[Federal Register Volume 91, Number 120 (Wednesday, June 24, 2026)]
[Proposed Rules]
[Pages 37848-37873]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2026-12750]
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FEDERAL HOUSING FINANCE AGENCY
12 CFR Parts 1282 and 1283
RIN 2590-AB64
Enterprise Duty To Serve Underserved Markets
AGENCY: Federal Housing Finance Agency.
ACTION: Notice of proposed rulemaking; request for comments.
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SUMMARY: The Federal Housing Finance Agency (FHFA or Agency) proposes
to rescind its regulation on Duty to Serve Underserved Markets and
replace it with a new rule. If adopted as proposed, the new rule would
enable the Federal National Mortgage Association (Fannie Mae) and the
Federal Home Loan Mortgage Corporation (Freddie Mac) (collectively, the
Enterprises) to better serve the needs of very low-, low-, and
moderate-income families in the manufactured housing, affordable
housing preservation, and rural housing markets through greater
innovation and with less administrative burden.
DATES: FHFA will accept written comments on the proposed rule on or
before July 24, 2026.
ADDRESSES: You may submit your comments on the proposed rule,
identified by regulatory information number (RIN) 2590-AB64, by any one
of the following methods:
Agency Website: https://www.fhfa.gov/regulation/federal-register.
Federal eRulemaking Portal: https://www.regulations.gov.
Follow the instructions for submitting comments. If you submit your
comment to the Federal eRulemaking Portal, please also send it by email
to FHFA at [email protected] to ensure timely receipt by FHFA.
Include the following information in the subject line of your
submission: Comments/RIN 2590-AB64.
Hand Delivered/Courier: The hand delivery address is:
Clinton Jones, General Counsel, Attention: Comments/RIN 2590-AB64,
Federal Housing Finance Agency, 400 Seventh Street SW, Washington, DC
20219. Deliver the package at the Seventh Street entrance Guard Desk,
First Floor, on business days between 9 a.m. and 5 p.m. EST.
U.S. Mail, United Parcel Service, Federal Express, or
Other Mail Service: The mailing address for comments is: Clinton Jones,
General Counsel, Attention: Comments/RIN 2590-AB64, Federal Housing
Finance Agency, 400 Seventh Street SW, Washington, DC 20219. Please
note that all mail sent to FHFA via U.S. Mail is routed through a
national irradiation facility, a process that may delay delivery by
approximately two weeks.
FOR FURTHER INFORMATION CONTACT: For general questions, please contact
[email protected]. For technical questions, please contact Leda
Bloomfield, Senior Associate Director, Office of Affordable Housing and
Community Investment, Division of Housing Mission and Goals, 202-649-
3415, [email protected]; Marcea Barringer, Supervisory Policy
Analyst, Office of Affordable Housing and Community Investment,
Division of Housing Mission and Goals, 202-308-1089,
[email protected], or Dinah Knight, Assistant General Counsel,
Office of General Counsel, (202) 748-7801, [email protected]. These
are not toll-free numbers. The mailing address is: Federal Housing
Finance Agency, 400 Seventh Street SW, Washington, DC 20219. For TTY/
TRS users with hearing and speech disabilities, dial 711 and ask to be
connected to any of the contact numbers above.
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Request for Comments
II. Statutory and Regulatory Background
A. Statutory Background
B. The Existing Duty to Serve Regulation
C. FHFA Review of the Current Program
III. Overview of the Proposed Rule
[[Page 37849]]
IV. Section-by-Section Analysis of Proposed Part 1283
A. Authority and Purpose--Sec. 1283.1
B. Definitions--Sec. 1283.2
C. Enterprise Duty to Serve Program--Sec. 1283.3
D. Duty to Serve Plan--Sec. 1283.4
E. Performance Monitoring and Reporting--Sec. 1283.5
F. Evaluations and Ratings--Sec. 1283.6
G. Requirements for Eligible Loan Purchases--Sec. 1283.7
H. Reservation of Authority--Sec. 1283.8
I. Effective Date
J. Comments Specifically Requested
V. Regulatory Impact
I. Request for Comments
FHFA invites comments on all aspects of the proposed rule and will
take all comments into consideration before issuing a final rule.
Comments, including any personally identifiable information such as
name and contact information, will be posted to the electronic
rulemaking docket on the FHFA public website at https://www.fhfa.gov,
except as described below. Commenters should submit only information
that the commenter wishes to make available publicly. FHFA will not
redact personally identifiable information once it is submitted.
Commenters who do not wish to be identified by their comments may
submit their comments anonymously. FHFA may post only a single
representative example of identical or substantially identical
comments, and in such cases will generally identify the number of
identical or substantially identical comments represented by the posted
example. FHFA may, in its discretion, redact or refrain from posting
all or any portion of any comment that contains content that is
obscene, vulgar, profane, or threatens harm. All comments, including
those that are redacted or not posted, will be retained in their
original form in FHFA's internal rulemaking file and will be considered
as required by all applicable laws. Commenters who would like FHFA to
consider any portion of their comment exempt from disclosure on the
basis that it contains trade secrets, or financial, confidential or
proprietary data or information, should follow the procedures in
section IV.D. of FHFA's Policy on Communications with Outside Parties
in Connection with FHFA Rulemakings, see https://www.fhfa.gov/sites/default/files/documents/Ex-Parte-Communications-Public-Policy_3-5-19.pdf. FHFA cannot guarantee that such data or information will remain
confidential if disclosure is sought pursuant to an applicable statute
or regulation. See 12 CFR 1202.8, 12 CFR 1214.2, and FHFA's FOIA
Reference Guide at https://www.fhfa.gov/about/foia-reference-guide for
additional information.
II. Statutory and Regulatory Background
A. Statutory Background
When the Federal Housing Enterprises Financial Safety and Soundness
Act of 1992 (Safety and Soundness Act) was enacted, Congress found that
the Enterprises ``have an affirmative obligation to facilitate the
financing of affordable housing for low- and moderate-income
families.'' \1\ Consistent with this obligation, the Housing and
Economic Recovery Act of 2008 amended the Safety and Soundness Act to
impose on the Enterprises a duty to serve certain borrowers in three
markets deemed by statute to be underserved.\2\ Specifically, to
increase the liquidity of mortgage investments and improve the
distribution of investment capital available for mortgage financing for
the manufactured housing, affordable housing preservation, and rural
housing markets, the Enterprises are required to provide leadership in
developing loan products and flexible underwriting guidelines that
facilitate a secondary market for mortgages on housing for very low-,
low-, and moderate-income families in those markets (the Duty to
Serve).\3\
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\1\ 12 U.S.C. 4501(7).
\2\ 12 U.S.C. 4565(a)(1).
\3\ 12 U.S.C. 4565(a). The terms ``very low-income,'' ``low-
income,'' and ``moderate-income'' are statutorily defined in 12
U.S.C. 4502(24), (14), and (16), respectively.
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The Safety and Soundness Act imposes requirements on both the
Enterprises and FHFA with regard to the Duty to Serve. Each Enterprise
must design programs and products that facilitate the use of assistance
provided by federal, state, and local governments; develop
relationships with nonprofit and for-profit organizations that develop
and finance housing and with state and local governments; take
affirmative steps to assist primary lenders to make housing credit
available in areas with concentrations of low-income and minority
families and assist insured depository institutions to meet their
obligations under the Community Reinvestment Act (CRA) of 1977; \4\ and
develop the institutional capacity to help finance low- and moderate-
income housing, including for first-time homebuyers.
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\4\ 12 U.S.C. 2901 et. seq.
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FHFA must establish by regulation a method for evaluating the
Enterprises' compliance with the Duty to Serve and rating the extent of
such compliance.\5\ FHFA must evaluate each Enterprise's compliance
with respect to each underserved market, taking into consideration the
Enterprise's development of loan products, more flexible underwriting
guidelines, and other innovative approaches to providing financing to
the underserved market; the extent of the Enterprise's outreach to
qualified loan sellers and other market participants in the underserved
market; the volume of loans purchased by the Enterprise in the
underserved market relative to the market opportunities available to
the Enterprise; and the amount of investments and grants made by the
Enterprise in projects that assist in meeting the needs of the
underserved market.\6\
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\5\ 12 U.S.C. 4565(d)(1).
\6\ 12 U.S.C. 4565(d)(2).
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B. The Existing Duty To Serve Regulation
Rulemaking process. FHFA established the existing Duty to Serve
Program through a series of rulemakings. In 2009, FHFA published an
Advanced Notice of Proposed Rulemaking (ANPR) to request comments on
the types of Enterprise transactions and activities that should be
considered under the Program, and how such transactions and activities
should be rated for the purpose of determining Enterprise performance
in the underserved markets.\7\ In 2010, FHFA published a proposed rule
that took into consideration the 100 comments received on the ANPR.\8\
FHFA received 4,019 comments on the 2010 proposed rule from a variety
of stakeholders, including individuals, trade associations, advocacy
groups, nonprofits, corporations, and government entities. FHFA then
evaluated the comments and issued a new proposed rule in 2015.\9\ After
considering the 1,567 comments received on the 2015 proposed rule, FHFA
adopted a final rule in 2016.\10\ Since 2016, the regulation has been
amended once to make minor changes to definitions applicable to the
rural housing market.\11\
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\7\ 74 FR 38572 (Aug. 4, 2009).
\8\ 75 FR 32099 (June 7, 2010).
\9\ 80 FR 79182 (Dec. 18, 2015).
\10\ 81 FR 96242 (Dec. 29, 2016); 12 CFR part 1282, subpart C.
\11\ 88 FR 23559 (Apr. 18, 2023).
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Overview of the current regulation. The existing regulation
requires each Enterprise to adopt a three-year Underserved Market Plan
(Plan), subject to FHFA review and non-objection. FHFA thereafter
monitors Enterprise
[[Page 37850]]
performance against their Plans, assigns annual performance ratings for
each underserved market, and, based on those ratings, determines
whether the Enterprise has complied with its Duty to Serve in each
underserved market. The regulation's planning and evaluation process
requirements are supplemented by Evaluation Guidance published
periodically by FHFA. If an Enterprise fails to comply with its Duty to
Serve any underserved market, FHFA may bring a statutorily prescribed
enforcement action.
Plan development; selection of eligible activities. Each Plan must
state the activities the Enterprise will undertake in each underserved
market to fulfill its Duty to Serve, along with one or more objectives
(i.e., specific actions) the Enterprise will carry out to complete each
activity.\12\ Notably, the existing regulation specifies activities
that are eligible to be included in Enterprise Plans for each
underserved market. The activities are divided among three categories:
Statutory Activities, Regulatory Activities, and Additional Activities
(each an ``Activity''). The category of Statutory Activities is
applicable to the affordable housing preservation market only and
covers activities related to eight federal affordable housing programs
listed in the Safety and Soundness Act or a comparable state or local
program.\13\ Regulatory Activities cover fifteen activities that FHFA
determined by regulation are eligible for Duty to Serve credit in the
designated market.\14\ Additional Activities are other activities
proposed by an Enterprise in its Plan and determined by FHFA on a case-
by-case basis to be eligible for Duty to Serve credit.\15\
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\12\ 12 CFR 1282.32.
\13\ 12 CFR 1282.34(c); see also 12 U.S.C. 4565(a)(1)(B)(i)-
(ix).
\14\ 12 CFR 1282.33(c), 1282.34(d), and 1282.35(c).
\15\ 12 CFR 1282.33(d), 1282.34(e), and 1282.35(d).
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For each Plan cycle, the existing regulation requires FHFA to
publish Evaluation Guidance that, among other things, specifies the
minimum number of Statutory or Regulatory Activities the Enterprises
must consider for each underserved market.\16\ For this purpose,
``consider'' means that the Enterprise must explain in its Plan how it
will undertake the Activity or why it will not undertake the Activity.
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\16\ 12 CFR 1282.32(d) and Appendix A in the Duty to Serve
Evaluation Guidance 2025-8 (August 18, 2025), (hereinafter
``Evaluation Guidance''), available at https://www.fhfa.gov/document/dts-evaluation-guidance-2025-8.pdf.
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Each Activity that will be undertaken must be supported by at least
one objective that is described in the Plan.\17\ Objectives must be
strategic, measurable, achievable considering market opportunities,
realistic considering the effort required for achievement, and time
bound.\18\ For each objective, the Enterprise must designate in its
Plan one of four statutory evaluation areas-outreach, loan product,
loan purchase, or investments and grants--under which the Enterprise is
seeking Duty to Serve credit.\19\
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\17\ 12 CFR 1282.32(e).
\18\ 12 CFR 1282.32(e).
\19\ 12 CFR 1282.36(b).
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FHFA review and non-objection. The existing regulation establishes
a review and non-objection process that begins with each Enterprise
submitting its proposed Plan to FHFA. Thereafter, FHFA must publish the
proposed Plans for public comment.\20\ The Enterprises may revise their
proposed Plans based on public input and must address FHFA's comments
before FHFA issues a non-objection.\21\ After FHFA is satisfied that
all of its comments on an underserved market in a proposed Plan have
been addressed, FHFA will provide a non-objection to the Plan for that
market. Ultimately, FHFA issues three non-objections to each
Enterprise, one for each underserved market in the Plan.
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\20\ 12 CFR 1282.32(g).
\21\ 12 CFR 1282.32(g)(4), (5).
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The existing regulation allows an Enterprise to request to modify
its Plan at any time during the three-year term, subject to FHFA review
and non-objection.\22\ FHFA may also require an Enterprise to modify
its Plan during the three-year term.\23\ Instances in which FHFA might
require modification include significant changes in market or
regulatory conditions, such as unexpected obstacles or opportunities,
or safety and soundness concerns. In practice, FHFA has established an
annual process where an Enterprise aggregates its requests to modify
its Plan and submits all requests to FHFA on or before a date specified
in the Evaluation Guidance.
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\22\ 12 CFR 1282.32(h).
\23\ Id.
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FHFA evaluation and ratings. Consistent with the statutory
requirements, the existing regulation establishes a framework for FHFA
to evaluate and rate each Enterprise's compliance with the Duty to
Serve in each underserved market. Under that framework, FHFA annually
evaluates each Enterprise's performance under its Plan, based on
quantitative and qualitative assessments of the Enterprise's
accomplishment of the objectives for each underserved market, and
considers any opportunities FHFA provided for the Enterprises to earn
extra credit.\24\
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\24\ 12 CFR 1282.36(c).
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The existing regulation also requires FHFA to describe in the
Evaluation Guidance how it will conduct quantitative and qualitative
assessments, the role of extra credit, how final ratings will be
determined, and other matters.\25\ In practice, FHFA updates the
Evaluation Guidance from time to time to describe its expectations for
what should be included in the Plans and related procedures, in
addition to describing the content required by regulation. Over three
Plan cycles between 2017 and 2025, FHFA published eight versions of the
Evaluation Guidance.
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\25\ 12 CFR 1282.36(d).
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C. FHFA Review of the Current Program
Scope of review. Since the existing regulation was finalized in
2016, FHFA has taken steps to assess its impact as part of widescale
regulatory reviews and targeted initiatives focused on the Duty to
Serve Program. In accordance with Executive Order 13579 (Regulation and
Independent Regulatory Agencies), every five years FHFA solicits public
comment on the operation of its existing significant regulations to
make the Agency's regulatory program more effective or less burdensome
in achieving statutory and regulatory objectives.\26\ More recently,
Executive Order 14219 (Ensuring Lawful Governance and Implementing the
President's ``Department of Government Efficiency'' Deregulatory
Initiative),\27\ required each agency including FHFA to undertake a
comprehensive review of its regulations considering, among other
things, the statutory bases for the authority expressed and interpreted
and significant regulatory costs imposed on private parties in light of
the public benefits conferred.
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\26\ See 77 FR 10351 (Feb. 22, 2012), setting forth FHFA's
Regulatory Review Plan.
\27\ 90 FR 10583 (Feb. 25, 2025).
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Specifically with regard to the Duty to Serve Program, in the past
ten years FHFA has hosted 24 public listening sessions and engaged with
members of the public, industry participants, and other stakeholders on
the successes and challenges of the Program. FHFA also routinely
engages with the Enterprises to better understand impediments to the
development and execution of their Plans and other barriers to the
provision of mortgage liquidity in the underserved markets. While that
work has been
[[Page 37851]]
ongoing, the fortuitous timing of the issuance of Executive Order 14394
(Removing Regulatory Barriers to Affordable Home Construction) (``E.O.
14394'') has enabled FHFA to also consider the policies and priorities
of that E.O. in reviewing the existing regulation and developing the
proposed rule.\28\ Among other things, E.O. 14394 directs FHFA to take
action to reform and eliminate unduly burdensome or costly energy
efficiency improvement standards for Duty to Serve properties and to
consider eliminating unduly burdensome rules and reforming programs
that constrain residential development and impede housing
affordability, including with respect to regulations like the Duty to
Serve regulation that apply to personal property (chattel) loans for
manufactured housing.
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\28\ 91 FR 13207 (Mar. 18, 2026).
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Market context. The current condition of the underserved markets
provides useful context for FHFA's review of the regulatory framework
and engagements with stakeholders. Each market poses a unique set of
opportunities and challenges. The manufactured housing market is
inherently affordable, but significant financing hurdles prevent many
buyers from entering the market. \29\ Borrowers, particularly those
seeking personal property (chattel) loans, face a 65.6% denial rate
compared to just 8.8% for site-built homes. Even when approved, these
borrowers are often subject to higher interest rates--averaging 9.24%
for personal property loans versus 6.63% for traditional mortgages--
creating a ``financing gap'' that frequently offsets the lower purchase
price of the home itself.\30\
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\29\ The existing regulation focuses on manufactured homes as
defined in section 603(6) of the National Manufactured Housing
Construction and Safety Standards Act of 1974, as amended (42 U.S.C.
5401 et. seq.), which are commonly referred to as ``HUD Code homes''
because they must meet standards set by the U.S. Department of
Housing and Urban Development (HUD). The manufactured housing market
serves over 20 million American families as a vital source of
unsubsidized affordable housing. Cost-efficiency remains its primary
driver; the average cost per square foot for a manufactured home
ranges from $79 for single-section to $87 for multi-section units,
significantly lower than the $169 average for site-built housing.
While production has grown steadily over the last decade, current
volumes remain well below the peaks of the 1980s and 1990s, when
these homes represented a full quarter of all single-family
construction. See MH Insider, ``Manufactured Housing Industry Trends
and Statistics'' (April 28, 2025), available at https://mhinsider.com/manufactured-housing-industry-trends-statistics/; See
Texas Manufactured Housing Association, ``Manufactured Home vs Site-
Built Cost Comparison 2024--Price Per Square Foot Analysis'' (July
29, 2025), available at https://www.texasmha.com/manufactured-home-vs-site-built-cost-comparison-price-per-square-foot-analysis; See
Harvard University Joint Center for Housing Studies, ``Five Barriers
to Greater Use of Manufactured Housing for Entry-Level
Homeownership'' (January 23, 2024), available at https://www.jchs.harvard.edu/blog/five-barriers-greater-use-manufactured-housing-entry-level-homeownership.
\30\ FHFA analysis of 2024 Home Mortgage Disclosure Act (HMDA)
data. See also The Urban Institute, ``Challenges to Obtaining
Manufactured Home Financing'' (June 2018), available at https://www.urban.org/sites/default/files/publication/98687/challenges_to_obtaining_manufactured_home_financing_0.pdf.
