Fannie Mae and Freddie Mac expand plans for equitable housing

Fannie Mae and Freddie Mac announced on Wednesday new updates to their equitable housing finance plans, which outline the expansion of accessible and affordable housing available to underserved communities.

Fannie Mae is expanding a series of pilot programs, launching new initiatives and applying new research to its understanding of its consumer housing journey roadmap. Freddie Mac is expanding special purpose credit programs (SPCPs), increasing the availability of accessory dwelling units (ADUs) and manufactured homes, and launching a correspondent lending program to assist smaller financial institutions with access to Freddie Mac’s multifamily financing.

Also, Freddie Mac’s DPA One, a down payment assistance digital platform, will be made available broadly this year and complements Freddie Mac’s SPCP efforts.

“Since the launch of our plan in 2022, we have made considerable progress in identifying meaningful ways to address historical challenges faced by underserved communities, particularly for Black and Latino people,” said Katrina Jones, vice president of racial equity strategy and impact at Fannie Mae. “When you add the present-day challenges of inadequate affordable housing supply and high housing costs, overcoming barriers to housing can seem harder than ever. But we are committed to making a fundamentally fairer and more equitable future for housing.”

Freddie Mac said progress has already been made with its plan and outlined additional changes it will implement.

“The actions laid out in this year’s Equitable Housing Finance Plan build upon the work we started last year to give families in underserved communities a more equitable chance to have a quality, affordable place to call home,” said Michael DeVito, CEO of Freddie Mac. “We have made meaningful progress over the last year, and we know there is much more to do. The update released today illustrates our commitment to help more families in the years to come.”

The specific actions that Fannie Mae will make were outlined in a blog post, which anticipates SPCPs will be used as a tool for “helping people in majority Black and Latino communities to buy their first home.” The GSE has also “created and implemented innovative ways to help people qualify for a mortgage, even if they have insufficient credit history.”

Accessibility to housing counseling is critical for Fannie Mae to achieve its goals, according to Jones.

“After completing over 11,000 counseling sessions in 2022 specifically addressing homeownership needs, we are expanding our efforts this year to help those facing financial hardship and improving access to information for long-term housing safety and stability,” Jones said. “We are also working alongside industry partners like HUD to bring comprehensive counseling opportunities to those in need and to test new counseling services in various parts of the country.”

SPCPs are a central fixture of Freddie Mac’s plan, and the organization plans to continue purchasing loans originated through lender SPCPs and its own program, “BorrowSmart Access,” which provides down payment assistance and borrower education to eligible families.

Freddie Mac also noted that it will assist renters on the path to homeownership in two ways: by establishing and improving credit scores of renters seeking to transition into homeownership, and “considering a history of on-time rent payments in loan purchase decisions.”

Freddie Mac’s renter credit-building initiative, which was launched in late 2021 and expanded earlier this year, has served 184,000 renters to date. It has also resulted in 27,000 renters establishing credit for the first time.

“We were able to make measurable headway on our Equitable Housing goals in year one by working closely with FHFA and other industry participants,” said Michael Hutchins, president of Freddie Mac. “Our 2023 Plan incorporates new thinking and lessons learned to ensure we are as effective and impactful as possible.”

The National Association of Real Estate Brokers (NAREB) recently urged mortgage lenders to accelerate special purpose credit programs (SPCPs) to boost Black homeownership rates and help close the wealth gap between Black and white Americans.