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Fannie Mae and Freddie Mac’s federal regulator has unleashed a flood of orders implementing sweeping changes that rein in programs and practices designed to boost lending in minority communities, protect borrowers from unfair or deceptive practices, and assess risks associated with climate change.
The orders were published on the social media platform X Monday and Tuesday, without further explanation, by an account registered to Federal Housing Finance Agency (FHFA) Director Bill Pulte. The FHFA has not responded to Inman’s requests for comment.
Fannie and Freddie programs and practices targeted for suspension or termination by the FHFA include:
“Before the Equitable Housing Finance Plans were created, Fannie Mae and Freddie Mac were doing a horrible job of serving the entirety of the market in an equitable way,” National Fair Housing Alliance (NFHA) Executive Vice President Nikitra Bailey told Inman.
Nikitra Bailey
“The housing equity plans were designed to help them meet their charter statutory obligations to esnure there is mortgage credit liquidity in every market at all times,” Bailey said. “So, the idea that you would take those away means that we might revert back to a time when their book of business for programs for black and Latino consumers was very low.”
Urban Institute researcher John Walsh, who contributed to a report published in July that he said “shows a strong need for SPCPs,” called the order to terminate Fannie and Freddie’s programs “disappointing.”
“Black and Latino households continue to experience disparities across the ‘three Cs’ of mortgage underwriting: collateral, capacity, and credit, which have excluded this community from thriving in the housing ecosystem, accessing the resources they need to build generational wealth, and closing the racial homeownership rate gap,” Walsh said in a statement to Inman.
“What we are concerned about is that their actions could be injecting unnecessary risk into the housing finance system,” Baliey said. “The future of the housing market is that seven out of 10 future home buyers are going to be people of color. If they cannot fairly access mortgages, the health of the system fails. And then the regulator who is responsible for oversight of their mission goals, and also oversight of their safety and soundness, is not meeting their requirements as a regulator.”
Social media blast
The X account registered to Pulte kicked off the flood of decrees on Monday, publishing the image of an order rescinding a directive issued by the Biden administration to provide additional protections for renters in multifamily developments funded by Fannie and Freddie.
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The order said “many states and local governments have existing laws and policies related to lease notices and grace periods for late fees,” and that incorporating additional tenant protections in Fannie and Freddie loan agreements “would increase compliance burdens for multifamily lenders and property owners.”
Pulte’s X account followed up with another order rescinding a Nov. 29 advisory bulletin — issued in the final weeks of the Biden administration — in which the FHFA informed Fannie and Freddie they were expected to police lenders to make sure they did not engage in “unfair or deceptive acts or practices.”
FHFA “is not the primary administrator of UDAP statutory provisions” and the advisory bulletin was being rescinded, “in order to reduce potential conflict or confusion,” the March 24 order said.
The Mortgage Bankers Association welcomed the rescission of the UDAP advisory bulletin, arguing that making Fannie Mae and Freddie Mac compliance regulators “was duplicative of federal and state regulatory oversight of UDAPs, and would have negatively impacted consumers and lenders through higher costs.”
But the MBA and other industry groups were still digesting the scope and impact of many of the FHFA’s other orders Wednesday, with the agency offering no additional insights on the rationale behind them nor details on how they’ll be implemented.
Special Purpose Credit Programs (SPCPs)
The order terminating Fannie Mae and Freddie Mac’s Special Purpose Credit Programs (SPCPS) Tuesday stated that “the current level of support for SPCPs is inappropriate for regulated entities in conservatorship.” While the order is “effective immediately,” it also says Fannie and Freddie “may comply with any contractual provisions regarding prior written notice to lenders.”
SPCPs allow lenders to create programs to benefit economically disadvantaged groups without violating the Equal Credit Opportunity Act. Lenders offering SPCP loans are permitted to consider characteristics such as race, national origin or sex if that benefits a class of people who would otherwise be denied credit or offered less favorable terms.
In a Jan. 20 executive order, “Ending Radical and Wasteful Government DEI Programs and Preferencing,” President Trump ordered the “termination of all discriminatory programs, including illegal DEI and ‘diversity, equity, inclusion, and accessibility’ (DEIA) mandates, policies, programs, preferences, and activities in the Federal Government, under whatever name they appear.”
Pulte appointed himself as the chairman of Fannie Mae and Freddie Mac’s boards last week and declared that “DEI is dead” at the mortgage giants. “They are safe and sound businesses, but we are going to make them safer and stronger.”