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Communities in the rural housing market often lack a robust banking
infrastructure, leaving residents with fewer mortgage products and
services than their urban counterparts. Supply of quality housing is
limited due to an aging housing stock that often exceeds its useful
life.\31\ By some estimates home prices in rural areas increased by
more than 35 percent between March 2020 and March 2023--double the rate
of appreciation seen in the three years preceding the COVID-19
pandemic. While price appreciation has since moderated, the compounding
effect of higher values and a significantly higher interest rate
environment has been a worsening of affordability.\32\ The annual
income required to afford a median-priced home in rural counties has
more than doubled; as of late 2025, households may need to earn
approximately $75,000 to afford a home, compared to roughly $36,000 in
2019.\33\ This shift clearly places significant pressure on low-to-
moderate-income families seeking to remain in or move to rural
communities.\34\
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\31\ Recent analysis of Home Mortgage Disclosure Act (HMDA) data
indicates that mortgage denial rates and pricing in rural areas
remain elevated compared to urban areas, largely due to credit
history and appraisal challenges. See National Rural Housing
Coalition, ``Barriers to Affordable Rural Housing'' (December 18,
2012), available at https://ruralhousingcoalition.org/barriers-to-affordable-rural-housing/; See Consumer Financial Protection Bureau,
``2023 Mortgage Market Activity and Trends'' (December 13, 2024),
available at https://www.consumerfinance.gov/data-research/research-reports/2023-mortgage-market-activity-and-trends/.
\32\ See Consumer Financial Protection Bureau (CFPB), ``Data
Spotlight: The Impact of Changing Mortgage Interest Rates''
(September 17, 2024), available at https://www.consumerfinance.gov/
data-research/research-reports/data-spotlight-the-impact-of-
changing-mortgage-interest-rates/
#:~:text=Effects%20of%20elevated%20interest%20rates,$2%2C399.
\33\ See Redfin News, ``The Housing Affordability Crisis Is
Accelerating Fastest in Rural America'' (November 20, 2025),
available at https://www.redfin.com/news/press-releases/the-housing-
affordability-crisis-is-accelerating-fastest-in-rural-america/
#:~:text=Rural%20homebuyers%20need%20to%20earn,than%20big%20cities%20
and%20suburbs.
\34\ See Fannie Mae, ``Moving to the Country: Unpacking the
Persistent Increase in Rural Housing Demand Since the Pandemic''
(November 8, 2024), available at https://www.fanniemae.com/research-and-insights/publications/housing-insights/unpacking-persistent-increase-rural-housing-demand-pandemic; See Redfin News, ``The
Housing Affordability Crisis Is Accelerating Fastest in Rural
America'' (November 20, 2025), available at https://www.redfin.com/news/press-releases/the-housing-affordability-crisis-is-accelerating-fastest-in-rural-america/.
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Finally, the preservation of existing affordable housing stock is
reaching a critical point. The supply of deeply affordable rental
options has significantly contracted; between 2014 and 2024, the market
saw a net loss of 2.5 million units with inflation-adjusted rents below
$600 (affordable to a household earning $24,000 annually).\35\ As the
nation's rental stock ages at an unprecedented rate, a growing number
of low-income households are increasingly restricted to substandard
housing options. This physical deterioration creates a secondary
crisis: the capital required for necessary rehabilitation is often so
high that it threatens the financial viability of maintaining the
units' long-term affordability.\36\
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\35\ See Harvard University Joint Center for Housing Studies,
``America's Rental Housing 2026'' (2026), available at https://www.jchs.harvard.edu/sites/default/files/reports/files/Harvard_JCHS_Americas_Rental_Housing_2026.pdf.
\36\ See Harvard University Joint Center for Housing Studies,
``America's Rental Housing 2024'' (2024), available at https://www.jchs.harvard.edu/sites/default/files/reports/files/Harvard_JCHS_Americas_Rental_Housing_2024.pdf.
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Compounding the physical decline in affordable housing units is a
looming ``subsidy cliff,'' with over half a million Low-Income Housing
Tax Credit (LIHTC) properties set to exit their compliance periods
between 2025 and 2038.\37\ This expiration places hundreds of thousands
of units at risk of converting to market-rate pricing, potentially
displacing low-income tenants. To combat this, industry participants
are diversifying their preservation strategies beyond traditional tax
credits, increasingly utilizing private-activity bonds and specialized
products, such as Freddie Mac's Workforce Housing Preservation tool, to
maintain long-term affordability.\38\
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\37\ See Yardi, ``Yardi Matrix Focuses on Upcoming LIHTC
Affordability Restriction Loss'' (March 3, 2025), available at
https://www.yardi.com/news/press-releases/yardi-matrix-focuses-on-
upcoming-lihtc-affordability-restriction-loss/
#:~:text=Yardi%20Matrix's%20new%20affordable%20housing,also%20expire%
20in%20that%20time.
\38\ See Affordable Housing Finance, ``Saving the Stock''
(September 29, 2025), available at https://www.housingfinance.com/developments/saving-stock; See Freddie Mac, ``Workforce Housing
Preservation,'' available at https://mf.freddiemac.com/docs/workforce-housing-preservation.pdf.
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Areas for improvement. FHFA regulatory and program reviews,
interactions with stakeholders, and evaluation of market context reveal
that, while the Enterprises have made
[[Page 37852]]
meaningful progress in serving the underserved markets, the need for
housing that is affordable to very low-, low-, and moderate-income
families in those markets continues to be acute, structural barriers
persist, and reforms to the Duty to Serve Program can help address
these challenges. These indicia of the persistent need for affordable
housing in the underserved markets support a renewed and heightened
focus on regulatory efficiency, to ensure that Enterprise resources are
used to benefit low- and moderate-income households and are not
diverted unnecessarily to meet administrative requirements. They also
support a reconsideration of regulatory effectiveness, to ensure that
the Duty to Serve regulation encourages innovation with respect to the
types of activities identified by statute as beneficial. Those
principles--improving regulatory efficiency to maximize the benefit of
Enterprise Duty to Serve resources to very low-, low-, and moderate-
income families, and encouraging the Enterprises to innovate with
regard to activities set forth by statute--informed FHFA's development
of the proposed rule.
FHFA believes there are several areas where the existing Duty to
Serve regulation could be improved. In brief, the existing regulation
may impose higher than necessary administrative costs with diminishing
returns for the underserved markets and may impose regulatory
compliance obligations that spread the Enterprises' resources too thin
or otherwise impeding their ability to deploy the scale of capital
necessary to significantly improve the secondary market in any single
underserved market.
By setting forth Statutory and Regulatory Activities in regulation,
specifying the minimum number of Activities, by category, that each
Enterprise must address in its Plan,\39\ and awarding points based on
the completion of objectives underlying those Activities, the current
approach was designed to reduce uncertainty and ensure coverage of
certain markets. However, it may have incentivized a ``compliance-
centric'' mindset that prioritizes the fulfillment of granular
regulatory benchmarks over meaningful market impact. For example, the
Enterprises' current Plans collectively describe 44 Activities and 72
objectives supporting these Activities, each of which must be aligned
with parameters established by the existing regulation and the
Evaluation Guidance, and many of which may have limited market impact.
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\39\ For example, for the Enterprises' current Underserved
Markets Plans, FHFA required each Enterprise to address all four
Regulatory Activities related to manufactured housing; a total of
five Statutory and Regulatory Activities related to the affordable
housing preservation market (for which the existing regulation sets
forth nine Statutory Activities and seven Regulatory Activities);
and all four Regulatory Activities related to rural housing. See
Evaluation Guidance, Appendix A and p. 6., available at https://www.fhfa.gov/document/dts-evaluation-guidance-2025-8.pdf.
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FHFA is also concerned that prescribing Activities, some of which
focus on narrow geographies or specific populations, may have had the
unintended consequence of limiting the Enterprises and their ability to
support the holistic health of the broader secondary market for very
low-, low-, and moderate-income families. Although the existing
regulation permits the Enterprises to propose Additional Activities,
and thus is not intended to stifle innovation, it is undeniable that
its primary focus is on the listed, prescribed, Statutory and
Regulatory Activities. And the sheer volume of disparate mandates--
ranging from specific energy-efficiency targets to niche preservation
silos--could create excessive administrative overhead that limits the
Enterprises' ability to pivot toward emerging market needs.
Additionally, FHFA has observed how certain regulatory provisions
may present unintended impediments to providing mortgage liquidity to
the underserved markets. One example is the calculation of median
income under the existing regulation, which is used to determine
whether a loan purchase supports a very low-, low-, or moderate-income
family. This calculation has resulted in the exclusion of loans to
families whose income, calculated in accordance with the existing
regulation, is above the area median but lower than the national
market. This occurs in rural communities and other underserved areas
where concentrations of low-income families or persistent poverty
depress the median income. For example, Freddie Mac developed its
HeritageOne product to provide conventional financing in Indian areas,
which have long been lacking in credit availability in part due to the
lack of products. Even as lenders have adopted the product, many loans
are ineligible for Duty to Serve credit because the widespread poverty
in Indian areas lowers median income (as calculated under the existing
regulation) such that a family that would be low-income in other parts
of the country is above the required threshold in the Indian area. This
occurs not only in Indian areas, but also other rural communities and
underserved areas where there are concentrations of low-income
families, which is itself a statutory geographic focus that the
Enterprises must serve.
Another unintended impediment is the complex calculation required
to assess affordability of manufactured housing communities required by
the existing regulation. While the calculation has not impeded either
Enterprise from purchasing manufactured housing community blanket
loans, it adds an unnecessary cost burden to the Enterprises and FHFA
given that manufactured housing is a naturally occurring source of
affordable housing.
III. Overview of the Proposed Rule
The proposed rule aims to encourage and enable the Enterprises to
better serve the needs of very low-, low-, and moderate-income families
in the underserved markets through greater innovation and with less
administrative burden. To those ends, FHFA is proposing to remove
prescribed Activities and instead would permit each Enterprise to take
any ``eligible action,'' meaning any action that is consistent with
carrying out the statutory Duty to Serve and that has not been
determined to be ineligible by FHFA, by regulation or after review. As
in the existing regulation, the proposed rule would identify some
ineligible actions (which are discussed more fully below).
Other changes would also encourage innovation and reduce burden.
FHFA is proposing to remove unnecessary conditions on eligible loan
purchases, revise the method for calculating median income to more
appropriately address families in areas of concentrations of low-income
families, update the approach to determining affordability for
manufactured housing communities, and reduce procedural requirements
for developing and reviewing Plans. FHFA is also proposing revisions to
its evaluation and rating process to better focus on whether the
Enterprise met the needs of each underserved market, rather than
whether it met its self-identified Plan goals; and to incorporate
throughout the regulation a number of ``best practices'' identified in
the Evaluation Guidance that have become current practice and could be
expressed in regulation. Finally, for the convenience of practitioners,
FHFA is proposing to remove regulatory provisions that are no longer
relevant because they address submission of the Enterprises' first
Underserved Markets Plans, and to relocate all regulatory requirements
related to the Enterprises' Duty to Serve from subpart C of part 1282,
Enterprise
[[Page 37853]]
Housing Goals and Mission, to a new part 1283, Enterprise Duty to
Serve.
This section details several technical and administrative revisions
intended to streamline the regulation, including the restriction on
eligible activities, the introduction of interpretive definitions, and
the relocation of the Duty to Serve rule from 12 CFR part 1282 to part
1283. While this section focuses on the rationale for these rescissions
and structural changes, the Section-by-Section Analysis provides a
detailed discussion of the proposed new regulatory text.
Removal of prescribed Activities. A significant proposed change is
the removal of the Activities framework, which would include
eliminating the lists of Statutory and Regulatory Activities, as well
as the related concepts of Additional Activities, ``extra credit,'' and
consideration of a ``minimum number'' of Activities. In their place,
FHFA proposes to permit an Enterprise to undertake any action that (1)
is consistent with its Duty to Serve and (2) has not been deemed
ineligible by FHFA by regulation or after case-by-case review. For
transparency, as in the existing regulation, FHFA intends to list
ineligible actions and conditions or characteristics that would make an
action ineligible in the regulation to the greatest extent
practicable.\40\
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\40\ In the existing regulation, see, e.g., 12 CFR 1282.37(b),
listing activities that receive no credit; and (c)(1), listing
conditions or characteristics of permanent construction take-out
loans that must be met for an Enterprise to receive credit.
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By eliminating a list of Activities prescribed in regulation and
eliminating the requirement that each Enterprise address a certain
number of Activities in its Plan, FHFA intends to encourage each
Enterprise to focus on innovative, high-impact initiatives that target
the liquidity needs of each underserved market as a whole, rather than
pursuing a high volume of disparate, generally small-scale Activities
that are encumbered by regulatory requirements. FHFA also notes that
removing Regulatory Activities related to water and energy efficiency
improvement is consistent with policies of E.O. 14394, which seeks to
reform or eliminate unduly burdensome or costly energy-efficiency,
water-use, or alternative energy requirements in the Duty to Serve
Program.
If the Activities framework is removed, related definitions set
forth in the existing regulation would also be removed. For example, if
Regulatory Activities related to ``small multifamily rental
properties'' are removed, there is no need for a definition of ``small
multifamily rental property'' or for other defined terms uniquely used
in the description of that Activity (such as ``community development
financial institution'').\41\ Similarly, if Regulatory Activities
related to housing for ``high-needs rural populations'' and financing
by ``small financial institutions'' of housing in rural areas are
removed, there is no need for a definition of ``high-needs rural
population'' and its two components, members of a ``Federally
recognized Indian tribe'' or ``agricultural worker,'' \42\ or for a
definition of ``small financial institution.'' Likewise, removing the
concept of ``extra credit'' would also lead to removal of the
definitions ``residential economic diversity activity,'' ``high
opportunity area,'' ``mixed-income housing,'' and ``area of
concentrated poverty.'' \43\
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\41\ See 12 CFR 1282.34(d)(1) and 1282.35(c)(4); see also 12 CFR
1282.1.
\42\ See 12 CFR 1282.1, 1282.35(c)(2), and 1282.35(c)(3).
\43\ 12 CFR 1282.32(d)(3), 1282.36(c), 1282.36(c)(3),
1282.38(e)(2), 1282.38(f), and 1282.38(f)(2).
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FHFA recognizes that the removal of some Regulatory Activities,
such as the rural market Regulatory Activity for high-needs rural
populations, which is directed to the housing needs of members of
Federally recognized Indian tribes located in Indian areas and
agricultural workers, could appear to negatively impact the populations
addressed.\44\ FHFA does not believe there would be any disadvantage to
those populations if part 1283 were adopted as proposed. To the
contrary, eliminating the Regulatory Activity would remove
administrative hurdles to serving those populations and other residents
in rural areas at the targeted income levels. For example, instead of
directing resources to verify that borrowers are agricultural workers,
an Enterprise would be able to direct resources to developing loan
products that best serve all families at the targeted income levels who
live in rural areas. Moreover, to ensure that residents of an ``Indian
area'' are not overlooked, the definition for ``high-needs rural
region'' would be expanded to include Indian areas, and, as described
below, changes would be made to the ``rural area'' definition to
emphasize that segment of the rural market. Unlike members of federally
recognized Indian tribes living in Indian areas, agricultural workers
are increasingly less tied to a specific geography. In the past twenty
years there has been a marked shift to ``off-farm'' housing for
agricultural workers; currently 83 percent of farmworkers live in
private market housing, and only 14 percent of farmworkers live in
grower-owned units.\45\ Nonetheless, agricultural workers continue to
be among the poorest rural populations in the country, often living in
overcrowded and unaffordable conditions.\46\ FHFA encourages the
Enterprises, who have made investments of $132 million supporting 829
units for agricultural workers in rural areas,\47\ to continue to work
to increase housing opportunities for the lowest-income rural
populations, including agricultural workers.
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\44\ 12 CFR 1282.35(c)(2).
\45\ See Housing Assistance Council, ``Creating a Better
Understanding of Farmworker Communities and Their Housing
Conditions'' (April 2024), p. 16, available at https://ruralhome.org/wp-content/uploads/2024/05/HAC-FW-Rural-Research-Brief_Final_4.30.24.pdf.
\46\ See Housing Assistance Council, ``Creating A Better
Understanding of Farmworker Communities and Their Housing
Conditions'' (April 2024), pp. 14-18, available at https://ruralhome.org/wp-content/uploads/2024/05/HAC-FW-Rural-Research-Brief_Final_4.30.24.pdf.
\47\ FHFA data.
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Removal of ``extra credit-eligible activities.'' Consistent with
the removal of prescribed lists of Statutory and Regulatory Activities,
FHFA is proposing to eliminate the concept of ``extra credit-eligible
activities'' set forth in the existing regulation at Sec.
1282.36(c)(3). Currently, FHFA may provide extra credit for residential
economic diversity activities included in a Plan and may designate
other Regulatory or Statutory Activities for extra credit in Evaluation
Guidance. In contrast, under the proposed approach, if there is no
bounded set of actions, there are no actions to which ``extra'' credit
may be applied. Specific incentives for ``residential economic
diversity'' activities would no longer be necessary: the Enterprises
could pursue such activities where they advance statutory objectives,
and FHFA would evaluate them based on the results achieved.
Removal of certain conditions on eligible loan purchases. FHFA is
proposing to remove the restriction at Sec. 1282.37(b)(3) on
subordinate multifamily liens (which, for Duty to Serve purposes, were
limited to subordinate liens originated for certain energy and water
improvements) to instead provide the Enterprises with expanded
flexibility to support financing multifamily properties. Although FHFA
previously noted that the use of subordinate loans to preserve
affordability was not standard practice and may not be an effective
tool,\48\ over the past decade subordinate liens have increasingly
become an important tool to preserve affordability. Since the existing
regulation was finalized in
[[Page 37854]]
2016, multifamily construction and operating costs have increased
substantially; in particular, during the COVID-19 pandemic,
construction costs increased by 17.5 percent and operating costs
increased by 10.4 percent.\49\ The cost increases have further
compounded the need for additional financing to fully fund development
or preservation of multifamily properties; these subordinate funding
sources often include affordability restrictions.\50\
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\48\ 81 FR at 96288.
\49\ Michael J. Novogradac, ``Affordable Housing Developers
Facing Increased Development Challenges,'' Novogradac Journal of Tax
Credits 15(5) (2024), available at https://www.novoco.com/periodicals/articles/affordable-housing-developers-facing-increased-development-challenges.
\50\ Jenna Davis and Sarah Karlinsky, ``The Cost of
Fragmentation: A Comparison of State Affordable Housing Finance
Governance Systems.'' UC Berkeley Terner Center for Housing
Innovation (2026), https://ternercenter.berkeley.edu/blog/the-cost-of-fragmentation-a-comparison-of-state-affordable-housing-finance-governance-systems/.
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The Agency also proposes to remove the restriction at Sec.
1282.37(b)(5) that permitted LIHTC equity investments only in rural
areas, to expand eligibility for LIHTC equity investments to all
underserved markets.\51\ The Agency believes the expanded eligibility
will help drive liquidity and innovation in the underserved markets.
Finally, FHFA is proposing to remove the statement at Sec. 1282.39(f)
that the purchase of a seasoned mortgage will be treated as a mortgage
purchase because it was unnecessary, and those purchases continue to be
eligible for credit.
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\51\ In this regard, FHFA notes that the preamble to the 2016
final rule states FHFA's interpretation that the affordable housing
preservation statutory activity related LIHTC, 12 U.S.C.
