Updated Fannie, Freddie Plans Include More LIHTC Investment
The Federal Housing Finance Agency (FHFA) recently published Fannie Mae’s and Freddie Mac’s Underserved Market Plans for 2022–2024. The plans outline how each firm intends to meet its obligations under FHFA’s Enterprise Duty-to-Serve Rule.
The context: Fannie Mae and Freddie Mac initially submitted their 2022–24 plans in May 2021, but FHFA rejected both plans in October, saying they did not sufficiently support affordable housing activities. The Duty-to-Serve program requires Fannie Mae and Freddie Mac to facilitate a secondary market for mortgages on housing for very low-, low-, and moderate-income families in: Manufactured Housing, Affordable Housing Preservation, and Rural Housing. The rule came about because the Housing and Economic Recovery Act of 2008 (HERA) amended the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 to establish a duty for Fannie Mae and Freddie Mac to serve these three specified underserved markets. The rule provides a points-based framework for FHFA’s method for evaluating and rating the enterprises’ compliance with the duty to serve each underserved market.
One level deeper: Last September, the FHFA announced that it increased the amount Fannie Mae and Freddie Mac can invest annually in LIHTC equity. Their annual investment cap for LIHTC equity was raised from $500 million to $850 million per year. The updated 2022–2024 plans include an increase in LIHTC loans and equity investment in LIHTC properties with an emphasis on rural areas. Fannie Mae intends to make 78 rural LIHTC investments in 2022 and 70 in 2023 and 2024, compared to 65 such investments in 2020 and 52 in 2021. Freddie Mac pledges to make 20 such investments in 2022, 22 in 2023, and 24 in 2024, compared to an average of 15 from 2018 to 2020.