Fannie Mae and Freddie Mac Aim to Empower, Educate and Invest in Underserved Black and Latino Communities

In 2021, the Federal Housing Finance Agency (FHFA) asked Fannie Mae and Freddie Mac to develop plans to address inequalities and barriers experienced by renters and (current and aspiring) homeowners in Black and Latino communities. Last month, Fannie Mae and Freddie Mac released their Equitable Housing Finance Plans for the 2022 through 2024 years.

Fannie Mae’s plan includes efforts to enhance homebuyer education via financial literacy programs, pilot programs to establish and/or improve credit scores, and to explore security deposit alternatives.  In addition, the creation of Special Purpose Credit Programs (SPCPs) will be aimed at serving specific areas of need and opportunity, such as down payment assistance and reducing borrower closing costs.

Freddie Mac’s plan includes a series of initiatives to advance equity in both the single-family and multifamily housing markets. Among the many initiatives is a commitment to explore the use of the SPCP framework to expand access to mortgage funding for formerly redlined communities. Some key areas that will be addressed include exploring the use of the SPCP framework to purchase loans originated through SPCP’s, expanding financing for affordable housing developers, increasing access to capital for emerging diverse multifamily developers to increase wealth-building opportunities, and expanding the multifamily tenant credit-building initiative with new tools aimed at encouraging financial empowerment and wealth building. Freddie Mac also expects to focus on the Low-Income Housing Tax Credit (LIHTC) program and the risk of lost affordability.

“Although the [LIHTC] program has been effective at creating new affordable supply, the program produces fewer than 50,000 new units annually and many states are constrained by LIHTC and private activity bond volume caps. The need for increased supply is compounded by the expiration of the regulatory agreements for these LIHTC properties. An estimated 718,000 units are expected to be released from these agreements by 2030. Expiring affordability is an urgent issue, potentially impacting hundreds of thousands of affordable units in the next several years and disproportionately affecting minority renters.”

Big thanks to Will Lau for authoring this post.

Source: FannieMae.com, FreddieMac.com, Affordable Housing Finance