4565(a)(1)(B)(viii), ``appl[ies] to debt, as it requires the
Enterprises to `develop loan products and flexible underwriting
guidelines to facilitate a secondary market' to preserve LIHTC-
subsidized properties.'' 81 FR at 96264. In reasoning that the
Enterprises' statutorily obligation with regard to preserving LIHTC-
subsidized properties addressed debt only (i.e., did not impose any
obligation with regard to LIHTC equity investments), FHFA's
interpretation supported a separate policy decision to limit
Enterprise DTS-eligible LIHTC equity investments to rural areas ``to
drive Enterprise innovation in rural markets'' in particular. Id. at
96282. In sum, in 2016 FHFA did not interpret 12 U.S.C.
4565(a)(1)(B)(viii) to prevent the Enterprises from making equity
investments in LIHTC-subsidized properties to preserve affordable
housing, provided such investments are otherwise permitted by the
Enterprises' charter acts and are safe and sound.
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Removal of outdated requirements. Some provisions in the existing
regulation are outdated because they address the development and
submission of the Enterprises' initial Duty to Serve Plans in 2018.
These provisions would not be included in new part 1283 and would be
effectively removed from the Duty to Serve regulation. This includes
provisions in Sec. 1282.32(g) concerning the submission process,
public input period, and FHFA review of the first proposed Plans, as
well as provisions in Sec. 1282.36(d) regarding timelines for issuing
Evaluation Guidance for the initial Plans. As the Duty to Serve Program
has been operational since 2018, references to these initial procedures
are no longer applicable or relevant.
Relocation of regulatory requirements. Finally, FHFA is proposing
to remove all regulatory requirements related to the Enterprises' Duty
to Serve from part 1282, Enterprise Housing Goals and Mission, and
locate them in new part 1283, Enterprise Duty to Serve. FHFA believes a
new part dedicated to the Enterprises' Duty to Serve could make
locating relevant regulatory requirements and associated definitions
easier for practitioners. Distinct parts would acknowledge that
regulations implementing Enterprise housing goals and Duty to Serve are
established by different legal authorities and operate under different
functional models. Specifically, Duty to Serve operates (and would
continue to operate) through a strategic planning process involving
multi-year plans and qualitative evaluations, while housing goals are
primarily defined by annual numerical targets. If new part 1283 is
adopted, part 1282 would be renamed Enterprise Housing Goals.
Part 1282 is structured so that all definitions appear at Sec.
1282.1 (subpart A). In conjunction with relocating all Enterprise Duty
to Serve regulatory requirements from part 1282 to new part 1283, FHFA
proposes to remove from part 1282 definitions of terms used exclusively
for Duty to Serve provisions. Those definitions would serve no purpose
in part 1282 because the terms defined would no longer be used in that
part. This is a housekeeping step and would not impact the operation of
subpart B ([Enterprise] Housing Goals) or subpart D (Reporting
requirements) of part 1282.
IV. Section-by-Section Analysis of Proposed Part 1283
A. Authority and Purpose--Sec. 1283.1
Section 1283.1 explains that the proposed rule would implement
section 1335 of the Safety and Soundness Act, 12 U.S.C. 4565, which
establishes the Enterprise's duty to serve and requires FHFA to
establish, by regulation, a method for annually evaluating and rating
each Enterprise's compliance with this duty.
B. Definitions--Sec. 1283.2
(1) Overview
Proposed Sec. 1283.2 contains definitions of terms that would be
used in part 1283, including new terms and terms relocated from part
1282 that relate exclusively to the Duty to Serve Program. Definitions
of other terms in part 1282 that are used for both Enterprise housing
goals and Enterprise Duty to Serve, which would also be used in new
part 1283, and which FHFA intends to be applied consistently across
both parts, would be restated in new Sec. 1283.2.
In developing this proposal, FHFA has also observed that some terms
used in the existing regulation and defined in Sec. 1282.1 are not
necessary to define in proposed part 1283 because the term either is
already defined by statute, by FHFA in part 1201, General Definitions
Applying to All [FHFA] Regulations, or has a commonly understood
meaning. FHFA is not proposing to relocate those terms and definitions
to new part 1283; however, it is also not proposing to remove them from
Sec. 1282.1 at this time.
(2) Underserved Markets and Related Terms
Underserved markets. FHFA is proposing to define underserved market
and each of the three statutory underserved markets for the convenience
of the reader. These definitions are intended to fully implement, but
not to limit or expand, statutory descriptions of the markets each
Enterprise has a duty to serve. The existing regulation uses the term
``underserved markets'' but does not define it. In addition, the
existing regulation incorporates statutory matter describing each
underserved market in regulatory provisions addressing that market (see
Sec. Sec. 1282.33, on the manufactured housing market; 1282.34, on the
affordable housing preservation market; and 1282.35, on the rural
housing market).
Affordable housing preservation market. FHFA proposes to define the
affordable housing preservation market as the market for preserving
residential housing that is affordable to very low-, low-, and
moderate-income families by preserving existing affordability
restrictions and supporting sustainable affordability mechanisms. FHFA
believes that definition is consistent with the statutory description
at 12 U.S.C. 4565(a)(1).\52\
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\52\ 12 U.S.C. 4565(a)(1)(B).
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(3) Manufactured Housing Market and Related Terms
FHFA proposes to define the manufactured housing market as the
market for residential properties that provide housing for very low-,
low-, and moderate-income families in
[[Page 37855]]
manufactured homes and manufactured housing communities.\53\ The terms
manufactured home and manufactured housing community would be relocated
from the existing regulation to Sec. 1283.2 without substantive
change.
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\53\ 12 U.S.C. 4565(a)(1)(A).
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Under the existing regulation, the term manufactured home is
defined to include only HUD Code homes. FHFA recognizes that other
types of non-site-built homes, including modular homes, serve as a
source of new affordable supply and are often constructed in the same
factories as traditional HUD manufactured homes. The Agency requests
comment on whether the definition of manufactured home should be
expanded to include a broader array of non-site-built homes such as
modular homes, panelized homes, and other types of factory-built homes
that are subject to state or local building codes. FHFA does not
believe that appropriate methodologies exist for assuring the
structural integrity of pre-HUD Code homes and is not reconsidering
including those homes in the manufactured home definition at this
time.\54\
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\54\ 81 FR at 96250. FHFA has ``acknowledge[d] the financing
needs for owners of pre-HUD Code homes'' and stated that it ``may
reconsider the matter in a future rulemaking if appropriate
methodologies can be found for assuring the structural integrity of
the homes.''
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(4) Rural Housing Market and Related Terms
FHFA proposes to define the rural housing market as the market for
residential properties that provide housing for very low-, low-, and
moderate-income families in rural areas. The term rural area is used
and defined in the existing regulation; the definition of that term
would be relocated to new part 1283 and, if amended as proposed,
expanded in scope.
Specifically, FHFA is proposing to revise the rural area definition
to include high-needs rural regions and thereby make clear that those
regions are a segment of the rural housing market. The proposed rule
would also amend the definition of high-needs rural region to include
Indian area. Other terms defined in Sec. 1282.1 and used in the
definitions rural area and high-needs rural region would be relocated
to Sec. 1283.2. These proposed changes are discussed below.
High-needs rural region. The existing regulation identifies
activities that support housing in high-needs rural regions (defined in
the existing regulation as Middle Appalachia,\55\ the Lower Mississippi
Delta, colonia census tracts, and persistent poverty counties) \56\ and
housing for high-needs rural populations (defined as members of a
Federally recognized Indian tribe located in an Indian area and
agricultural workers living in rural areas) as two of the four
Regulatory Activities eligible for credit in the rural market.\57\
Although the Safety and Soundness Act does not limit the rural market
that the Enterprises have a duty to serve, historically these
Regulatory Activities have been their focus. By eliminating those
Regulatory Activities and revising the definition of rural area, FHFA
aims to direct the Enterprises' efforts towards the rural market as a
whole. This change, along with expanding the definition of high-needs
rural region to include additional geographic areas associated with
high-needs populations, is intended to balance the widespread need for
liquidity in the rural market with the acute housing needs of
households in the high-needs rural regions.
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\55\ Middle Appalachia includes the three regions identified as
central (north central, central, and south central).
\56\ When the existing regulation was finalized in 2016, FHFA
committed to provide the Enterprises, and to post on FHFA's website,
a data file that lists all of the census tracts that are covered by
the definitions of Middle Appalachia, the Lower Mississippi Delta,
or are ``persistent poverty areas.'' 81 FR at 96274, 96275, and
96277. In practice, FHFA publishes maps and data sets that depict
all high-needs rural regions, also including colonia census tracts,
on its website. FHFA plans to continue that practice if new part
1283 is finalized as proposed.
\57\ The other Regulatory Activities eligible for credit in the
rural market are financing by small financial institutions of rural
housing and small multifamily rental properties in rural areas.
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Households in high-needs rural regions as defined in the existing
regulation face challenges such as a lack of affordable housing, lower
wages, and limited access to credit.\58\ Private capital is often
scarce due to small deal sizes, limited CRA incentives, and limited
lender participation due to perceived risk.\59\
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\58\ See National Low Income Housing Center, ``Rural America
Cannot Address Housing Needs without Federal Investments'' (2025),
available at https://nlihc.org/sites/default/files/UTF-8Rural%20Housing%20Needs%20Factsheet.pdf.
\59\ See ``Duty to Serve: FHFA Presents Snapshots from Fannie
Mae's and Freddie Mac's Duty to Serve Underserved Markets Plans for
High-Needs Rural Regions and Populations'' (2018), available at
https://www.fhfa.gov/sites/default/files/documents/DTS-High-Needs-Rural-Regions-and-Populations.pdf; See The Federal Reserve Bank of
Richmond, ``Barriers to Rural Investment'' (December 5, 2024),
available at https://www.richmondfed.org/region_communities/regional_data_analysis/regional_matters/2024/rm_12_05_24_barriers_rural_investment.
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Members of federally recognized Indian tribes living in an Indian
area face similar issues.\60\ In addition, Indian areas pose unique
challenges with land titling and lack of housing supply, among other
things.\61\ For those reasons, FHFA believes it is appropriate to
include Indian area within the high-needs rural regions definition.
During the 2016 rulemaking, both Enterprises proposed this approach in
comments on the proposed rule.\62\ FHFA, at the time, rejected this
proposal on the basis that it ``would be over-inclusive and would
direct support away from the [targeted] population.'' \63\ Given the
Agency's experience with the Duty to Serve Program over the past decade
and the continuing housing needs in Indian areas, including on fee
simple property, FHFA now believes those concerns are unfounded.
Because the term Indian area is already used and defined in the
existing regulation, FHFA is proposing to relocate that definition from
part 1282 to new part 1283.
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\60\ See U.S. Department of Housing and Urban Development (HUD),
``Housing Needs of American Indians and Alaska Natives in Tribal
Areas: A Report From the Assessment of American Indian, Alaska
Native, and Native Hawaiian Housing Needs'' (January 2017),
available at https://www.huduser.gov/portal/sites/default/files/pdf/HNAIHousingNeeds.pdf.
\61\ See U.S. Department of Housing and Urban Development (HUD),
``Mortgage Lending on Tribal Land: A Report From the Assessment of
American Indian, Alaska Native, and Native Hawaiian Housing Needs''
(January 2017), available at https://www.huduser.gov/portal/sites/default/files/pdf/nahsg-lending.pdf.
\62\ 81 FR at 96277.
\63\ Id.
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FHFA also considered whether any other region should be identified
as a high-needs rural region, generally understood as a rural area with
a high concentration of poverty, substandard housing conditions, and
particularly acute financing needs for affordable housing for low-
income households.\64\ FHFA observes that identifying additional
regions could result in missing some areas and that maintaining a
complete list in a regulation could prove infeasible. On the other
hand, FHFA is not currently proposing to remove identified regions from
the rule because by naming some areas FHFA better informs the public of
those types of regions it considers to be high-needs rural regions. For
those reasons, FHFA invites comments on whether the rule should
identify additional areas as high-needs rural regions, and if so what
those areas would be. FHFA also requests comment on whether the
Enterprises should be permitted to treat regions as high-needs rural
areas in their Plans, that are in
[[Page 37856]]
addition to the regions specifically identified in the rule.
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\64\ FHFA would also consider identifying such geographies as
high-needs rural regions even if they are within metropolitan
statistical areas, as part 1282 currently does with regard to
colonia census tracts. See 12 CFR 1282.1.
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Colonia census tract. FHFA is also proposing an amendment to the
colonia census tract definition intended to simplify it, and to make a
technical amendment to the definition of high-needs rural region. These
amendments are not intended to change the meaning of either colonia
census tract or the scope of the high-needs rural regions. In 2023,
FHFA published a final rule that added colonia census tract as a
defined term and amended the definition of high-needs rural region by
substituting colonia census tract for colonia.\65\ As a result of these
amendments, the existing regulation defines colonia census tract by
cross-reference to the separately defined term colonia. FHFA now
believes that the definition of colonia can be presented as part of the
colonia census tract definition and that doing so would make the
colonia census tract definition easier to understand. As proposed,
colonia census tract would be defined as ``a census tract that contains
an identifiable community that meets the definition of a colonia under
a federal, state, tribal, or local program.'' Additionally, prior to
the 2023 amendments, the term colonia appeared twice in the high-needs
rural region definition. However, the amended regulatory text
inadvertently substituted colonia census tract for colonia only once.
FHFA is proposing a technical amendment to correct that oversight.
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\65\ 88 FR 23559 (Apr. 18, 2023).
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(5) Proposed Disposition of Other Terms Used in the Existing Regulation
As previously noted, FHFA is proposing not to define terms in part
1283 that are used and defined in the existing regulation and that
would be used in part 1283, which are defined in the Safety and
Soundness Act or in FHFA's General Definitions rule at 12 CFR part
1201. Moreover, some statutorily-defined terms that are used only once
in part 1283, such as HOEPA mortgage, are not included in proposed
Sec. 1283.2 because reference to the statutory definition can be
included where the term is used in the regulatory provision. Finally,
FHFA does not propose to define in Sec. 1283.2 terms that are used and
defined in the existing regulation, which FHFA has determined have
commonly understood meanings (such as ``day'').
Terms proposed to be used in part 1283 and defined as currently set
forth in part 1282 are balloon note \66\ dwelling unit; family; lender;
low-income; manufactured home; median income; metropolitan area;
moderate-income; mortgage; mortgage purchase; mortgage revenue bond;
multifamily property; non-metropolitan area; owner-occupied;
participation; proprietary information; refinancing mortgage; rent;
rental unit; residence; secondary residence; single-family housing; and
very low-income. FHFA considered not defining many of these terms
because the Agency believes they are commonly understood, and requests
comment on which of these terms, if any, do not need a regulatory
definition.
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\66\ In some cases, FHFA is making a technical change to a
defined term to align the term with regulatory text. For example,
part 1282 defines the term balloon mortgage but uses the term
balloon note; defines the term multifamily housing but uses the term
multifamily property; and defines the term owner-occupied housing
but uses the terms owner-occupied unit and owner-occupied property.
Compare 12 CFR 1282.1 and 1282.37(d)(2), 1282.38(d)(2), and 1282(c)
and (c)(2), respectively. FHFA proposes to correct the defined terms
to balloon note, multifamily property, and owner-occupied in part
1283. At this time, the Agency is not proposing to update the term
in part 1282, but may do so in a future rulemaking.
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C. Enterprise Duty To Serve Program--Sec. 1283.3
(1) Overview
Section 1283.3 of the proposed rule would set forth the
Enterprises' statutory duty to serve and the statutory requirements for
carrying out that duty. This section would also establish the
Enterprises' authority to engage in any ``eligible action'' to meet
their duty to serve obligation.
(2) Duty in General, Sec. 1283.3(a); Program Requirements, Sec.
1283.3(b)
Section 1335 of the Safety and Soundness Act establishes two
statutory mandates for the Enterprises: section 1335(a) imposes the
duty to serve, while section 1335(b) details requirements for carrying
out that duty.\67\ As proposed, Sec. 1283.3(a) and (b) would set forth
these statutory mandates. By including substantive statutory
requirements in proposed Sec. 1283.3(a) and (b), FHFA aims to provide
all stakeholders with a singular reference point for Program
expectations, fostering transparency, accountability, and ultimately
better outcomes.
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\67\ 12 U.S.C. 4565(a) and (b).
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In Sec. 1283.3(a), FHFA is proposing a slightly re-phrased version
of language contained in section 1335(a) of the Safety and Soundness
Act to expressly state the Duty to Serve in the regulatory text.\68\
Section 1283.3(a) would require each Enterprise to provide leadership
in developing loan products and flexible underwriting guidelines that
facilitate a secondary market for mortgages for very low-, low-, and
moderate-income families in those markets, in order to increase the
liquidity of mortgage investments and improve the distribution of
investment capital available for mortgage financing in the manufactured
housing market, affordable housing preservation market, and rural
housing market.
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\68\ 12 U.S.C. 4565(a). The re-phrasing primarily involves
relocating a clause; no substantive change to the meaning of the
statutory language is intended.
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Section 1283.3(b) would incorporate the requirements for carrying
out the duty to serve in section 1335(b) of the Safety and Soundness
Act.\69\ In brief, proposed Sec. 1283.3(b) would require the
Enterprises to: (i) design programs and products that facilitate the
use of federal, state, and local governments assistance programs; (ii)
develop relationships with nonprofit and for-profit organizations that
develop and finance housing with state and local governments; (iii)
assist primary lenders to make housing credit available in areas with
concentrations of low-income and minority families, and assist insured
depository institutions to meet their CRA obligations; and (iv) develop
the institutional capacity to help finance low- and moderate-income
housing, including for first-time homebuyers.
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\69\ 12 U.S.C. 4565(b).
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(3) Authority To Take Any ``Eligible Action''
Section 1283.3(c)(1) of the proposed rule would establish the
authority of each Enterprise to take any action that is consistent with
the statutory duty to serve and that has not been determined to be
ineligible by FHFA, by regulation or after review. Actions determined
to be ineligible by regulation would be set forth in part 1283. For
transparency, from time to time, FHFA may publish a list of any other
actions that it has determined are ineligible with the Duty to Serve
after review.
Although proposed Sec. 1283.3(c) would not establish specific
``eligible actions,'' it reflect the statutory prohibition against
considering contributions to the Housing Trust Fund (12 U.S.C. 4568)
and the Capital Magnet Fund (12 U.S.C. 4569) and mortgage purchases
funded from such grants.\70\ Proposed Sec. 1283.3(c) would also
reference FHFA determinations of ineligible loan purchases set forth in
Sec. 1283.7 of the proposed rule.\71\
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\70\ 12 U.S.C. 4565(d)(4); see also 12 CFR 1282.37(b)(1).
\71\ In proposed Sec. 1283.7, which is discussed more fully
below, FHFA proposes to consolidate and update provisions of
Sec. Sec. 1282.37, 1282.38, and 1282.39 of the existing regulation,
on loan purchases that are ineligible under the existing regulation.
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[[Page 37857]]
For eligible actions, the standards of ``consistent with the Duty
to Serve'' and ``eligible'' or ``ineligible'' are not new; they are the
standards FHFA would apply under the existing regulation when reviewing
an Additional Activity.\72\ Thus the proposed rule does not assert
additional authority or result in FHFA exercising its authority in a
different manner.\73\ Nonetheless, the concept of ``any eligible
action''--viewed in contrast to prescribed Activities--is intentionally
broad and is intended to push the Enterprises to consider new ways they
may effectively serve the underserved markets. Although the Enterprises
could currently include in their Plans Activities other than the
Statutory and Regulatory Activities set forth in the existing
regulation, they have infrequently pursued activities outside that
defined menu.
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\72\ See 12 CFR 1282.33(d) (manufactured housing market),
1282.34(e) (affordable housing preservation market), and 1282.35(d)
(rural housing market), stating in each case that an Additional
Activity is one that is ``consistent with'' the obligation to serve
the particular underserved market, ``subject to FHFA determination
of whether the [Additional Activity] is eligible to receive duty to
serve credit.''
