WASHINGTON—America’s Credit Unions is backing a proposal by the Federal Housing Finance Agency to overhaul the “Duty to Serve Underserved Markets” framework, saying the changes would give Fannie Mae and Freddie Mac greater flexibility to purchase specialized mortgage products and expand access to affordable housing finance.
In a comment letter to the FHFA, America’s Credit Unions said it supports the agency’s proposal to replace the current regulatory framework with a more flexible, principles-based approach that would allow the government-sponsored enterprises (GSEs) to pursue any eligible action that advances service to underserved markets, rather than limiting them to a prescribed list of activities.
‘Rigid, Pre-Defined Activities’
The trade group said the existing framework has constrained innovation by requiring Fannie Mae and Freddie Mac to focus on rigid, pre-defined activities. The proposed changes, it said, would encourage the enterprises to purchase a broader range of mortgage products originated by credit unions, including loans tailored to low-income borrowers, rural communities, first-time homebuyers, manufactured housing and affordable housing initiatives.
America’s Credit Unions urged FHFA to ensure community-based credit unions, Community Development Financial Institutions and minority depository institutions have meaningful opportunities to participate as the enterprises develop new mortgage products and pilot programs, saying those institutions are well positioned to test innovative approaches in underserved markets.
Change Endorsed
The association also endorsed FHFA’s proposal to change how borrower income eligibility is determined for Duty to Serve purposes. Under the proposal, borrower income would be measured against the highest applicable median income benchmark—whether local, state or national, and either urban or non-metropolitan—rather than relying solely on local median incomes.
America’s Credit Unions said the revised methodology would better reflect economic conditions in underserved communities, particularly in rural and economically distressed areas where local median incomes may understate borrowers’ financial capacity. The organization said the change would allow more loans originated by credit unions to qualify for Duty to Serve consideration, increase secondary market liquidity and expand access to affordable mortgage credit.
Recommendations Made
The organization also offered several recommendations to strengthen the proposal.
- America’s Credit Unions called on FHFA to broaden the definition of manufactured housing to include modular, panelized and other state-code factory-built homes in addition to traditional HUD-code manufactured homes. T
- The group said expanding the definition would increase financing options, provide greater flexibility for credit unions and help boost the supply of affordable housing for first-time buyers.
- The association also urged FHFA to move more aggressively to develop a secondary market for manufactured housing chattel loans, which are personal property loans secured by manufactured homes rather than real estate.
Just 0.5% of Volume
According to the letter, credit unions frequently originate manufactured housing loans, but manufactured home chattel loans account for just 0.5% of total loan originations because a robust secondary market has yet to develop.
America’s Credit Unions asked FHFA to require Fannie Mae and Freddie Mac to publish transparent pilot underwriting guidelines for chattel loans during the first year of the new Duty to Serve planning cycle. The guidelines, the group said, should define eligible loan characteristics, underwriting standards, servicing requirements and participation criteria to provide lenders with a clear path for originating loans eligible for Enterprise purchase.
