Building Upon Meaningful Progress to Create More Housing Opportunities
Last week, Freddie Mac published updates to its three-year Equitable Housing Finance Plan, the company’s roadmap to promote sustainable homeownership and rental opportunities for historically underserved communities across the nation. The ambitious, crosscutting Plan is an important part of our mission of Making Home Possible.
Our newly-released Plan builds upon the meaningful work we undertook throughout 2022, in collaboration with FHFA, other industry participants, trade organizations and community stakeholders. The 2023 updates reflect a continuation of our efforts to ensure equal access to quality, affordable housing for more families, while also fine-tuning our work to focus on activities with the largest impact. Here, we summarize select accomplishments from our 2022 Plan, both in the single-family and multifamily markets, and detail how we will expand upon them in the year ahead. Notwithstanding our progress, we know this is just the beginning and there is much more work to do — and we are committed to doing it.
Helping Put Homeownership within Reach for All
Purchasing Mortgages Through Special Purpose Credit Programs
One of the signature elements of our inaugural Plan was the use of Special Purpose Credit Programs (SPCPs), which are a valuable tool to expand access to credit to underserved borrowers and communities in a way that is responsible and sustainable. Under federal law, lenders may use an SPCP to offer special credit terms (e.g., down payment assistance, underwriting or pricing) for traditionally disadvantaged groups. At Freddie Mac, we have implemented a two-pronged approach to using SPCPs. First, we developed our own SPCP, BorrowSmart AccessSM, which is currently available in 10 major cities. Second, we are acquiring loans via lender SPCPs. By providing liquidity to the market for these programs, lenders can reach more qualified borrowers in communities of color.
Freddie Mac’s SPCP work is critically important because it helps borrowers overcome one of the largest barriers to homeownership: down payment. In the year ahead, we will continue to evolve our SPCP initiative, while also expanding other initiatives that help borrowers with down payments. This includes our DPA OneSM initiative, a digital platform that matches potential homebuyers with local down payment assistance programs in their area.
Improving our Automated Underwriting System
In 2022, we made available several important updates to our automated underwriting system to increase fairness and expand access to credit, particularly for historically underserved borrowers. For example, our automated underwriting system, which is currently used to verify assets, income and employment, will also now consider a history of on-time rent payments and positive cash flow activity as part of its loan purchase decisions.
In 2023, we will continue making enhancements to leverage detailed credit attributes that replace third-party credit scores. This will include expanding our use of trended data, which provides a better picture of creditworthiness over time. These updates should result in approximately 17,000 additional Black and Latino borrowers accepted per year, relative to years past.
Expanding Outreach and Industry Engagement
Freddie Mac remains a leader in its outreach, engagement and education efforts to consumers and the industry. We held events and trainings for industry professionals on expanding opportunity for potential homebuyers, particularly diverse borrowers. In addition, we worked with our borrower help centers and renter resource organizations to provide housing assistance, financial counseling, legal aid and training, focused on helping diverse renters experiencing challenging life events or housing stability issues.
Through these initiatives, we served more than 300,000 consumers in 2022, with nearly 80% self-identifying as people of color. In 2023, we expect to grow this work, by training more than 350,000 additional consumers and 30,000 industry professionals, including through 350 community events. Further, we will continue to work with industry partners on specific issues of concern, such as appraisal and valuation equity, to help mitigate the potential for discrimination. We will continue our role as a core sponsor of the Appraisal Diversity Initiative, which helps increase the diversity of appraisers through education scholarships and mentorship. These education and outreach efforts helped contribute to the more than 488,000 minority borrowers who purchased or refinanced a home, accounting for more than 30% of the company’s Single-Family acquisitions.
For more than 20 years, Freddie Mac has been at the forefront of borrower education with our CreditSmart® suite of financial capability and homeownership education resources. More than five million consumers at various life stages have benefitted from this free resource, which has included tailored bilingual content for Spanish speakers since 2002. Last year, nearly 140,000 consumers benefited from CreditSmart and in the coming year, through our new CreditSmart Essentials Spanish language curriculum, we will reach even more Latino consumers, including renters in multifamily properties we have financed.
Supporting Renters and Encouraging Diversity in the Multifamily Industry
Supporting the Creation, Preservation and Rehabilitation of Multifamily Affordable and Workforce Housing
The prolonged shortage of multifamily housing and the aging of the current multifamily housing stock disproportionately harm underserved communities. To help address this problem, in 2022, we supported the creation of more than 20,000 new workforce and affordable housing units through forward commitments, which are agreements to purchase loans at a later date with certain financing terms locked in today. We preserved affordability for more than 4,000 housing units without government support and funded the rehabilitation of nearly 11,000 workforce and affordable housing units. We also conducted research examining what happens to the affordability of properties as they exit the Low-Income Housing Tax Credit program.
Over the next two years, we plan to support and fund the creation, preservation, and rehabilitation of tens of thousands more at-risk housing units.
Increasing Opportunities for Renters
We are also focused on providing renters more opportunities to achieve homeownership by helping them establish and strengthen their credit scores. In 2022, we supported the enrollment of more than 184,000 renters in our innovative credit building initiative, which encourages the reporting of participating renters’ on-time rent payments to the major credit bureaus. Importantly, this helped more than 27,000 of those enrolled establish credit scores for the first time. In 2023, the company will expand this initiative, with a goal of making on-time rent reporting an industry standard.
To further empower renters, we are expanding our financial education efforts and ensuring greater access to tenant support services through Renter Resource Organizations. We also conducted a first-of-its-kind comparative analysis of state-based tenant protections to help guide future efforts to support the availability of those protections.
Increasing Opportunities for Emerging and Diverse Multifamily Borrowers and Lenders
We also are focused on empowering diverse multifamily borrowers by working to close knowledge, relationship and financing gaps that exist in the industry. We are doing so with online resources and our Develop the Developer curriculum for diverse and emerging multifamily borrowers in underserved areas. In addition, we co-hosted several virtual events and convened a Diverse and Emerging Borrower Steering Committee to advance inclusivity within the multifamily industry. Additionally, we expanded our Small Balance Loan Link parameters to include 2-4-unit non-contiguous properties, which gives smaller, emerging borrowers more opportunities to grow their portfolios. Finally, we launched a new correspondent relationship program that leverages our existing multifamily lender network to support small financial institutions.
In 2023, we aim to further increase opportunities for smaller borrowers to grow their portfolios, support underserved communities and provide more affordable housing options for renters.
A Good Start, But Far from Complete
Each year when we update the Plan we reach an inflection point — an opportunity to step back and assess our success, identify areas where we fell short and build upon lessons learned for the following year. After year one, we’re encouraged by the progress we have made, but we know there is much more to do. We will continue to move forward, with passion and humility, to help ensure families in all communities have an equal chance at a quality, affordable place to call “home.”
To learn more read Freddie Mac’s 2023 Equitable Housing Finance Plan, 2022 Performance Report or fact sheet. Learn more about the company’s diversity, equity and inclusion efforts.
©2023 by Freddie Mac.
Transcript: Freddie Mac CEO and CFO Discuss First Quarter 2023 Financial and Business Results
Michael DeVito, Chief Executive Officer
Christian Lown, Executive Vice President and Chief Financial Officer
Making an Impact Through Innovative Financing and Investor Transparency
Robert Koontz, SVP Multifamily Capital Markets