\73\ Similarly, the proposed approach would not change any
statutory obligation an Enterprise has to consider or undertake
certain actions to comply with its Duty to Serve in a particular
market, such as the obligation to support statutorily-listed federal
affordable housing programs as part of serving the affordable
housing preservation market. In that regard, FHFA has previously
opined that it does not expect the Enterprises to address each of
the statutorily-listed programs in each three-year Plan. See 74 FR
38572, 38574 (Aug. 4, 2009) (``[C]ompliance with the duty to assist
with affordable housing preservation is not dependent on whether the
Enterprise assists each enumerated program each year, because the
needs and opportunities in some programs might change.''); and 75 FR
32099, 32106 (June 7, 2010) (``The Enterprises would not be required
to assist each program every year, but could take a step-by-step,
concentrated approach. For example, an Enterprise might initially
focus on the HUD Section 8, Section 236 and Section 202
programs.''). FHFA has also stated that it did not expect the
Enterprises to address two statutory programs--the supportive
housing program for persons with disabilities under section 811 of
the Cranston-Gonzalez National Affordable Housing Act, 42 U.S.C.
8013, and the permanent supportive housing projects subsidized under
programs under Title IV of the McKinney-Vento Homeless Assistance
Act, 42 U.S.C. 11361 et seq.--because they either carried no debt or
did not involve debt financing. 81 FR at 96262. FHFA continues to
hold these views. If new part 1283 is finalized as proposed, the
Enterprises would not be expected to address each of the
statutorily-listed federal affordable programs in each Plan or to
support a statutorily-listed program that does not involve debt.
---------------------------------------------------------------------------
FHFA's experience administering the Duty to Serve Program suggests
that identifying Regulatory Activities by regulation may have had the
unintended consequence of discouraging innovation, by undermining the
need for the Enterprises to identify and implement novel or more
market-responsive solutions. Likewise, the requirement that each
Enterprise explain why it did not select other actions from the
Statutory and Regulatory Activities menu may have contributed to the
Enterprises favoring actions that are already recognized in regulation
over exploring alternatives that could have greater impact. And because
the existing regulation requires a minimum number of Activities in each
market, the Enterprises may have felt pressure to distribute their
efforts across a broad array of lower-impact activities in order to
satisfy the numeric threshold, rather than concentrating resources on
fewer, higher-impact actions.
If identifying Regulatory Activities constrained innovation, other
tools in the existing regulation that were intended to drive innovation
have not always worked as desired. For example, FHFA has designated
chattel lending as an ``extra-credit'' opportunity in its Evaluation
Guidance every year since the inception of the Duty to Serve Program,
yet the Enterprises have not purchased any chattel loans as part of
their Duty to Serve Programs.\74\ It would be particularly timely and
appropriate for the Enterprises to focus more attention on chattel
lending: today approximately 70 to 80 percent of new manufactured homes
are titled as personal property, which makes chattel loans the
predominant financing option for manufactured homes.\75\ And because
manufactured housing is among the most affordable forms of
homeownership in the United States, for many households, particularly
those in land-lease communities, chattel lending may be a critical
means to homeownership.\76\ Despite its importance, however, the
chattel lending market remains underdeveloped, with limited liquidity,
the absence of a securitization infrastructure, and a lack of robust
performance data. These gaps have constrained borrower access to
sustainable credit, perpetuated reliance on higher-cost financing, and
restricted consumer choice. For these reasons, expanding responsible
chattel financing is critical to the Enterprises fully meeting their
Duty to Serve.
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\74\ Both Enterprises have previously undertaken chattel lending
pilot initiatives but these initiatives were constrained by
insufficient industry data and, as a result, did not achieve the
intended outcomes. See Freddie Mac's 2024 Annual Report on
manufactured housing titled as personal property, available at
https://www.fhfa.gov/document/mh_chattel_2_a_narrative_2024.pdf and
Fannie Mae's 2019 Annual Report on manufactured housing titled as
personal property, available at https://www.fhfa.gov/sites/default/files/reports_11_23/Enterprise%20quarterly%20and%20annual%20reports/2019-DTS-Reports/Fannie%20Mae/MH_Chattel_2_NR_Q1_2019.pdf.
\75\ According to the Manufactured Housing Survey administered
by the U.S. Census Bureau, 78% of new homes constructed in 2024 were
titled as personal property, with 18% titled as real estate.
\76\ Allaire Conte, ``Manufactured Home Loans Explained: Real
Property vs. Chattel Financing,'' realtor.com (October 27, 2025),
available at https://www.realtor.com/advice/finance/manufactured-home-loans-real-vs-personal-property and ABT Associates ``Expanding
Resident and Nonprofit Ownership of Manufactured Home Parks,''
available at https://rocusa.org/wp-content/uploads/2024/07/ABT-Policy-Brief_Manufactured-Housing.pdf.
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Relatedly, E.O. 14394 directs FHFA to reform programs that
constrain residential development and impede housing affordability,
including specifically ``FHFA's guidelines and regulations regarding
chattel lending for manufactured housing.'' The strategic shift
reflected in the proposed rule, away from prescribed Regulatory
Activities and toward innovative and market-driven ``eligible
actions,'' is responsive to that direction. It would remove any
perceived barriers to chattel lending in the existing regulation and
present a new opportunity for the Enterprises to direct their attention
to establishing appropriate underwriting standards, risk management
protocols, and the securitization infrastructure necessary to expand
their impact in the chattel lending market. Consistent with E.O. 14394,
FHFA expects the Enterprises to develop and implement robust,
responsible chattel financing initiatives and will assess them on their
progress in expanding liquidity, supporting sustainable credit, and
enhancing consumer choice in the manufactured housing market.
In sum, FHFA's proposed focus on ``any eligible action'' is
intended both to give the Enterprises greater flexibility to undertake
actions that respond to market needs and to encourage innovation that
supports meaningful outcomes. The transition to a more flexible
approach does not signal a retreat from past, proven interventions that
have stabilized or expanded liquidity in the underserved markets.
Rather, the Agency anticipates that the Enterprises will leverage their
accumulated institutional knowledge, proven strategies, and data-driven
insights to iterate upon and scale high-impact activities from earlier
Plan years. By grounding future innovation in the successes of the
previous decade, the Enterprises can ensure that novel strategies are
additive rather than duplicative. FHFA is committed to a regulatory
environment that fosters the evolution of successful models while
[[Page 37858]]
providing the Enterprises the autonomy to pivot as market dynamics
shift and believes the proposed approach better supports those goals.
D. Duty To Serve Plan--Sec. 1283.4
(1) Overview
Section 1283.4 of the proposed rule would establish requirements
for each Enterprise's Underserved Markets Plan (now called a Duty to
Serve Plan to match current industry and Enterprise naming practices)
and procedures for FHFA to review those Plans, reflecting FHFA's
experience implementing the requirements and procedures set forth in
Sec. 1282.32 of the existing regulation. The proposed rule would
continue to require each Enterprise to prepare a three-year plan, which
would identify actions the Enterprise would undertake in each
underserved market to meet its duty to serve. However, FHFA is
proposing significant changes to the Plan content provisions.
(2) Plan Content
Section 1283.4(b) of the proposed rule would require each
Enterprise to incorporate seven elements in its Duty to Serve Plan: (i)
a needs and opportunities assessment; (ii) the actions an Enterprise
will undertake to address the identified needs; (iii) measurable
targets for each action; (iv) a description of how the Enterprise will
fulfill the statutory program requirements reflected in proposed Sec.
1283.3(b); (v) a description of public engagement activities; (vi) a
list of Enterprise mortgage products that support housing for very low-
, low- and moderate-income families in each underserved market; and
(vii) summary reference tables.
If new part 1283 is finalized as proposed, FHFA expects that the
needs and opportunities assessment would be based on rigorous,
empirical research, and could produce data and insights beneficial to
the public. FHFA expects that the actions identified in the Plans will
explicitly and logically tie to the needs and opportunities assessment,
reflecting a comprehensive and data-driven understanding of underserved
market needs and the Enterprise's ability to meet those needs, given
its prominence and role in the mortgage market. The proposed rule
reflects that expectation by requiring each Enterprise, in its Plan, to
set forth intended actions ``to address the identified liquidity and
investment capital needs, risks, and opportunities.'' In practice,
under the existing regulation, FHFA has observed that both Enterprises
routinely assess market needs and opportunities when developing their
Plans. The proposed rule codifies this practice by requiring such
assessment, and would ensure that it serves as a basis for the
development of Plan actions. This proposed change ensures that the
Enterprises' actions are anchored in a transparent, evidence-based
understanding of market conditions. FHFA believes that a systematic
assessment enables the Enterprises to focus their efforts where they
can achieve the greatest impact.
The Enterprises would also be required to describe how they expect
to fulfill the statutory program requirements reflected in proposed
Sec. 1283.3(b). FHFA is proposing this addition to more closely align
Enterprise planning efforts with statutory intent and to make that
alignment more transparent. Since program inception, FHFA has not
observed the Enterprises taking sustained action to address certain
statutory requirements FHFA now proposes to set forth in Sec.
1283.3(b). For example, although both Enterprises have discussed the
challenges faced by insured depository institutions in meeting their
CRA obligations and general affordability concerns in low-income areas,
neither Enterprise has identified any specific Plan actions that
address these statutory requirements directly. If the final rule is
adopted as proposed, the Agency expects each Enterprise would describe
the specific programs, products, initiatives, or other actions it is
taking to meet each program requirement, together with a discussion of
how those actions will carry out the duty to serve in the three-year
Plan period.\77\
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\77\ When finalizing the existing regulation in 2016, FHFA noted
that ``it is reasonable to make Enterprise research and development
activities eligible for Duty to Serve credit under the loan product
or outreach evaluation areas because of their importance in
encouraging innovation and creative solutions to the challenges that
exist in the underserved markets.'' 81 FR at 96247. This continues
to be FHFA's position.
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The public engagement element would require the Enterprise to
describe its public engagement activities, the significant input
received from those activities, and how the Enterprise considered and
addressed substantial points raised by the public. The existing
regulation provides that each Enterprise ``may, in its discretion, make
revisions'' based on public input, but does not require the Enterprise
to respond to stakeholder concerns.\78\ To enhance transparency and
ensure a meaningful exchange of information, the proposed rule would
replace this discretionary standard with a requirement that the
Enterprises provide a reasoned response to substantial points raised
during the public comment period. This element is intended to promote
accountability and provide the public with a clearer understanding of
the technical, operational, or policy constraints informing the
Enterprises' final determinations.
---------------------------------------------------------------------------
\78\ 12 CFR 1282.32(g)(4).
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FHFA recognizes that public input may, at times, be conflicting.
The Enterprises would retain the discretion to exercise their
professional judgement and expertise in determining which suggestions
to adopt. However, the proposed rule would require the Enterprises to
conscientiously engage with public feedback by considering and
responding to public recommendations and proposals.
The proposed inclusion of a list of mortgage products that support
housing for the underserved markets and summary reference tables is
intended to provide FHFA with information to facilitate its evaluation.
Loan product development is one of the enumerated statutory activities;
a list of the full suite of available products that have been developed
to facilitate lending in the underserved markets would assist FHFA in
determining whether the available products meet the identified needs. A
list of products may also be useful to lenders and other market
participants seeking to assist these markets.
Likewise, the summary reference tables assist the Agency during
Plan review and non-objection and performance evaluation. These tables
are currently recommended as a best practice in FHFA's Evaluation
Guidance and Fannie Mae has provided these tables in its most recent
Plan. FHFA is now proposing to make what has been an optional best
practice a regulatory requirement. As described in the Evaluation
Guidance, the first table provides the Enterprise's view of which
actions correspond to the four statutory activity categories (loan
product development, outreach, loan purchases, and investments and
grants), which, as described in more detail below, are assessed
separately. The second table provides a single view of all loan
purchase targets over the three Plan years, which otherwise would be
spread across multiple pages throughout the Plan.
(3) Plan Procedures
Establishment of Regulatory Deadlines. Proposed Sec. 1283.4(c)
seeks to replace existing ``floating'' compliance dates, previously
determined at the discretion of FHFA or triggered by ad hoc events such
as website postings,
[[Page 37859]]
with fixed dates to the extent feasible for Enterprise Plan submission,
FHFA review and Objection or Non-objection, and Plan publication. When
FHFA was developing the existing regulation, the lack of program
experience necessitated a flexible approach to scheduling. However,
after a decade of operational experience, FHFA now possesses sufficient
data to propose a permanent schedule. Fixed dates would provide the
Enterprises and market participants with greater operational certainty
and facilitate long-term strategic planning.
Based on a retrospective review of the Plan process, FHFA has
determined that the current review cycle routinely exceeds eight months
and is unnecessarily protracted. The proposed rule would establish a
streamlined six-month review period from Enterprise submission of the
proposed Plans to final adoption. This expedited schedule reflects the
increased proficiency of both FHFA and the Enterprises in navigating
the Duty to Serve Program framework, and anticipates reductions in
procedural steps if aspects of this proposed rule are ultimately
adopted. For example, FHFA anticipates the elimination of Activities
and supporting objectives may result in more focused Plans. At the same
time, FHFA recognizes that circumstances may arise that indicate more
time for review or submission is warranted. For that reason, the
proposed rule would authorize FHFA to extend regulatory deadlines, as
necessary.
The proposed rule would require each Enterprise to submit its Plan
by June 30 of the year prior to the first year for which the Plan is
applicable. Following submission, FHFA expects to conduct an initial
assessment, including reviews necessitated by the current
conservatorship status of the Enterprises, and launch public engagement
efforts within 15 days of receipt of the Plans (i.e., by July 15).
Generally, the Agency has held Listening Sessions and released
Requests for Input and intends this practice to continue. Requests for
Input would likely include a 45-day public comment period (i.e., until
roughly the end of August). Although the existing regulation provided a
60-day comment period for the Enterprises' initial Underserved Markets
Plans, it also provided FHFA discretion to establish the deadline for
public input on subsequent Plans.\79\ FHFA believes that a 45-day
period would be appropriate and effective because public stakeholders
and FHFA have gained familiarity with the Duty to Serve Program since
2016.
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\79\ 12 CFR 1282.32(g)(3).
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Throughout the input period, FHFA will provide ongoing feedback to
the Enterprises based on the Agency's own review. The proposed rule
would establish October 1 of the year prior to the first year for which
the Plan is applicable as the date for each Enterprise to resubmit its
proposed Plan to FHFA. This means that the Enterprises would have
approximately 30 days (essentially, the month of September) to evaluate
public input and Agency feedback, make necessary Plan adjustments, and
resubmit the Plans to FHFA. FHFA is requesting public comment on
whether the proposed timing provides sufficient time for commenters to
review and provide feedback, and for the Enterprises to incorporate
such feedback into their Plans.
FHFA would then have approximately 45 days following Plan
resubmission to finalize its review and determine whether to issue an
objection or non-objection to the Plans (i.e., by November 15 prior to
the first year the Plan is applicable). The Agency would conduct a
review for objection or non-objection to an Enterprise's Plan based on
standards relating to: (i) regulatory compliance, including eligibility
of proposed actions, addressing public input, and other Plan content
requirements; (ii) likelihood of achieving Duty to Serve compliance
upon implementation; (iii) consistency with the Enterprises' charters;
and (iv) safety and soundness. FHFA review would also include an
evaluation of whether the Enterprise demonstrated a good faith effort
to evaluate Agency feedback; however, an Enterprise's decision not to
incorporate the feedback is not grounds for objection per se. If the
rule is adopted as proposed, FHFA intends to communicate potential
grounds for objection as early as possible to allow an Enterprise the
maximum time to revise, resubmit, and obtain FHFA non-objection to its
Plan so that it can become effective on the following January 1.
However, the failure to receive a non-objection to a Plan prior to
January 1 of the first year the Plan is applicable does not relieve the
Enterprise of its obligation to comply with its Duty to Serve for that
Plan year.
Deadlines fixed in regulation are intended to hold both the Agency
and the Enterprises accountable for a timely, transparent, and
predictable regulatory process. While the Agency intends to adhere
strictly to those deadlines to ensure Plans are in place by January 1
of the first Plan year, the proposed rule would include a ``safety
valve'' to provide flexibility when necessary, permitting FHFA to
extend any regulatory deadline or time period upon providing written
notice to an Enterprise.
Finally, similar to the existing regulation, the proposed rule
would require an Enterprise to publish its final Plan on its website as
soon as practicable. Unlike the existing regulation, the proposed rule
would further specify that each Plan be published no later than 10 days
after the Enterprise receives FHFA's non-objection notification.
Plan Modifications. Under Sec. 1282.32(h) of the existing
regulation, an Enterprise may modify its Plan at any time subject to
FHFA Non-Objection. The existing regulation does not provide a specific
standard or threshold for such requests, which has led to a practice of
frequent, routine modifications. The proposed rule would limit an
Enterprise's ability to request a Plan modification to the occurrence
of a ``special circumstance.''
In practice, FHFA established an annual process for the Enterprises
to request Plan modifications that has become administratively
burdensome for both FHFA and the Enterprises and that dilutes the
stated objectives in the Plans. FHFA has observed that each Enterprise
annually requests approximately 15 modifications to its Plan. These
routinely include downward adjustments to loan purchase targets during
the final quarter of the calendar year. In many instances, these
modifications appear designed to align Plan targets with realized
outcomes rather than to address fundamental shifts in market strategy.
The Agency is concerned that the current modification practice creates
a risk of inappropriately moving the performance goal posts rather than
driving the Enterprises toward the ambitious objectives established at
the Plan's inception.
The proposed rule would significantly narrow the circumstances
under which an Enterprise may request a Plan modification. Under the
proposal, modifications would be permitted only in response to
extraordinary and significant market disruptions, such as a global
pandemic or a systemic financial crisis (a ``special circumstance'').
The concept of a ``special circumstance'' is not intended to encompass
ordinary market volatility, such as routine fluctuations in interest
rates, seasonal shifts in housing supply, or foreseeable economic
cycles, or circumstances that only affect one or two of the underserved
markets.
[[Page 37860]]
Procedurally, an Enterprise would submit a request to FHFA to
modify its Plan, including both the modification(s) requested and the
basis for the Enterprise's assessment that special circumstances exist.
Similar to the existing regulation, the proposal would retain FHFA's
discretion to seek public input on proposed modifications.
Modifications would become effective after FHFA review and non-
objection.
The proposed modification process would not preclude an Enterprise
from addressing or explaining the impact of unforeseen market
volatility of a more usual nature (i.e., not a special circumstance).
Under the proposed rule, if an Enterprise misses a target due to
ordinary market volatility, it may address the shortfall in its Annual
Performance Report, explaining the market conditions that caused the
shortfall and any mitigating actions taken, including actions that were
not originally contemplated in the Plan. FHFA will take those market
conditions and the Enterprise's mitigating actions into consideration
when evaluating how the Enterprise met the needs of the underserved
market relative to actual conditions.
A primary rationale for this proposed change to the modification
process is the evolution of FHFA's evaluation framework, as discussed
further below. The proposed evaluation process focuses on whether an
Enterprise successfully addressed the needs of the underserved market,
rather than on a narrow technical determination of whether they met all
the Plan targets. Under the proposed rule a high rating would be
predicated on impactful performance relative to market conditions, such
that late-year corrections to Plan targets (as are permitted under the
existing regulation) would not be necessary for an Enterprise to
demonstrate compliance or receive a favorable evaluation.
