Nearly two years ago the Federal Housing Finance Agency (FHFA) approved Underserved Market Plans from Fannie Mae and Freddie Mac.  These plans, part of FHFA's Duty to Serve mandate to the two GSEs, set forth their plans for serving three specific markets, manufactured housing, affordable housing preservation, and rural housing, by increasing the liquidity of mortgage investments and improving the distribution of capital available for mortgage financing for very low-, low-, and moderate-income families in the three markets.  The plans went into effect at the first of the year, and the GSEs have used them to set several programs in motion. Most recent was last week's announcement from Freddie Mac of an intent to expand mortgages available to shared equity housing arrangements.

FHFA is now requesting comment on four changes to its plans requested by Fannie Mae.  The company proposed 22 modifications and Freddie Mac proposed one, however all but these four fell outside of any requirement for public comment.

The first requested change is to Objective 2 of Fannie Mae's intent to expand its of loans for the purchase or rehabilitation of distressed properties.  This objective was proposed because, "One of the biggest challenges in the market for the purchase or rehabilitation of distressed properties as homes for very low-, low-, and moderate-income families is a lack of liquidity for individuals, non-profits, and other mission-oriented entities." Fannie Mae's original objective was to acquire 11,000 such mortgages over a three year period.

The change is requested because the baseline data on the numbers of distressed properties in the national inventory, according to data from Moody's Analytics, has declined significantly from the numbers used by Fannie Mae. There is now a shortfall of anywhere from 10 to 20 percent for each of the three years in the timeline. Fannie Mae is requesting an adjustment of their target number for each of those years.

The second modification is to Objective 2 of its plan for manufactured housing which called for Fannie Mae to establish a chattel loan pilot structure and secure approval from FHFA to purchase chattel loans.  It is now requesting permission to include in its pilot program designed to this end of options which would include a whole loan bulk purchase.

The justification for this change is that further research has determined there is little demand for the program as initially proposed.

The third and fourth requested changes both concern rural housing objectives.  The first is an expansion of the rural investments targets for investing in Low-Income Housing Tax Credit (LIHTC) properties.  The adjustments reflect an evaluation of Fannie Mae's current portfolio and other issues and reflects the progress made in developing relationships with syndication partners since the goals were established.

Rather than the five investments initially proposed, the modification reads: "Fannie Mae will make equity investments in 20 LIHTC projects, through either proprietary or multi-investor syndicated funds, in the rural areas that are eligible for Duty to Serve credit as identified through outreach efforts while taking into account safety and soundness concerns."

Finally, Objective 1 of its planned financing purchase of rural single-family loans from small financial institutions will be modified to reflect the outreach and solution development it had achieved prior to the first of this year.  An additional Objective - Objective 3 - will be added so as to give Fannie Mae credit for loans funded by small financial institutions but where the loan was delivered directly to Fannie Mae rather than through a purchase. The benchmark for this objective would be changed to a three-year average (2014-2016) rather than just 2016 alone.

Comments on any or all of the proposed modifications can be made until November 2, 2018 on FHFA's website or by mail.  FHFA asks input on the potential impact of any modification on the objective of the underserved market as a whole, whether there are market conditions to be taken into consideration, or any safety and soundness concerns.  FHFA also requests any additional information or feedback.