HOPE Submits Comments to the Federal Housing Finance Agencies on 2022-2024 Underserved Market Plans

February 7th, 2023

August 15, 2022

Homeownership is a key opportunity for families to build wealth and a critical strategy in closing the racial wealth gap. Government Sponsored Enterprises (GSEs) such as Fannie Mae and Freddie Mac can play a crucial role in closing the gap, given their work in housing finance for underserved markets.[1] Fannie Mae and Freddie Mac have published their 2022-2024 Underserved Market plans, which propose promising strategies in affordable housing preservation and rural housing.

HOPE has published recommendations on the market plans with a focus on two areas of opportunity:

Investing in Mortgage Lending by Community Development Financial Institutions
Low-Income Housing Tax Credit (LIHTC) Equity Investments

Each recommendation is grounded in lessons learned from our experience with providing high-performing mortgages to communities of color in the Deep South – communities that are often considered too risky to lend by the GSEs.

Key recommendations in HOPE’s comment include:

Product Expansion with CDFIs

Only about 4 percent of mortgages purchased by GSEs annually are made to Black households. This is below the proportion of total mortgage originations to Black households nationwide and well below levels needed to close the gaps.[2] Efforts must be taken across the GSE system to meaningfully improve the level of lending to Black households. One way to do this is to expand the products eligible to be purchased by GSEs to include products provided by CDFIs that serve communities of color.

Down Payment Assistance

The Fannie Mae and Freddie Mac Duty to Serve final plans do not include the deployment of a down payment assistance initiative to expand homeownership. In order to realize significant gains in homeownership, a robust down payment assistance initiative should be implemented in every high-needs region, including Appalachia, the Lower Mississippi Delta, U.S. / Mexico border, and in Native communities.

CDFI Capitalization

Duty to Serve plans should provide capital and operating support to minority-serving CDFIs – CDFIs led by people of color and/or with long track records of providing mortgages to households of color at significant and meaningful levels – well beyond existing lending rates among mortgage originators in the Deep South.

LIHTC Equity Investments with Developers of Color

Financing LIHTC projects in rural communities is critical to supplying housing for populations that have historically faced challenges in accessing affordable, quality housing. In addition to targeting rural housing and LIHTC projects, Freddie Mac and Fannie Mae should commit to partnering with developers of color for at least half of their LIHTC transactions.

HOPE’s full comment is available here.

[1] Laurie S. Goodman and Christopher Mayer, “Homeownership and the American Dream” Journal of Economic Perspectives Volume 32, Number 1, Winter 2018 available at https://www.urban.org/sites/default/files/publication/96221/homeownership_and_the_american_dream_0.pdf

[2] FHFA Fannie Mae 2021 “Annual Housing Activities Report & Annual Mortgage Report” https://www.fanniemae.com/media/43111/display accessed August 2022; FHFA “2021 Annual Housing Report,” https://www.fhfa.gov/AboutUs/Reports/ReportDocuments/Annual-Housing-Report-2021.pdf accessed August 2022; Consumer Finance Protection Bureau “Data Point: 2020 Mortgage Market Activity and Trends” https://files.consumerfinance.gov/f/documents/cfpb_2020-mortgage-market-activity-trends_report_2021-08.pdf