By restricting what has become a routine, resource-intensive
modification process under the existing regulation, the proposed rule
would redirect Enterprise capacity toward Plan execution. This proposed
framework would better ensure that the Plans remain a stable roadmap
for market support and are not treated as fluid documents to be
adjusted to accommodate underperformance.
However, FHFA recognizes the difficulty in projecting loan purchase
targets up to three years in the future, and requests comment on
whether narrow updates to loan purchase targets for future years of the
Plan should be allowed during the fourth quarter of the prior calendar
year. Annual goal setting related to loan purchase targets would
potentially result in more challenging, but realistic targets that take
into account the most recent market developments. Further, FHFA
requests comment on whether these updates should be subject to the
modification review procedure (without the need to show ``special
circumstances'') and should require FHFA non-objection.
FHFA review and Objection or Non-objection. FHFA proposes to issue
a single, consolidated determination of Non-Objection or Objection for
each Enterprise's three-year Duty to Serve Plan. This approach is a
change from the current regulation which requires that FHFA non-object
or object separately to an Enterprise's Plan for each underserved
market. The change is intended to reduce unnecessary process
complexity, while preserving FHFA's ability to require revisions if any
portion of the Plan does not meet regulatory standards.
FHFA also proposes to refine the bases for Objection to focus on
whether a Plan meets statutory and regulatory requirements, includes
feasible and well-supported activities, and presents reasonable and
supportable targets. These changes clarify the threshold necessary for
FHFA Non-Objection.
If FHFA does not issue a Non-Objection before January 1 of the
first Plan year, FHFA proposes to permit the Enterprise to begin
implementing those parts of the proposed Plan for which FHFA did not
raise specific concerns on the Plan effective date, in coordination
with FHFA staff. Concurrently, the Enterprise should promptly submit
any revisions that FHFA may require to issue a Non-Objection to the
pending Plan. FHFA expects an Enterprise to maintain continuity in its
Duty to Serve activities during this period. This clarification is
intended to reinforce that an Enterprise's statutory responsibility to
carry out its duty to serve does not depend on the timing of FHFA's
Non-Objection and to ensure there is no gap in statutory compliance or
support for the underserved markets. Even if a Non-Objection is
provided after January 1 of the first Plan year, FHFA evaluation will
consider the Enterprise's Duty to Serve activities in the underserved
markets over the entire calendar year.
E. Performance Monitoring and Reporting--Sec. 1283.5
(1) Ongoing Monitoring
Proposed Sec. 1283.5(b) would codify FHFA's existing expectation
that each Enterprise monitor Plan performance and report on such
performance to its board of directors and senior management, and the
existing practice of Enterprise participation in ongoing monitoring
discussions with FHFA. It would require each Enterprise to conduct
ongoing monitoring and assessment of its completion of actions and
achievement of targets under its Plan. FHFA expects each Enterprise's
board of directors and senior management to provide oversight and
support of the Enterprise's Duty to Serve obligations. This may be
demonstrated by, among other things, incorporating Duty to Serve
ratings into corporate objectives and scorecards, ensuring the Program
is adequately resourced, and by acting promptly to address poor Duty to
Serve performance.
Although the existing regulation does not expressly require the
Enterprises to participate in FHFA ongoing monitoring activities, in
practice, FHFA routinely meets with the Enterprises to hold them
accountable throughout the year, rather than waiting until year-end
evaluations when course corrections or adjustments may no longer be
possible or meaningful. The proposed rule would require such
participation.
(2) Annual Reports
Similar to the existing regulation, proposed Sec. 1283.5(b)(1)
would require each Enterprise to submit an annual report to FHFA. The
proposed rule would accelerate the annual report submission date from
75 days after the end of the calendar year (i.e., March 15) to March 1
of the year after the close of the applicable Plan year. FHFA believes
shortening the time to develop and submit the annual report is
appropriate and would not cause additional burden due to improvements
in Enterprise data reporting automation.
(3) Quarterly Reports
Proposed Sec. 1283.5(b)(2) would retain the requirement in the
existing regulation that the Enterprises submit first, second, and
third quarter reports on their progress. Specifically, as proposed,
each Enterprise must submit to FHFA a report no later than May 15,
August 15, and November 15 of the applicable Plan year. The proposed
rule would accelerate the submission deadline for quarterly reporting
from 60 to 45 days, again based on improvements in data automation. For
simplicity, the proposed rule would change the submission date for each
from ``within 60 days'' of the end of the respective quarter to
specific dates.
In each report, the Enterprise would be required to describe the
completion of actions and achievement of targets under its Plan for
each underserved market for the applicable quarter and
[[Page 37861]]
include such other information and data as may be required by FHFA. To
permit FHFA to modify reporting requirements from time to time so that
it only collects information that is necessary and appropriate, the
proposed rule does not set forth details on data required to be
reported but anticipates FHFA establishing specific reporting
requirements periodically, outside of a rulemaking.
(4) Publication of Information on Enterprise Performance
The proposed rule's provisions on publication of information about
Enterprise Duty to Serve performance would be a significant change from
the existing regulation and FHFA practice. The current regulation
requires FHFA to publish ``certain information'' from quarterly reports
``at a reasonable time after the end of the calendar year for which
they apply'' and to publish ``certain information'' from each annual
report ``at a reasonable time after receiving them.'' \80\ In practice,
FHFA publishes information from the quarterly reports at the same time
as it publishes the annual reports, with each separate action having
its own self-contained ``mini-report'' comprised of reports over the
four quarters. While the quarterly reports demonstrate progress on Plan
actions over the year, they do not introduce new information
considering what is provided in the annual report. FHFA believes that
the requirement to publish quarterly reports creates an unnecessary
administrative burden associated with aggregating and compiling
multiple ``mini-reports,'' without providing a commensurate benefit to
the public. Thus, FHFA now proposes that only Enterprise annual reports
be published (which would continue to exclude confidential and
proprietary information and data).
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\80\ 12 CFR 1282.66(d).
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Additionally, FHFA proposes that each Enterprise publish the annual
report on its website as soon as practicable but no later than March
30, and maintain it on the website thereafter. That proposal shifts
responsibility for public disclosure from FHFA to the Enterprises. This
reflects the Agency's position that the Plans and the resulting
performance data are Enterprise products. Requiring the Enterprises to
host and maintain their own reports on their respective websites
reinforces the perception that the primary authors of Plan strategies
are accountable to the public in their performance results. FHFA is
also proposing to require that the Enterprises' published annual
reports comply with Section 508 of the Rehabilitation Act to ensure
accessibility.
F. Evaluations and Ratings--Sec. 1283.6
(1) Overview
The proposed rule would set forth evaluation and ratings
requirements, which FHFA is required by statute to establish by
regulation.\81\ The proposed rule would substantially change the
evaluation and rating procedures and standards in the existing rule,
and would incorporate in regulation some evaluation procedures that are
described in the separate Evaluation Guidance FHFA has previously
provided to the Enterprises.
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\81\ 12 U.S.C. 4565(d).
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(2) The Current Process
The current evaluation framework is a two-step process, consisting
of an assessment and the assignment of any extra credit.
In Step One, FHFA calculates an Enterprise's achievement of the
objectives in its Plan to determine compliance. This step is a
quantitative and qualitative evaluation to determine the impact of
achievement for each objective to meet the needs of the particular
underserved market. FHFA assigns an impact score of 0, 10, 20, 30, 40,
or 50 to each action based on an evaluation of both direct impact and
future, potential impact. After assigning an impact score for each
objective, FHFA averages the impact scores for all objectives in that
underserved market. The result of this calculation, the impact average,
is a single numerical score for each underserved market which serves as
the measure of impact that an Enterprise had on the underserved market.
Until August 2025, FHFA also assigned a concept score of 0, 10, 20,
30, 40, or 50 to each action based on future, potential impact during
the initial review of its Plan. FHFA then averaged impact and concept
scores for each objective in cases where the impact score exceeded the
concept score. The resulting score was then used to calculate a simple
average for objectives grouped by evaluation area (outreach, loan
products, loan purchases, and investments and grants). Then, the
averages were weighted by evaluation area and summed to form an overall
performance score for each underserved market.
Revisions to the guidance in August 2025 eliminated the calculation
to average the impact and concept scores, which could penalize an
Enterprise for outperforming targets. The revisions also removed the
weighted average calculations, which could have unintended
consequences, such as overemphasizing the importance of an objective
when there was only one objective in an evaluation area. Instead, under
the revised procedure, FHFA performs a simple average of the impact
scores for the objectives in an underserved market, which it could then
adjust upwards for extra credit.
In Step Two, FHFA determines whether, and if so how much, extra
credit to award for the Enterprise's achievement of extra credit-
eligible activities. FHFA then computes a final performance score for
each underserved market, incorporating any extra credit awarded, which
is converted into a rating of Fails (for final performance scores below
25), Minimally Passing (23-30), Low Satisfactory (30-35), High
Satisfactory (35-40), or Exceeds (above 40).
FHFA has observed a number of challenges associated with the
current process that suggest it could be improved. The Agency believes
the current evaluation framework, by focusing on the impact of
individual activities and requiring a minimum level of activity
``points,'' may not fully capture an Enterprise's overall impact on an
underserved market, and may incent the Enterprises to identify a high
volume of low-impact activities to meet the outlined standards, instead
of focusing on a smaller volume of ambitious goals that are designed to
have a high impact.
FHFA has also observed that the mathematical averaging of scores
may have unintentionally discouraged the expansion of Duty to Serve
activities. In the current framework, an Enterprise has a disincentive
to add new, potentially riskier, or smaller-scale activities to a
market sector if there is a risk that these activities could
mathematically ``drag down'' the average of high-scoring existing
activities. Similarly, the use of weighted averages has tended to
flatten the distinct impact of specific high-value actions, such as
investments and grants, obscuring their significance. The rating
procedures in place for the majority of the program also penalized the
Enterprises for deviating from a Plan even if the ultimate market
impact of the deviation was significantly more positive than the impact
of executing on the original proposal would have been.
(3) The Proposed Process
The proposed rule moves from an inputs-based model to an outcome-
based model that holistically assesses
[[Page 37862]]
all of the Enterprise's activities in each market. In contrast to the
current regulation, in the proposed framework, Plans would serve as a
facilitative instrument for achieving statutory objectives and a
primary vehicle for communicating Enterprise strategies to
stakeholders. In this context, FHFA's non-objection would provide a
preliminary assessment of prospective alignment with statutory and
regulatory requirements, signaling that the proposed activities are
likely to result in compliance if executed as designed. However, FHFA's
non-objection would not constitute a prospective determination of
compliance nor create a ``safe harbor;'' rather, final determinations
would be contingent upon the totality of an Enterprise's realized
actions and their substantive impact on the underserved markets.
Consistent with its current approach, FHFA is proposing to continue
to assign a rating to each Enterprise for each underserved market--
manufactured housing, affordable housing preservation, and rural
housing--based on an evaluation and rating of component factors. As one
change from the current approach, however, the proposed rating system
would be aligned with CAMELSO,\82\ the rating system used by FHFA
examination divisions, which is similar to other federal financial and
consumer compliance rating systems. Under that system, FHFA assigns a
``1'' rating for the lowest degree of supervisory concern, and a ``5''
rating to the highest level of supervisory concern. By adopting a
rating framework, methodology and scale comparable to that used by
FHFA's other divisions and by other federal financial regulatory
evaluations, FHFA would help ensure that the Enterprises and other
stakeholders share a uniform understanding of each rating's
significance and the severity of any associated deficiencies.
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\82\ See https://www.fhfa.gov/supervision/examiner-resources/camelso.
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(4) Component Ratings
Proposed Sec. 1283.6(b) would retain the evaluation areas, or
components, of the existing regulation, and add three additional
components: program requirements, program management, and other
factor(s) identified by the FHFA Director. FHFA will continue to assess
specific components of each Enterprise's duty to serve performance in
each underserved market.
Under the proposed rule, FHFA would assign a component rating to an
Enterprise's loan product development, outreach, loan purchases,
investments and grants, program requirements, program management, and
any other factor or factors identified by the FHFA Director, for each
underserved market.
FHFA reviews of the loan product development, outreach, loan
purchase, and investments and grants components would be similar to
those reviews currently. For the loan product development component,
FHFA reviews the Enterprise's actions to develop new and modify
existing loan products, and to develop more flexible guidelines and
other innovative approaches to providing financing in each underserved
market. For the outreach component, FHFA reviews the Enterprise's
actions to listen, collaborate, educate, and respond to market
participants. For the loan purchase component, FHFA reviews the
Enterprise's goal settings and volume of loan purchases in the context
of past performance, market conditions, and market opportunities. For
the investments and grants component, FHFA reviews the number of the
Enterprise's investments and grants in projects which assist meeting
the needs of such underserved markets, as well as the overall and
efficient deployment of funds.
For the proposed program requirements component, FHFA would review
the effort and execution by an Enterprise to meet the statutory and
regulatory program requirements for Duty to Serve. Inclusion of the
program requirements component ensures that the Enterprises focus on
these specific, statutory program requirements (which, as noted above,
would be set forth in regulation for transparency, completeness, and
ease of reference).
For the program management component, FHFA would review the
capability and willingness of the board of directors and management to
ensure the Enterprise meets its Duty to Serve. The Agency believes
inclusion of a program management component will reinforce the
importance of Enterprise governing bodies integrating Duty to Serve
obligations and compliance into the Enterprise's core business
strategies. Sound program management serves as the structural
foundation for the entire framework; without robust board oversight,
senior management accountability, and the dedicated allocation of
personnel and resources, even the most innovative loan products or
purchase targets are unlikely to achieve sustained success. FHFA also
believes that a program management component will incentivize a culture
of transparency and Enterprise proactive engagement with FHFA, reducing
operational and compliance risk and ensuring that the Enterprises
maintain the agility necessary to make mid-course strategic
adjustments. Ultimately, prioritizing program management reinforces the
principle that long-term, impactful service to very low-, low-, and
moderate-income families requires a governance structure that is as
sophisticated and well-resourced as any other primary business line
within the Enterprise.
Finally, the Agency proposes to include as an assessment component
any other factor identified by the Director in the year prior to the
Plan year subject to evaluation. This component provides the Agency
with the flexible opportunity to identify additional focus areas that
reflect key or emerging policy priorities.
(5) Market-Level Ratings
Similar to the existing regulation, proposed Sec. 1283.6(c) would
use a five-scale rating system to assign a rating based on FHFA's
assessment of Enterprise performance. Instead of a scale of qualitative
descriptions, however, FHFA now proposes a numeric scale similar to
that it uses for assigning a safety and soundness composite rating.
Thus, under the proposed framework, FHFA would assign an overall
composite rating for each underserved market, considering each
component and the component rating assigned. A market-level rating of
``1,'' ``2,'' or ``3'' would constitute compliance by the Enterprise
with its Duty to Serve the underserved market. A market-level rating of
``4'' or ``5'' would constitute noncompliance. Notably, the existing
regulation established four ``passing'' ratings (Exceeds, High
Satisfactory, Low Satisfactory, and Minimally Passing). FHFA believes
that the Enterprises have now had ten years of experience with
developing and implementing Plans, such that performance previously
justifying a Minimally Passing should not, in the future, be deemed as
complying with the Duty to Serve. FHFA does not intend the Enterprises
to target ``minimal'' performance; it intends the Enterprises to
provide meaningful support to the underserved markets.
FHFA does not propose to state a standard for assigning a
particular component or market-level rating in regulation, but may
publish guidance that describes how FHFA plans to conduct the
evaluation and ratings process (and may publish guidance on other
topics, as appropriate). As context for the proposed rule, however, and
so that the public and the Enterprises may
[[Page 37863]]
better understand how FHFA intends to implement the proposed numeric
rating scale, FHFA is offering a description of performance justifying
ratings of ``1,'' ``3,'' and ``4'' below.
To receive a market-level rating of ``1,'' FHFA expects the
Enterprise's demonstrated actions and impact in the particular market
to be strong in every respect, typically shown by the Enterprise having
received a rating of ``1'' for most components with no rating less than
a ``2.'' A rating of ``1'' could be achieved if the Enterprise
demonstrated exceptional leadership in the market in developing loan
products and flexible underwriting guidelines to facilitate a secondary
market for mortgages for very low-, low-, and moderate-income families
in the underserved market. The Agency further anticipates that an
Enterprise's actions would have a significant impact on the liquidity
of mortgage investments and distribution of investment capital
available for single-family and multifamily mortgage financing in the
underserved market. Plan actions would also include creative and novel
solutions that have the capacity for scale. Finally, FHFA would expect
an Enterprise's actions to be grounded in rigorous, proactive market
analysis and research informed by robust stakeholder engagement across
a wide variety of stakeholders.
A market-level rating of ``3'' would indicate that the Enterprise's
demonstrated actions and impact in the duty to serve market needs
improvement. The Agency anticipates that an Enterprise receiving a
composite ``3'' rating for an underserved market will typically
demonstrate performance warranting a ``3'' or better in most
components, with no individual component rated lower than a ``4.'' FHFA
expects to assign a composite ``3'' to an Enterprise that has
demonstrated moderate leadership in developing loan products and
flexible underwriting guidelines. While the Enterprise's actions
contributed to market liquidity and the distribution of investment
capital, the scope of this impact was moderate and may not fully
address the breadth of underserved market needs. Enterprise actions,
while supported by adequate market analysis and stakeholder engagement,
would be generally inconsistent or reactive, with impacts that are
uneven or not sustained.
In contrast, a market-level rating of ``4'' would be assigned when
the Enterprise's demonstrated actions and impact in the underserved
markets is determined by FHFA to be weak and deficient. The Agency
anticipates that this rating would reflect minimal leadership in
developing the loan products or flexible underwriting guidelines
necessary to facilitate a secondary market for very low-, low-, and
moderate-income families in the underserved market. Furthermore, FHFA
expects that for an Enterprise receiving a ``4,'' actions intended to
support the underserved market would have had minimal impact on the
liquidity of mortgage investments or the distribution of investment
capital, and were generally not designed to be scalable. The Agency
anticipates observing a programmatic approach that is minimally
grounded in market analysis or novel research, and with minimal
stakeholder impact.
(6) Failure To Comply
There is a specific statutory process for enforcing the
Enterprises' Duty to Serve.\83\ Similar to the existing regulation,
FHFA proposes to state that the FHFA Director will follow the
procedures in 12 U.S.C. 4566(b) if an Enterprise fails to comply with
its duty to serve in proposed Sec. 1283.6(d).\84\ Because a market-
level rating of ``4'' or ``5'' would indicate non-compliance with the
Duty to Serve, FHFA could invoke those statutory remedies if an
Enterprise achieved either such rating, or if FHFA deems there is a
substantial probability that the Enterprise would achieve a rating of
``4'' or ``5.''
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\83\ 12 U.S.C. 4566.
\84\ Compare 12 CFR 1282.40.
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(7) Publication of FHFA Evaluation and Ratings
Section 1283.6(e) of the proposed rule would codify FHFA's current
practice of publishing a market-level rating and compliance
determination for each Enterprise, for each underserved market, in
FHFA's Annual Housing Report. Proposed Sec. 1283.6(e) would also
require FHFA to publish a narrative assessment of each Enterprises'
performance; this addition is designed to increase transparency.
G. Requirements for Eligible Loan Purchases--Sec. 1283.7
(1) Overview
Proposed Sec. 1283.7 would address criteria a loan purchase must
meet to qualify as an ``eligible action'' under proposed Sec.
1283.3(c), set forth rules for determining affordability to very low-,
low-, and moderate-income families, and address transactions that FHFA
believes should be treated as loan purchases. Some proposed provisions
are drawn from similar provisions in the existing regulation at Sec.