Fannie and Freddie had launched SPCPs in select U.S. cities aimed at boosting lending by expanding borrower eligibility criteria, reducing closing costs and providing flexibility in the form of down payment assistance. Lenders can participate in Fannie and Freddie SPCPs or develop their own programs.
In a March 2024 report detailing Fannie Mae’s performance in meeting its Equitable Housing Finance Plan, the mortgage giant said it had acquired 921 mortgages with $6.9 million in down payment and closing cost assistance in 2023. Those loans were made to first-time homebuyers in majority Black and Latino census tracts in six major metros.
In addition, Fannie Mae said it also acquired 4,747 mortgages in 2023 from lenders sponsoring their own SPCP programs, “many of which included down payment or closing costs assistance.”
In its most recent Equitable Housing Finance Plan Performance Report, Freddie Mac said it provided liquidity for more than 9,300 SPCP loans in 2023, with 57 percent of those loans going to minority families.
While most of those loans (6,828) were acquired from lenders operating their own SPCP programs, Freddie Mac also expanded its own BorrowSmart Access program, which funded 2,479 loans for first-time homebuyers in 10 markets: Atlanta, Georgia; Chicago; Detroit; El Paso, Houston and McAllen, Texas; Memphis, Tennessee; Miami; Philadelphia and St. Louis.
The BorrowSmart Access program provided at least $3,000 to each borrower in “cash-to-close” support from both Freddie Mac and the originating lender.
In October 2023, Freddie Mac launched a second SPCP program, HeritageOne, to serve members of federally recognized American Indian and Alaska Native (AIAN) tribes living within tribal areas.
While Fannie and Freddie were to have published 2024 performance reports on their Equitable Housing Finance Plans this month, the 2023 reports may be their last. Those reports have been removed from the mortgage giants’ websites, but are still accessible in a database maintained by the non-profit Internet Archive.
Equitable Housing Finance Plans
The FHFA on Tuesday waived a requirement that Fannie and Freddie adopt Equitable Housing Finance Plans every three years and publish annual reports documenting their performance.
The March 25 order said that waiving the requirement would promote FHFA’s review and consideration of whether best efforts are being made to ensure Fannie and Freddie achieve the public mission set out for them in their charters.
In publishing a final rule requiring Fair Lending, Fair Housing and Equitable Housing Finance Plans, the Biden administration last year said it was “codifying existing FHFA practices in regulation and adding new requirements related to fair lending, fair housing, unfair or deceptive acts or practices, and Equitable Housing Finance Plans.”
In reversing course on that rule, the FHFA said its waiver is “indefinite,” but did not reveal whether it would institute a new rulemaking procedure to make the change permanent.
Since its establishment in 2021, the Equitable Housing Finance Plan program has focused Fannie and Freddie on “addressing inequities and removing barriers to housing opportunities in a manner consistent with safety and soundness, and borrower sustainability for Black and Latino borrowers, as these borrower populations have been historically denied consistent and systemic fair, just, and impartial treatment and face persistent disparities in accessing housing,” the FHFA said in a Federal Register notice. “Although the Enterprises focused their 2022-2024 Equitable Housing Finance Plans on addressing barriers faced by Black and Latino borrowers, all implemented actions were beneficial to numerous underserved communities.”
In addition to SPCPs, measures undertaken by Fannie and Freddie under their Equitable Housing Finance Plans included expanded financing for affordable housing developers, rehabilitation loans to maintain existing affordable housing stock, and initiatives to combat appraisal bias and promote greater diversity in the appraisal field.
“The Enterprises’ respective performance reports demonstrate their efforts to ensure all communities have greater access to sustainable rental and homeownership opportunities and better preparedness for obtaining a mortgage loan, all while fulfilling their statutory missions to promote affordable housing, serve the public interest, and ensure safety and soundness,” the FHFA said in putting forward the final rule.
“Ultimately, FHFA expects that … changes implemented as part of the inaugural Equitable Housing Finance Plans will have long-standing impacts, even as the Enterprises proceed to devise new objectives to advance sustainable housing opportunities and address a new set of barriers impacting the spectrum of underserved communities for the 2025-2027 Equitable Housing Finance Plans.”
Editor’s note: This story has been updated with comments from the National Fair Housing Alliance and the Urban Institute.
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