geographic areas across the United States. The plan fortifies our strong belief that affordable housing is a vital component of strong, healthy and sustainable communities, and a critical gateway to opportunity and family mobility.

The plan took effect on January 1, so we’re just getting started. Look for more developments to Duty to Serve soon.

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