1282.37, on general requirements for credit, and Sec. Sec. 1282.38 and
1282.39, on general and special requirements for loan purchases,
including determining that the loan is affordable to the targeted
income group. Proposed changes are intended to improve logical flow and
clarity and to update the affordability requirements to facilitate
serving underserved households.
(2) Eligible and Ineligible Loan Purchases
Proposed Sec. 1283.7(a)(1) would set forth criteria a loan
purchase must meet to be an ``eligible action'': it must be secured by
a dwelling unit; it must finance housing that is affordable (whether
owner-occupied or rental); and it must not be a type of loan purchase
determined ineligible by FHFA by regulation, as set forth at proposed
Sec. 1283.7(a)(2). In proposing specific types of ineligible loan
purchases, FHFA has considered the general and special requirements for
loan purchases in Sec. Sec. 1282.38 and 1282.39, respectively, of the
existing regulation as well as the general requirements for credit set
forth at Sec. 1282.37 of the existing regulation. Those provisions
establish a credit-based framework in which FHFA determines whether an
Enterprise receives credit or extra credit for its Activities.
Activities are evaluated within multiple evaluation areas, and their
structure relies heavily on how credit is assigned. This approach was
appropriate for a Duty to Serve evaluation process centered on
numerical credit but would not be aligned with FHFA's proposed, updated
evaluation framework.
Because the Duty to Serve framework FHFA is now proposing would no
longer award ``credit'' or ``extra credit,'' expressing requirements in
terms of ``credit'' would no longer be appropriate. However, FHFA has
determined that some of the existing regulation's requirements for
credit generally, and some general and special requirements for loan
purchases specifically, address types of actions or features of a loan
purchase that would make it an ineligible action. In that light, FHFA
has considered each of the requirements in Sec. Sec. 1282.37, 1282.38,
and 1282.39 to assess whether it describes a product or action that
would be ineligible for consideration generally when FHFA evaluates an
Enterprise's Duty to Serve compliance, or describes a feature of a loan
purchase that should make that purchase ineligible for consideration.
FHFA has also considered the structure of those sections and observes
that their content does not always align with the section
[[Page 37864]]
heading (e.g., Sec. 1282.37, on general requirements for credit
generally, addresses in paragraph (d) of that section requirements for
loan purchases, which are also addressed in Sec. 1282.38, on general
requirements for loan purchases). FHFA believes that the regulation
could be structured in a more transparent manner.
To that end, in structuring the proposed rule, FHFA proposes to
include in proposed Sec. 1283.3(c) types of actions that are
ineligible for consideration under any evaluation area and that were
previously set forth in Sec. 1282.37(b) of the existing regulation.
In contrast, various provisions in Sec. Sec. 1282.37, 1282.38, and
1282.39 of the existing regulation state that Duty to Serve credit will
not be awarded for purchases of loans due to certain loan features
(such as, for example, purchases that finance secondary residences
\85\). In the proposed rule, FHFA intends to address ineligible loan
purchases in one section (proposed Sec. 1283.7(a)(2)). FHFA is seeking
comment on whether any of the eligibility requirements for loan
purchases should apply to any other evaluation area.
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\85\ 12 CFR 1282.37(d)(1).
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Many features that would make a loan purchase ineligible for Duty
to Serve consideration in the proposed rule align with outcomes in the
existing regulation. In Sec. 1283.7(a)(2) FHFA proposes to deem
``ineligible'' purchases of mortgages loans that finance any dwelling
units that are secondary residences; \86\ refinancing mortgages that
are not arms-length transactions or borrower driven; \87\ single-family
refinancing mortgages that result from conversion of balloon notes to
fully amortizing notes, if the Enterprise already owns or has an
interest in the balloon note at the time the conversion occurs; \88\
purchases of single-family mortgage covered by section 103(bb) of the
Home Ownership and Equity Protection Act, 15 U.S.C. 1602(bb) (HOEPA
mortgages); \89\ purchases of single-family mortgages for which the
income of the mortgagor(s) is unavailable; \90\ purchases of mortgages
or interests in mortgages that received Duty to Serve ``credit'' under
any underserved market within the five years immediately preceding the
current performance year; \91\ purchases of mortgages where the
property or any units within the property have not been approved for
occupancy,\92\ except for ``single close'' single-family construction
to permanent loans in the construction phase; purchases of any
interests in mortgages that FHFA determines will not be treated as
interests in mortgages; \93\ and purchases of state and local
government housing bonds, except as provided in proposed Sec.
1283.7(c)(5).\94\ For the ``single-close'' exception, the proposed
regulation would recognize that construction-to-permanent loans are an
important product tool to finance new affordable supply.
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\86\ Compare 12 CFR 1282.37(d)(1).
\87\ Compare 12 CFR 1282.39(g).
\88\ Compare 12 CFR 1282.37(d)(2).
\89\ Compare 12 CFR 1282.37(b)(2).
\90\ Compare 12 CFR 1282.38(c)(2).
\91\ Compare 12 CFR 1282.37(d)(3).
\92\ Compare 12 CFR 1282.37(d)(4).
\93\ Compare 12 CFR 1282.37(d)(5).
\94\ Compare 12 CFR 1282.36(d)(6).
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Conversely, FHFA has determined that other types of actions, or
some types of loan purchases, that were ineligible for credit under the
existing regulation are too restrictive and in fact should not make an
action or purchase ineligible. For example, as described above, FHFA
has reconsidered the existing restriction on subordinate liens on
multifamily properties and believes the Enterprises should have
expanded flexibility to support financing multifamily properties. To
that end, in contrast to the existing regulation, subordinate liens on
such properties would not be ``ineligible'' per se,\95\ but would be
subject to specific affordability requirements that preserve lasting
and sustainable homeownership opportunities. FHFA has also reconsidered
and is not reproposing the existing restriction on permanent
construction take-out loans in order to provide the Enterprises with
flexibility to use this loan type in all evaluation areas (rather than
just affordable housing preservation); \96\ and has reconsidered and is
not reproposing the existing restriction limiting LIHTC equity
investments to rural areas, to expand eligibility for LIHTC equity
investments to all underserved markets.\97\ FHFA has observed the
continued need for investment in older LIHTC properties in non-rural
areas, especially outside of the largest cities that are in the CRA
footprints of multiple bank investors.
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\95\ Compare 12 CFR 1282.37(b)(3).
\96\ Compare 12 CFR 1282.37(b)(6).
\97\ Compare 12 CFR 1282.37(b)(5).
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(3) Affordability Requirements
As noted above, in the proposed rule as in the existing regulation,
a loan purchase must meet regulatory affordability requirements to be
considered for Duty to Serve. To determine affordability in the
proposed rule, FHFA proposes to retain many core elements of the
existing regulation. These include affordability requirements for
owner-occupied and rental properties, such as using borrower and renter
income relative to median income, and using market-rent determinations
for unoccupied units.
For mortgage purchases financing owner-occupied single-family
properties, in the proposed rule (as in the existing regulation)
affordability would be determined for each income group based on the
income of the mortgagor(s) compared to the applicable median income at
the time the mortgage was originated. For mortgage purchases financing
rental units, affordability would be determined by comparing the unit
rent to the applicable median income, adjusted for unit size. These
proposed provisions are similar to those set forth in the existing
regulation.\98\ In each case, a mortgage would be affordable if it did
not exceed the percentage of applicable median income provided in a
table currently set forth in subpart B of part 1282, developed for
Enterprise housing goals and currently adopted by reference into
subpart C of that part, for Enterprise Duty to Serve. As in the
existing regulation, FHFA proposes to adopt those tables by reference.
FHFA is also proposing a change to calculating median income intended
to ensure that persistent poverty in many geographies does not unfairly
disqualify individual borrowers; and would add assumptions for
determining affordability with regard to properties with federal
affordability requirements and for blanket loans on manufactured
housing communities.
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\98\ Compare 12 CFR 1282.38(c)(1) and (d)(1).
---------------------------------------------------------------------------
The proposed rule's requirements for the timeliness of borrower
income and area median income information are also carried over from
the existing regulation. After the existing regulation was finalized,
however, data collection has advanced; for that reason, the Agency is
proposing to make ineligible any loan for which there is missing data
and information to determine loan affordability.
(4) Affordability Assumptions
The first assumption that FHFA is proposing would recognize that
all units with federal housing program affordability restrictions must
be occupied by families earning no more than 100 percent of area median
income (as calculated by the federal affordability program). FHFA is
proposing to recognize these restrictions and would not require the
Enterprises to
[[Page 37865]]
reconfirm affordability for Duty to Serve purposes.
Separately, the proposed rule would change the affordability
requirements for the purchase of blanket loans on manufactured housing
communities. Under the existing regulation, the manufactured housing
community must meet specific affordability tests. The tests use a
census tract-based income analysis as a proxy for affordability. Under
this framework, all homes in the community are treated as affordable if
the median income of the census tract where the community is located is
at or below the area median income. If the median income of the census
tract exceeds the area median income, the number of homes treated as
affordable is reduced. Alternatively, manufactured housing communities
owned by government instrumentalities, non-profits, or residents may
qualify based upon the existence of specific underlying documentation
requiring affordability.
In the proposed rule, FHFA would replace these bifurcated and
administratively intensive tests with a presumption of affordability.
Under this revised standard, manufactured housing community is presumed
to meet the affordability standard unless FHFA determines otherwise.
This shift is supported by research from HUD showing that
manufactured housing is the nation's primary source of unsubsidized
affordable housing.\99\ Research from the Consumer Financial Protection
Bureau (CFPB) using HMDA data showed that the median household income
for manufactured housing borrowers was $52,000 for chattel loans and
$53,000 for mortgage loans, compared to $83,000 for site-built
housing.\100\ More recent 2021 HMDA data cited by the Urban Institute
showed that the median income for manufactured housing borrowers was
$57,000, compared to $93,000 for site-built borrowers.\101\ This data
demonstrates that the manufactured housing market inherently serves the
lowest deciles of the housing market, making tract-by-tract income
analysis a redundant verification of a self-evident economic reality.
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\99\ U.S. Department of Housing and Urban Development,
``Manufactured Housing and the PRICE Competition'' (May 2024),
available at https://www.hudexchange.info/programs/manufactured-housing-and-price.
\100\ Consumer Financial Protection Bureau, ``Manufactured
Housing Finance: New Insights from the Home Mortgage Disclosure Act
Data'' (May 2021), p. 33, available at https://files.consumerfinance.gov/f/documents/cfpb_manufactured-housing-finance-new-insights-hmda_report_2021-05.pdf.
\101\ Urban Institute, ``The Role of Manufactured Housing in
Increasing the Supply of Affordable Housing'' (July 2022), p. 9,
available at https://www.urban.org/sites/default/files/2022-07/The%20Role%20of%20Manufactured%20Housing%20in%20Increasing%20the%20Supply%20of%20Affordable%20Housing.pdf.
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The primary objective of FHFA's proposed revision is to alleviate
the ``compliance friction'' that has historically disincentivized the
financing of high-impact properties. The previous requirement for
specific affordability documentation placed a burden on entities that
may lack the administrative capacity to maintain such rigorous
evidentiary standards. Streamlining the process will remove barriers to
secondary market liquidity by allowing the Enterprises to focus their
resources on market outreach and mission-driven lending rather than
technical verification of demographic data that is already well-
established.
Consistent with the existing regulation, FHFA retains the authority
to disqualify loan purchases that fail to serve the very low-, low-,
and moderate-income population. The proposed rule continues the
``unless otherwise determined by FHFA'' clause as a safeguard against
``luxury'' or ``lifestyle'' manufactured housing communities. FHFA will
continue to rely on robust Enterprise reporting, market monitoring, and
public input to identify properties that may not align with the Duty to
Serve mission. For example, if market data or stakeholder feedback
indicates that a specific manufactured housing community is being
positioned as a luxury-tier community--characterized by market-leading
rents or amenities far exceeding standard affordable housing--FHFA may
exercise its authority to exclude that loan purchase. This approach
maintains the integrity of the Duty to Serve Program while
significantly reducing the front-end burden for the vast majority of
affordable communities.
(5) Application of Median Income
The proposed rule would also amend the calculation of borrower
median income to determine eligibility for very low-, low-, and
moderate-income thresholds. FHFA believes that the current calculation
unnecessarily restricts families targeted for assistance by the
Enterprises' duty to serve actions in areas of concentrated poverty,
particularly in rural areas.
In the existing regulation, for mortgages in metropolitan
statistical areas (MSAs), borrower median income is compared to the
relevant MSA median income to determine whether the loan will receive
duty to serve credit. For mortgages in rural areas, borrower median
income is compared to the higher of the relevant county median income
or the state non-MSA median income. This comparison has contributed to
challenges in awarding Duty to Serve credit to areas with incomes below
the national average. For example, in 2024, a potential borrower in a
non-MSA in Puerto Rico, one of the lowest-income U.S. territories,
could earn 284 percent less than a borrower in a non-MSA in
Massachusetts, one of the highest-income States, and still not qualify
as low-income under the existing Duty to Serve regulation.\102\
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\102\ Assumes a borrower with the state's median income average
of $27,313, living in Vieques Municipio, Puerto Rico with a state
non-MSA value of $26,400 and a county average of $26,400. Assumes a
borrower with the state's median income average of $104,828 living
in Kent County, Massachusetts with a state non-MSA value of $85,000
and county value of $109,700. See U.S. Census Bureau, ``American
Community Survey 2024 1-Year Estimates'' (September 2025), available
at https://www2.census.gov/library/publications/2025/demo/acsbr-025.pdf.
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Thus, FHFA is concerned that the current methodology may
disadvantage low-income communities which already face barriers to
investment due to underlying structural economic conditions. To address
that concern, FHFA now proposes to compare rural borrower incomes to
the highest applicable median among county, state, and national rural
medians, and to compare urban borrower incomes to the highest
applicable median among county, state, and national urban medians.
The proposed modification is expected to expand Duty to Serve-
eligible rural lending, aligning with the statutory intent to support
low-income borrowers in both rural and urban areas while respecting
income differences across geographies, and to assist lenders in making
housing credit available in areas with concentrations of low-income
families. For example, from 2022 to 2024, relative to the status quo,
the proposed change increased loans qualifying for High-Needs Rural
Region activities by 352 percent in Puerto Rico, 16 percent in
Mississippi, 8 percent in West Virginia, and 21 percent in Louisiana.
These regions represent some of the lowest income areas during that
period.\103\ Under the proposed change, median incomes of very low-,
low-, and moderate-income borrowers qualifying for Duty to Serve credit
from 2022-2024 increased by a relatively small amount--less than
$4,500--demonstrating that borrowers assisted
[[Page 37866]]
under the proposal remain low-income. The recommendation is also
operationally efficient, requiring only three additional data points in
the FHFA-established file used by the Enterprises to determine Duty to
Serve income eligibility, with no other operational changes for FHFA.
The proposed change also makes it easier for the Enterprises to achieve
mission objectives.
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\103\ See U.S. Census Bureau, ``American Community Survey 2024
1-Year Estimates'' (September 2025), available at https://www2.census.gov/library/publications/2025/demo/acsbr-025.pdf.
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FHFA considered other policy alternatives, including adopting the
median income methodology in the CRA implementing regulations,\104\
modifying the calculated ratio at various geographic levels for only
urban or only rural borrowers, and comparing rural and urban borrowers
to the same medians for combined urban and rural areas. The CRA
alternative is not recommended, as it is expected to reduce mission
credit by offering less flexibility than the current regulation for
comparing rural borrowers to relevant areas. The other options explored
are also not recommended because they either make unfair comparisons
between rural and urban borrower medians, failed to significantly
increase mission credit compared to the proposed option or status quo,
or increased the administrative burden for FHFA and the Enterprises.
Overall, FHFA believes that the proposed change to the median income
definition would effectively expand mission credit for low-income
borrowers in low-income regions while supporting administrative
priorities of reducing regulatory burden and appropriately balancing
statutory intentions.
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\104\ See e.g., 12 CFR 25.12 (OCC) and 345.12 (FDIC).
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(6) Treatment of Other Transactions as Mortgage Purchases
The existing regulation identifies a number of transactions that
FHFA determined should be treated as mortgage purchases. FHFA now
proposes to carry the substance of those determinations into proposed
Sec. 1283.7(c), with some reorganization to enhance clarity. As in the
existing regulation, credit enhancements, risk-sharing arrangements,
participations, cooperative and condominium loans, refinancing
transactions, mortgage revenue bonds, and seller dissolution options
would continue to be treated as mortgage purchases, under the same
defined conditions as are set forth in the existing regulation.\105\
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\105\ See 12 CFR 1282.39(b) through (e) and (g) through (i).
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FHFA is not proposing to include a provision on seasoned mortgages,
currently in the existing regulation,\106\ in proposed Sec. 1283.7(c),
because it is unnecessary. To avoid confusion, however, FHFA is
affirming that purchases of seasoned mortgages would be eligible
actions (provided they otherwise meet the requirements of proposed
Sec. 1283.3(c) and are not ineligible for another reason).
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\106\ See 12 CFR 1282.39(f).
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H. Reservation of Authority--Sec. 1283.8
FHFA exercises general regulatory, examination, and enforcement
authorities over the Enterprises to ensure that they are operated in a
safe and sound manner, comply with applicable law, and fulfill their
public purposes. Consistent with these authorities, the proposed rule
would expressly state that it does not permit or require an Enterprise
to engage in any activity that would otherwise be inconsistent with its
Charter Act or the Safety and Soundness Act.
Proposed Sec. 1283.8 would also state that FHFA's review and Non-
Objection to a proposed Plan does not constitute approval of any action
described in the Plan. This provision acknowledges that a three-year
Plan could include innovative actions that may be subject to other FHFA
approval considerations or processes and that proposed actions may not
be ripe for such approval when a Plan is reviewed.
I. Effective Date
(1) Transition to New Plans
FHFA intends regulatory changes to be in effect by January 1, 2028,
which is the beginning of the 2028-2030 Duty to Serve Plan period. The
Agency intends to finalize this regulation well in advance of June 30,
2027 to ensure the Enterprises have adequate time to prepare their
2028-2030 Plans, allow for public feedback, and enable FHFA to
thoroughly review and grant Non-Objection to the Plans, consistent with
the evaluation standards specified in the proposed rule.
If FHFA is unable to finalize the regulation within the timeframe
described, the Agency could permit the Enterprises to extend their
existing 2025-2027 Underserve Markets Plans for a period after which
they would develop a Duty to Serve Plan in compliance with the new
evaluation standards, which would extend through the end of 2030 (or
through 2031, if the 2025-2027 Plans were extended significantly into
or through 2028). FHFA requests comment on the possible extension of
the 2025-2027 Plans into 2028.
(2) Implementation of New Evaluation Process
If the proposed rule is finalized before the end of 2027, FHFA
believes that it could be beneficial to the Enterprises and the public
if the proposed evaluation framework were implemented for Duty to Serve
assessments in 2027. FHFA requests comment on whether it would be
confusing for the Enterprises or the public to evaluate under the new
evaluation framework Plans developed under the existing regulation,
anticipating application of the existing regulation's evaluation
methodology. FHFA would also consider evaluating the Enterprises' 2027
Duty to Serve performance under both evaluation methodologies; this
approach may provide useful information to the Enterprises and the
public in understanding how an evaluation under the new (proposed)
methodology compares to an evaluation under the existing regulation's
methodology. FHFA requests comment on its use of the new (proposed)
evaluation methodology for assessing Enterprise 2027 Duty to Serve
performance.
J. Comments Specifically Requested
As stated above, FHFA invites comments on all aspects of the
proposed rule and will take all comments into consideration before
issuing a final rule. In addition to general comments on the proposal,
FHFA also requests comment on the questions set forth below. The most
helpful comments reference the specific questions listed, explain the
reason for any changes, and include supporting data.
(a) Definitions
1. Should FHFA consider changing the scope of the definitions for
affordable housing market, manufactured housing market, or rural
housing market?
2. Should FHFA consider adding other US territories or areas to the
proposed high-needs rural regions definition? If so, what areas should
FHFA add, and how do those areas qualify as high-needs rural regions?
3. Are there terms proposed to be defined in the existing
regulation that are commonly understood such that no definition of the
term is necessary?
4. Should FHFA change the definition of manufactured home to
acknowledge the increasing importance to the manufactured housing
market of other types of factory-built homes beyond HUD-code
manufactured homes (such as modular homes)?
[[Page 37867]]
(b) Duty To Serve Plans
5. Are there additional summary reference tables that the
Enterprises should include in their Plans to enhance transparency,
comparability, and accountability?
6. Should an Enterprise be allowed to request that FHFA permit it
to modify its Plan based on a change in market conditions or other
events or circumstances? Should FHFA be allowed to initiate a request
that an Enterprise modify its Plan based on a change in market
conditions or other events or circumstances? Under what circumstances?
7. Does the proposed timing for public feedback provide sufficient
opportunity for the public to review the proposed Plans and submit
comments, and for the Enterprises to incorporate such feedback into
their Plans? If not, what should be the proposed timing for public
feedback?
8. Should the Enterprises be allowed to annually update loan
purchase targets for future Plan years prior to that Plan year
commencing? If yes, should these objects be subject to the modification
review procedures and/or require FHFA non-objection?
9. FHFA proposes to remove the restriction that permitted LIHTC
equity investments only in rural areas, to expand eligibility for LIHTC
equity investments to all underserved markets. Should the Enterprises
also be permitted to invest in New Markets Tax Credits, to provide
additional liquidity to increase housing supply?
(c) Requirements for Eligible Loan Purchases
10. Should any of the eligibility requirements for loan purchases
(proposed Sec. 1283.7(a)(2)) apply to any other evaluation area?
11. Should FHFA classify micropolitan statistical areas and
metropolitan statistical areas as urban for the calculation of median
incomes? What would be the costs or benefits of the change?
12. Are there impacts FHFA should consider if, in the future, the
Agency aligns the median income calculation of the Enterprises housing
goals and other income eligibility qualifying programs to match the DTS
methodology?
(d) Effective Date
13. Should FHFA adopt the proposed effective date of January 1,
2028, aligned with the commencement of the 2028 to 2030 Duty to Serve
Plan cycle. If not, what alternative approaches, including a potential
extension of the 2025 to 2027 Plans through 2028 or other options,
should the Agency consider?
14. Should FHFA use the new (proposed) evaluation methodology for
assessing Enterprise 2027 Duty to Serve performance? Should FHFA
evaluate Enterprise 2027 Duty to Serve performance using both the
methodology of the existing regulation and the new (proposed)
methodology?
V. Regulatory Impact
A. Paperwork Reduction Act
The proposed rule would not contain any information collection
requirement that would require the approval of the OMB under the
Paperwork Reduction Act (44 U.S.C. 3501 et seq.). Therefore, FHFA has
not submitted the proposed rule to OMB for review for purposes of the
Paperwork Reduction Act.
B. Regulatory Flexibility Act
The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) requires that
a regulation that has a significant economic impact on a substantial
number of small entities, small businesses, or small organizations must
include an initial regulatory flexibility analysis describing the
regulation's impact on small entities. Such an analysis need not be
undertaken if the agency has certified that the regulation will not
have a significant economic impact on a substantial number of small
entities. 5 U.S.C. 605(b). FHFA has considered the impact of the
proposed rule under the Regulatory Flexibility Act. FHFA certifies that
the proposed rule, if adopted as a final rule, will not have a
significant economic impact on a substantial number of small entities
because the rule applies to Fannie Mae and Freddie Mac which are not
small entities for purposes of the Regulatory Flexibility Act.
C. Executive Orders 12866 and 14215: Regulatory Planning and Review
Executive Order 14215 \107\ (Independent Agency Accountability)
amends Executive Order 12866 \108\ (Regulatory Planning and Review) to
include in its definition of ``agency,'' those agencies under 44 U.S.C.
3502(1) including any ``independent regulatory agency.'' Accordingly,
Executive Order 12866 as amended requires FHFA to submit ``significant
regulatory actions'' to the Office of Management and Budget, Office of
Information and Regulatory Affairs (OIRA) for review. Executive Order
12866 defines a ``significant regulatory action'' as one that is likely
to result in a rule that may: (1) Have an annual effect on the economy
of $100 million or more or adversely affect in a material way the
economy, a sector of the economy, productivity, competition, jobs, the
environment, public health or safety, or State, local, or tribal
governments or communities; (2) create a serious inconsistency or
otherwise interfere with an action taken or planned by another agency;
(3) materially alter the budgetary impact of entitlements, grants, user
fees, or loan programs or the rights and obligations of recipients
thereof; or (4) raise novel legal or policy issues arising out of legal
mandates, the President's priorities, or the principles set forth in
the Executive Order.
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\107\ 90 FR 10447 (Feb. 24, 2025).
\108\ 58 FR 51735 (Oct. 4, 1993).
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OIRA has determined the proposed rule is not a significant
regulatory action under section 3(f) of Executive Order 12866 and is
not an economically significant regulatory action under section 3(f)(1)
of Executive Order 12866.
D. Executive Order 13563: Improving Regulation and Regulatory Review
Executive Order 13563 directs agencies to analyze regulations that
are ``outmoded, ineffective, insufficient, or excessively burdensome,
and to modify, streamline, expand, or repeal them in accordance with
what has been learned.'' Executive Order 13563 also directs that, where
relevant, feasible, and consistent with regulatory objectives, and to
the extent permitted by law, agencies are to identify and consider
regulatory approaches that reduce burdens and maintain flexibility and
freedom of choice for the public.
FHFA has developed this proposed rule in a manner consistent with
these requirements. If implemented, the proposed rule would reduce
regulatory burden on the Enterprises by streamlining Plan requirements,
including by eliminating mandates for the Enterprises to consider and
address in their Plans a specified number of activities from a
prescribed list. Additionally, the proposed rule would allow greater
flexibility for the Enterprises to identify actions that best meet the
needs of the underserved markets. Further, the proposed rule would
reduce administrative burden for FHFA by simplifying the monitoring and
evaluation process, reducing the time and resources needed for FHFA to
fulfill its statutory duties. Overall, FHFA believes that the proposed
rule is consistent with Executive Order 13563.
E. Executive Order 14192: Unleashing Prosperity Through Deregulation
Executive Order 14192 requires that an agency, unless prohibited by
law, identify at least at least 10 existing regulations be repealed
when the agency publicly proposes for notice and
[[Page 37868]]
comment or otherwise promulgates a new regulation with total costs
greater than zero. Executive Order 14192 further requires that any new
incremental costs associated with new regulations shall, to the extent
permitted by law, be offset by the elimination of existing costs
associated with at least 10 prior regulations. HFA's implementation of
these requirements will be informed by M-25-20, Guidance Implementing
Section 3 of Executive Order 14192, Titled ``Unleashing Prosperity
Through Deregulation'' (March 26, 2025). This proposed rule is expected
to be an Executive Order 14192 deregulatory action given the associated
cost savings.
F. Providing Accountability Through Transparency Act of 2023
The Providing Accountability Through Transparency Act of 2023 (5
U.S.C. 553(b)(4)) requires that a notice of proposed rulemaking include
the internet address of a summary of not more than 100 words in length
of a proposed rule, in plain language, that shall be posted on the
internet website under section 206(d) of the E-Government Act of 2002
(44 U.S.C. 3501 note) (commonly known as Regulations.gov). FHFA's
proposed rule and the required summary can be found at https://www.regulations.gov.
List of Subjects in 12 CFR Parts 1282 and 1283
Mortgages, Reporting and recordkeeping requirements.
Authority and Issuance
For the reasons stated in the preamble, under the authority of 12
U.S.C. 4501, 4502, 4511, 4513, 4526, and 4561-4566, FHFA proposes to
amend subchapter E of chapter XII, of title 12 of the Code of Federal
Regulations, as follows:
SUBCHAPTER E--HOUSING GOALS AND MISSION
PART 1282--ENTERPRISE HOUSING GOALS AND MISSION
0
1. The authority citation for part 1282 continues to read as follows:
Authority: 12 U.S.C. 4501, 4502, 4511, 4513, 4526, 4561-4566.
0
2. Revise the title of part 1282 to read as ``Enterprise Housing
Goals''.
0
3. In Sec. 1282.1(b), remove the definitions of ``Additional
Activity'', ``Agricultural worker'', ``Area of concentrated poverty'',
``Colonia'', ``Colonia census tract''; ``Community development
financial institution'', ``Evaluation Guidance'', ``Federally insured
credit union'', ``Federally recognized Indian tribe'', ``High-needs
rural population'', ``High-needs rural region'', ``High opportunity
area'', ``Indian area'', ``Insured depository institution'', ``Lower
Mississippi Delta'', ``Manufactured home'', ``Manufactured housing
community'', ``Middle Appalachia'', ``Mixed-income housing'',
``Persistent poverty county'', ``Regulatory Activity'', ``Resident-
owned manufactured housing community'', ``Residential economic
diversity activity'', ``Rural area'', ``Small financial institution'',
``Small multifamily rental property'', ``Statutory Activity'', and
``Underserved Markets Plan.''
0
4. Remove Subpart C consisting of Sec. Sec. 1282.31 through 1282.41
and redesignate Subpart D as Subpart C.
0
5. Remove Sec. 1282.66(d).
PART 1283--ENTERPRISE DUTY TO SERVE UNDERSERVED MARKETS
0
6. Add part 1283 to read as follows:
Sec.
1283.1 Authority and purpose.
1283.2 Definitions.
1283.3 Enterprise duty to serve program.
1283.4 Duty to serve plan.
1283.5 Performance monitoring and reporting.
1283.6 Evaluations and ratings.
1283.7 Requirements for eligible loan purchases.
1283.8 Reservation of authority.
Authority: 12 U.S.C. 4501, 4502, 4511, 4513, 4514, 4526, 4565-
4566.
Sec. 1283.1 Authority and purpose.
This part implements section 1335 of the Safety and Soundness Act
(12 U.S.C. 4565) which establishes a duty for each Enterprise to serve
three underserved markets: the affordable housing preservation market,
the manufactured housing market, and the rural housing market. This
part also establishes a process for FHFA annually to evaluate and rate
whether, and the extent to which, each Enterprise has complied with
that duty to serve, as required by the Safety and Soundness Act.
Sec. 1283.2 Definitions.
(a) Statutory terms. All terms defined in the Safety and Soundness
Act are used in accordance with their statutory meaning.
(b) Other terms. For purposes of this part:
Affordable housing preservation market means the market for
residential properties that provide housing to very low-, low-, and
moderate-income families by preserving existing affordability
restrictions or supporting sustainable affordability mechanisms.
Balloon note means a mortgage providing for payments at regular
intervals, with a final payment (``balloon payment'') that is at least
5 percent more than the periodic payments. The periodic payments may
cover some or all of the periodic principal or interest. Typically, the
periodic payments are level monthly payments that would fully amortize
the mortgage over a stated term and the balloon payment is a single
payment due after a specified period (but before the mortgage would
fully amortize) and pays off or satisfies the outstanding balance of
the mortgage.
Colonia census tract means a census tract that contains an
identifiable community that meets the definition of a colonia under a
federal, state, tribal, or local program.
Dwelling unit means a room or unified combination of rooms with
plumbing and kitchen facilities intended for use, in whole or in part,
as a dwelling by one or more persons, and includes a dwelling unit in a
single-family property, multifamily property, or other residential or
mixed-use property.
Family means one or more individuals who occupy the same dwelling
unit.
High-needs rural region means any of the following regions,
provided the region is located in a rural area:
(i) Middle Appalachia;
(ii) The Lower Mississippi Delta;
(iii) A colonia census tract;
(iv) An Indian area; or
(v) A tract located in a persistent poverty county and not included
in Middle Appalachia, the Lower Mississippi Delta, a colonia census
tract, or an Indian area.
Indian area has the meaning in 24 CFR 1000.10.
Lender means any entity that makes, originates, sells, or services
mortgages, and includes the secured creditors named in the debt
obligation and document creating the mortgage.
Low-income means:
(i) In the case of owner-occupied units, income not in excess of 80
percent of area median income; and
(ii) In the case of rental units, income not in excess of 80
percent of area median income, with adjustments for smaller and larger
families in accordance with this part.
Lower Mississippi Delta means the Lower Mississippi Delta counties
designated by Public Laws 100-460, 106-554, and 107-171, along with any
future updates made by Congress.
Manufactured home means a manufactured home as defined in section
603(6) of the National Manufactured Housing Construction and Safety
Standards Act of 1974, as amended, 42 U.S.C. 5401 et seq., and
implementing regulations.
[[Page 37869]]
Manufactured housing community means a tract of land under unified
ownership and developed for the purposes of providing individual rental
spaces for the placement of manufactured homes for residential purposes
within its boundaries.
Manufactured housing market means the market for residential
properties that provide housing for very low-, low-, and moderate-
income families in manufactured homes and manufactured housing
communities.
Median income means, with respect to an area, the unadjusted median
family income for the area as determined by FHFA. FHFA will provide the
Enterprises annually with information specifying how the median family
income estimates for metropolitan and non-metropolitan areas are to be
applied for purposes of determining median income.
Metropolitan area means a metropolitan statistical area (MSA), or a
portion of such an area, including Metropolitan Divisions, for which
median incomes are determined by FHFA.
Middle Appalachia means the ``central'' Appalachian subregions
under the Appalachian Regional Commission's subregional classification
of Appalachia.
Moderate-income means:
(i) In the case of owner-occupied units, income not in excess of
area median income; and
(ii) In the case of rental units, income not in excess of area
median income, with adjustments for smaller and larger families in
accordance with this part.
Mortgage means a member of such classes of liens, including
subordinate liens, as are commonly given or are legally effective to
secure advances on, or the unpaid purchase price of, real estate under
the laws of the State in which the real estate is located, together
with the credit instruments, if any, secured thereby, and includes
interests in mortgages. Mortgage includes a mortgage, lien, including a
subordinate lien, or other security interest on the stock or membership
certificate issued to a tenant-stockholder or resident-member by a
cooperative housing corporation, as defined in section 216 of the
Internal Revenue Code of 1986, and on the proprietary lease, occupancy
agreement, or right of tenancy in the dwelling unit of the tenant-
stockholder or resident-member in such cooperative housing corporation.
Mortgage purchase means a transaction in which an Enterprise bought
or otherwise acquired a mortgage or an interest in a mortgage for
portfolio, resale, or securitization.
Mortgage revenue bond means a tax-exempt bond or taxable bond
issued by a state or local government or agency where the proceeds from
the bond issue are used to finance residential housing.
Multifamily property means a residence consisting of more than four
dwelling units. The term includes cooperative buildings and condominium
projects.
Non-metropolitan area means a county, or a portion of a county,
including those counties that comprise Micropolitan Statistical Areas,
located outside any metropolitan area, for which median incomes are
determined by FHFA.
Owner-occupied means single-family housing in which a mortgagor
resides, including two- to four-unit owner-occupied properties where
one or more units are used for rental purposes.
Participation means a fractional interest in the principal amount
of a mortgage.
Persistent poverty county means a county in a rural area that has
had 20 percent or more of its population living in poverty over the
past 30 years, as measured by the most recent successive decennial
censuses.
Proprietary information means all mortgage data and all data or
information that the Enterprises submit to the Director in the Annual
Housing Activities Report under section 309(n) of the Fannie Mae
authorizing statute or section 307(f) of the Freddie Mac authorizing
statute.
Refinancing mortgage means a mortgage undertaken by a borrower that
satisfies or replaces an existing mortgage of such borrower. The term
does not include:
(i) A renewal of a single payment obligation with no change in the
original terms;
(ii) A reduction in the annual percentage rate of the mortgage as
computed under the Truth in Lending Act (15 U.S.C. 1601 et seq.), with
a corresponding change in the payment schedule;
(iii) An agreement involving a court proceeding;
(iv) A workout agreement, in which a change in the payment schedule
or collateral requirements is agreed to as a result of the mortgagor's
default or delinquency, unless the rate is increased or the new amount
financed exceeds the unpaid balance plus earned finance charges and
premiums for the continuation of insurance;
(v) The renewal of optional insurance purchased by the mortgagor
and added to an existing mortgage;
(vi) A renegotiated balloon mortgage note on a multifamily property
where the balloon payment was due within 1 year after the date of the
closing of the renegotiated mortgage; and
(vii) A conversion of a balloon mortgage note on a single-family
property to a fully amortizing mortgage note where the Enterprise
already owns or has an interest in the balloon note at the time of the
conversion.
Rent means the actual rent or average rent by unit size for a
dwelling unit.
(i) Rent is determined based on the total combined rent for all
bedrooms in the dwelling unit, including fees or charges for management
and maintenance services and any utility charges that are included.
(A) Rent concessions shall not be considered, i.e., the rent is not
decreased by any rent concessions.
(B) Rent is net of rental subsidies, i.e., the rent is decreased by
any rental subsidy.
(ii) When the rent does not include all utilities, the rent shall
also include:
(A) The actual cost of utilities not included in the rent;
(B) The nationwide average utility allowance, as issued
periodically by FHFA;
(C) The utility allowance established under the HUD Section 8
Program (42 U.S.C. 1437f) for the area where the property is located;
or
(D) The utility allowance for the area in which the property is
located, as established by the state or local housing finance agency
for determining the affordability of low-income housing tax credit
properties under section 42 of the Internal Revenue Code (26 U.S.C.
42).
Rental unit means a dwelling unit that is not owner-occupied and is
rented or available to rent.
Residence means a property where one or more families reside.
Rural area means:
(i) A census tract outside of a metropolitan statistical area as
designated by the Office of Management and Budget; or
(ii) A census tract in a metropolitan statistical area as
designated by the Office of Management and Budget that is outside of
the metropolitan statistical area's Urbanized Areas as designated by
the U.S. Department of Agriculture's (USDA) Rural-Urban Commuting Area
(RUCA) Code #1, and outside of tracts with a housing density of over 64
housing units per square mile for USDA's RUCA Code #2; or
(iii) Any high-needs rural region that meets the criteria of
paragraphs (i) or (ii); or
(iv) A colonia census tract that does not meet the criteria of
paragraphs (i), (ii), or (iii) of this definition.
Rural housing market means the market for residential properties
that
[[Page 37870]]
provide housing for very low-, low-, and moderate-income families in
rural areas.
Secondary residence means a dwelling where the mortgagor maintains
(or will maintain) a part-time place of abode and typically spends (or
will spend) less than the majority of the calendar year. A person may
have more than one secondary residence at a time.
Single-family housing means a residence consisting of one to four
dwelling units. Single-family housing includes condominium dwelling
units and dwelling units in cooperative housing projects.
Underserved market means each of the manufactured housing market,
the affordable housing preservation market, and the rural housing
market.
Utilities means charges for electricity, piped or bottled gas,
water, sewage disposal, fuel (oil, coal, kerosene, wood, solar energy,
or other), and garbage and trash collection. Utilities do not include
charges for subscription-based television, telephone, or internet
service.
Very low-income means:
(i) In the case of owner-occupied units, income not in excess of 50
percent of area median income; and
(ii) In the case of rental units, income not in excess of 50
percent of area median income, with adjustments for smaller and larger
families in accordance with this part.
Sec. 1283.3 Enterprise duty to serve program.
(a) Duty in general. To increase the liquidity of mortgage
investments and improve the distribution of investment capital
available for mortgage financing in the manufactured housing market,
affordable housing preservation market, and rural housing market, each
Enterprise must provide leadership in developing loan products and
flexible underwriting guidelines that facilitate a secondary market for
mortgages for very low-, low-, and moderate-income families in those
markets.
(b) Program requirements. To carry out the duty set forth under
paragraph (a) of this section each Enterprise must:
(1) Design programs and products that facilitate the use of
assistance provided by the federal, state, and local governments;
(2) Develop relationships with nonprofit and for-profit
organizations that develop and finance housing and with state and local
governments;
(3) Take affirmative steps, including developing appropriate and
prudent underwriting standards, business practices, repurchase
requirements, pricing, fees, and procedures, to:
(i) Assist primary lenders to make housing credit available in
areas with concentrations of low-income and minority families;
(ii) Assist insured depository institutions to meet their
obligations under the Community Reinvestment Act of 1977, 12 U.S.C.
2901 et seq.; and
(4) Develop the institutional capacity to help finance low- and
moderate-income housing, including for first-time homebuyers.
(c) Eligible actions. (1) An Enterprise may take any action that
would be consistent with carrying out the Enterprise's duty to serve
and has not been deemed ineligible by FHFA, by regulation or after
review.
(2) In accordance with paragraph (c)(1) of this section, the
following actions are ineligible:
(i) Contributions to the Housing Trust Fund (12 U.S.C. 4568) and
the Capital Magnet Fund (12 U.S.C. 4569), and mortgage purchases funded
with such grant amounts; and
(ii) Purchases of mortgage loans that do not satisfy the
requirements set forth in Sec. 1283.7(a)(1) or that are ineligible in
accordance with Sec. 1283.7(a)(2).
Sec. 1283.4 Duty to serve plan.
(a) General. To demonstrate how the Enterprise intends to meet its
duty to serve and to provide a basis for FHFA evaluation and rating,
each Enterprise must adopt a three-year Duty to Serve Plan (``Plan'')
that commences on January 1 of the first year for which the Plan is
applicable. The Plan must describe the actions the Enterprise will take
to meet its duty to serve in each underserved market and satisfy other
requirements as set forth in this part.
(b) Plan content. The Plan must include for each underserved
market:
(1) An assessment of liquidity and investment capital needs, risks,
and market opportunities based on market research, stakeholder
consultations, and public engagement.
(2) The specific actions that the Enterprise intends to take in
each Plan year to address the identified liquidity and investment
capital needs, risks, and opportunities.
(3) One or more measurable targets for each action, with loan
purchases and investments including, at a minimum, a number of units
target for multifamily and number of loans target for single-family.
(4) A description of how the Enterprise will fulfill the program
requirements set forth in Sec. 1283.3(b).
(5) A description of public engagement activities undertaken during
the development of the Plan, including any significant input received,
and how the Enterprise considered and addressed the input in its Plan.
(6) A list of the Enterprise's mortgage products that support
housing for very low-, low- and moderate-income families in the
underserved markets.
(7) Reference tables summarizing the planned actions in each Plan
year, including:
(i) A table listing for each underserved market, all actions by the
following component categories: loan product development, outreach,
loan purchases, and investments and grants; and
(ii) For loan purchases, and investments and grants actions, a
table listing each action and associated target by year.
(c) Submission to FHFA; review and non-objection--(1) Submission of
proposed Plans. Each Enterprise must submit its proposed Plan to FHFA
for review and feedback on or before June 30 of the year prior to the
first year for which the Plan is applicable.
(2) Public input. (i) Prior to making a decision on a proposed
Plan, FHFA will seek public input on the proposed Plan.
(ii) Each Enterprise must revise its proposed Plan based on public
input and resubmit the proposed Plan to FHFA for review by October 1 of
the year prior to the first year for which the Plan is applicable.
(3) FHFA review; non-objection. (i) FHFA will review each proposed
Plan and provide feedback to each Enterprise for consideration.
(ii) FHFA will object or non-object to the Plan no later than
November 15 of the year prior to the first year for which the Plan is
applicable, provided that FHFA may extend the date upon notice to the
Enterprises. FHFA will object to any Plan that:
(A) Does not include the content required by Sec. 1283.4(b);
(B) When fully implemented is not likely to result in a market-
level rating that demonstrates compliance by the Enterprise with the
duty to serve;
(C) Does not demonstrate a good faith effort to consider FHFA
feedback; or
(D) Contains any action that FHFA has determined is not consistent
with the Enterprise's authorizing statute or the safe and sound
operation of the Enterprise, or is not an eligible action for purposes
of Sec. 1283.3(c).
(iii) FHFA will notify each Enterprise in writing of its decision
to object or non-object to a proposed Plan. If FHFA objects to a
proposed Plan, the Enterprise must revise and resubmit the Plan for
FHFA review within 10 days. The failure to receive a non-objection to a
Plan prior to January 1 of the first year the Plan is applicable does
not relieve the Enterprise of its obligation to comply with its duty to
serve for that Plan year.
[[Page 37871]]
(4) Plan publication. Each Enterprise must publish its Plan on its
website as soon as practicable, but no later than 10 days after FHFA
provides non-objection to the Plan and must maintain it thereafter. If
the Plan is subsequently modified, each Enterprise must publish its
modified Plan as soon as practicable, but no later than 10 days after
FHFA approves the modified Plan.
(5) Public accessibility. Each Enterprise shall ensure that each
Plan published on its website complies with Section 508 of the
Rehabilitation Act of 1973.
(d) Modification of a Plan--(1) Enterprise-initiated modifications.
An Enterprise may request to modify its Plan during the three-year term
only upon the occurrence of special circumstances. An Enterprise
request to FHFA must include the basis for its determination of special
circumstances and its proposed Plan modifications.
(2) Special circumstances. For purposes of this section, ``special
circumstances'' means extraordinary and significant changes in market
conditions that were unforeseeable at the time of Plan inception and
that fundamentally alter the feasibility or utility of the Plan, as a
whole. Ordinary market volatility, routine economic fluctuations,
underserved market-specific disruptions, or an Enterprise's failure to
execute planned actions do not constitute special circumstances.
(3) FHFA response to Enterprise modification request. FHFA will
respond to an Enterprise's modification request within a reasonable
time and may approve or deny the request in its sole discretion.
(4) Public input. FHFA may seek public input on proposed
modifications to a Plan if FHFA determines that public input would
assist its consideration of the proposed modifications.
(5) Non-Objection required. All modified Plans are subject to a
determination of non-objection by FHFA under the same standards set
forth in paragraph (c)(3)(ii) of this section.
(e) Extension of deadlines by FHFA. FHFA may extend any of the
foregoing deadlines or periods in its discretion, upon written notice
to the Enterprise. Any such notice shall set forth the date to which,
or the number of days by which, the deadline or period is being
extended.
Sec. 1283.5 Performance monitoring and reporting.
(a) Ongoing monitoring. On an ongoing basis, each Enterprise must
monitor and assess the completion of actions and achievement of targets
under its Plan and report on its performance to its board of directors
and senior management. Each Enterprise must participate in ongoing
monitoring discussions with FHFA regarding Plan performance.
(b) Annual and quarterly reports--(1) Annual report. No later than
March 1 of the year after the close of the applicable Plan year, each
Enterprise must submit an annual report to FHFA. In its report, the
Enterprise must describe the completion of actions and achievement of
targets under its Plan for each underserved market for the applicable
Plan year and include such other information and data as may be
required by FHFA. Each Enterprise must publish its annual report, with
confidential and proprietary information omitted, on its website as
soon as practicable, but no later than March 30 and maintain it
thereafter. Each Enterprise shall ensure that the annual report
complies with Section 508 of the Rehabilitation Act of 1973, 29 U.S.C.
701 et seq.
(2) Quarterly reports. Each Enterprise must submit quarterly
reports to FHFA on or before May 15, August 15, and November 15 of the
applicable Plan year. In each report, the Enterprise must describe the
completion of actions and achievement of targets under its Plan for
each underserved market for the applicable quarter and include such
other information and data as may be required by FHFA.
Sec. 1283.6 Evaluations and ratings.
(a) General. FHFA will evaluate and rate each Enterprise's
compliance with its duty to serve each underserved market on an annual
basis in accordance with framework established in this section. In
determining whether, and the extent to which, an Enterprise has
complied with the duty to serve each underserved market, FHFA will
evaluate and rate the impact of the Enterprise's actions to address the
needs of each underserved market during the applicable Plan year.
(b) Component ratings. At the end of each Plan year, FHFA will
assess how well each Enterprise met the needs of each underserved
market and assign a rating from ``1'' (highest performance) to ``5''
(lowest performance) for each of the following components:
(1) Loan product development. The Enterprise's development of loan
products, more flexible underwriting guidelines, and other innovative
approaches to providing financing for very low-, low-, and moderate-
income families in the underserved market;
(2) Outreach. The extent of the Enterprise's outreach to qualified
loan sellers and other market participants in the underserved market;
(3) Loan purchases. The volume of loans purchased by the Enterprise
in the underserved market relative to the market opportunities
available to the Enterprise;
(4) Investments and grants. The amount of the Enterprise's
investments and grants in projects that assist in meeting the needs of
the underserved market;
(5) Program requirements. The extent to which the actions completed
under the Plan satisfy the requirements set forth in Sec. 1283.3(b);
(6) Program management. The capability and willingness of the board
of directors and management, in their respective roles, to meet the
Enterprise's duty to serve; and
(7) Other factors. Any other factor identified by the Director in
writing prior to the Plan year subject to evaluation.
(c) Market-level ratings; compliance or noncompliance. Based on its
assessment of each component and component rating for an underserved
market, FHFA will assign a market-level, composite rating from ``1''
(highest performance) to ``5'' (lowest performance) for each
Enterprise's duty to serve performance in each underserved market. A
market-level rating of ``1,'' ``2,'' or ``3'' will constitute
compliance by the Enterprise with the duty to serve that underserved
market. A market-level rating of ``4'' or ``5'' will constitute
noncompliance by the Enterprise with the duty to serve that underserved
market.
(d) Failure to comply. If the Director determines that an
Enterprise did not comply with, or there is a substantial probability
that an Enterprise will not comply with, the duty to serve a particular
underserved market in a given year and the Director determines that
such compliance is or was feasible, the Director will follow the
procedures in 12 U.S.C. 4566(b).
(e) FHFA evaluation and ratings. FHFA will annually publish a
narrative assessment, market-level rating, and compliance determination
for each underserved market for each Enterprise in FHFA's Annual
Housing Report.
Sec. 1283.7 Requirements for eligible loan purchases.
(a) Eligible loan purchases. (1) Eligible loan purchases must:
(i) Be secured by dwelling units;
(ii) Be affordable in accordance with paragraph (b) of this
section; and
(iii) Not be of a type that FHFA has determined to be ineligible in
paragraph (a)(2) of this section or after review.
[[Page 37872]]
(2) The following loan purchases are ineligible:
(i) Mortgages loans that finance any dwelling units that are
secondary residences;
(ii) Refinancing mortgages that are not arms-length transactions or
borrower driven;
(iii) Single-family refinancing mortgages that result from
conversion of balloon notes to fully amortizing notes, if the
Enterprise already owns or has an interest in the balloon note at the
time conversion occurs;
(iv) Single-family mortgage covered by section 103(bb) of the Home
Ownership and Equity Protection Act, 15 U.S.C. 1602(bb) (HOEPA
mortgages);
(v) Single-family mortgages for which the income of the
mortgagor(s) is unavailable;
(vi) Mortgages or interests in mortgages that previously received
duty to serve credit under any underserved market within the five years
immediately preceding the current performance year;
(vii) Mortgages where the property or any units within the property
have not been approved for occupancy, except for ``single close''
single-family construction to permanent loans in the construction
phase;
(viii) Any interests in mortgages that FHFA determines will not be
treated as interests in mortgages; and
(ix) State and local government housing bonds, except as provided
in Sec. 1283.7(c)(5).
(b) Affordability requirements. FHFA will determine whether a loan
purchase serves very low-, low-, and moderate-income families based on
factors relevant to specific housing types as set forth in paragraphs
(b)(1) through (b)(3) of this section.
(1) Owner-occupied units. For mortgage purchases financing owner-
occupied single-family properties, affordability for each income group
is determined based on the income of the mortgagor(s) compared to the
applicable median income at the time the mortgage was originated. A
mortgage is affordable if it does not exceed the percentage of the
applicable median income provided in Sec. 1282.17 for the income
group.
(2) Rental units--(i) General. For mortgage purchases financing
rental units, affordability is determined by comparing the unit rent to
the applicable median income, adjusted by unit size. A rent is
affordable if it does not exceed the percentage of the applicable
median income provided in Sec. 1282.19 for the income group, as
adjusted by unit size.
(ii) Unoccupied units. Anticipated rent for unoccupied units may be
the market rent for similar units in the property or neighborhood as
determined by the lender or appraiser for underwriting purposes. This
includes any unit in a multifamily property that is unoccupied because
it is being used as a model unit or rental office, if the Enterprise
determines that the number of such units is reasonable and minimal
considering the size of the multifamily property.
(iii) Timeliness of information. In evaluating affordability, an
Enterprise must use tenant income and the applicable median income
available at the time the mortgage was originated or acquired,
whichever is later.
(iv) Use of rent and affordability of rents based on housing
program affordability requirements. For an Enterprise purchase of a
loan subject to federal affordability restrictions (including but not
limited to properties receiving Low-Income Housing Tax Credits (26
U.S.C. 42), Section 8 Housing Assistance Payment contracts (42 U.S.C.
1437f), or HOME funding (15 U.S.C. 1602(bb)) restricted units shall be
presumed as affordable for very low-, low-, or moderate-income
families, unless otherwise determined by FHFA. For an Enterprise
purchases of loans subject to any other affordability restriction, for
purposes of determining affordability based on income (such as in the
case of a housing program that establishes the maximum permitted income
level for a tenant) the maximum income level must be no greater than
the maximum income level for each income group targeted by the duty to
serve, adjusted for family or unit size as provided in Sec. 1282.17 or
Sec. 1282.18, as appropriate.
(3) Manufactured housing communities. For an Enterprise purchase of
a blanket loan on a manufactured housing community, unless otherwise
determined by FHFA, homes in the community shall be presumed as
affordable for very low-, low-, or moderate-income families.
(4) Application of median income. (i) If the property that is the
subject of the mortgage is in a metropolitan area, for purposes of
determining affordability, the applicable median income is the highest
of the metropolitan area median income, State median income including
metropolitan areas, or national median income including metropolitan
areas.
(ii) If the property that is the subject of the mortgage is not in
a metropolitan area, the applicable median income that is highest of
the county median income, State non-metropolitan median income, or
national non-metropolitan median income.
(iii) When an Enterprise cannot determine whether a mortgage is on
dwelling unit(s) located in one area, the Enterprise must determine the
median income for the split area in the manner prescribed by the
Federal Financial Institutions Examination Council for reporting under
the Home Mortgage Disclosure Act (12 U.S.C. 2801 et seq.), if the
Enterprise can determine that the mortgage is on dwelling unit(s)
located in a census tract, or a census place code.
(c) Treatment of other transactions as mortgage purchases. A
transaction described by any of paragraphs (c)(1) through (c)(7) of
this section constitutes the purchase of a mortgage on a dwelling unit
for purposes of paragraph (a) of this section.
(1) Credit enhancements. (i) Dwelling units financed under a credit
enhancement entered into by an Enterprise will be treated as mortgage
purchases only when:
(A) The Enterprise provides a specific contractual obligation to
ensure timely payment of amounts due under a mortgage or mortgages
financed by the issuance of housing bonds (such bonds may be issued by
any entity, including a state or local housing finance agency); and
(B) The Enterprise assumes a credit risk in the transaction
substantially equivalent to the risk that would have been assumed by
the Enterprise if it had securitized the mortgages financed by such
bonds.
(ii) When an Enterprise provides a specific contractual obligation
to ensure timely payment of amounts due under any mortgage originally
insured by a public purpose mortgage insurance entity or fund, the
Enterprise may, on a case-by-case basis, seek approval for such
transactions to receive credit for a particular underserved market.
(2) Risk-sharing. Mortgages purchased under risk-sharing
arrangements between an Enterprise and any federal agency under which
the Enterprise is responsible for a substantial amount of the risk will
be treated as mortgage purchases.
(3) Participations. Participations purchased by an Enterprise will
be treated as mortgage purchases only when the Enterprise's
participation in the mortgage is 50 percent or more.
(4) Cooperative housing and condominiums. (i) The purchase of a
mortgage on a cooperative housing unit (``a share loan'') or a mortgage
on a condominium unit will be treated as a mortgage purchase. Such a
purchase will receive duty to serve credit in the same manner as a
mortgage purchase of single-family owner-occupied units, i.e.,
[[Page 37873]]
affordability is based on the income of the mortgagor(s).
(ii) The purchase of a blanket mortgage on a cooperative building
or a mortgage on a condominium project will be treated as a mortgage
purchase. The purchase of a blanket mortgage on a cooperative building
will receive duty to serve credit in the same manner as a mortgage
purchase of a multifamily rental property, except that affordability
must be determined based solely on the comparable market rents used in
underwriting the blanket loan. The purchase of a mortgage on a
condominium project will be evaluated in the same manner as a mortgage
purchase of a multifamily rental property.
(iii) Where an Enterprise purchases both a blanket mortgage on a
cooperative building and share loans for units in the same building,
both the mortgage on the cooperative building and the share loans will
be treated as mortgage purchases. Where an Enterprise purchases both a
mortgage on a condominium project and mortgages on individual dwelling
units in the same project, both the mortgage on the condominium project
and the mortgages on individual dwelling units will be treated as
mortgage purchases.
(5) Mortgage revenue bonds. The purchase or guarantee by an
Enterprise of a mortgage revenue bond issued by a state or local
housing finance agency will be treated as a purchase of the underlying
mortgages only to the extent the Enterprise has sufficient information
to determine whether the underlying mortgages or mortgage-backed
securities serve the income groups targeted by the duty to serve.
(6) Seller dissolution option. (i) Mortgages acquired through
transactions involving seller dissolution options will be treated as
mortgage purchases only when:
(A) The terms of the transaction provide for a lockout period that
prohibits the exercise of the dissolution option for at least one year
from the date on which the transaction was entered into by the
Enterprise and the seller of the mortgages; and
(B) The transaction is not dissolved during the one-year minimum
lockout period.
(ii) FHFA may grant an exception to the one-year minimum lockout
period described in paragraphs (c)(6)(i)(A) and (c)(6)(i)(B) of this
section, in response to a written request from an Enterprise, if FHFA
determines that the transaction furthers the purposes of the
Enterprise's Charter Act and the Safety and Soundness Act.
(iii) For purposes of paragraph (c)(6) of this section, ``seller
dissolution option'' means an option for a seller of mortgages to the
Enterprises to dissolve or otherwise cancel a mortgage purchase
agreement or loan sale.
(7) Subordinate liens on single-family properties. (i) The purchase
of subordinate liens on single-family properties will be treated as
mortgage purchases only when they are used for affordable homeownership
preservation through one of the following shared equity homeownership
programs:
(A) Resale restriction programs administered by community land
trusts, other nonprofit organizations, or state or local governments or
instrumentalities; or
(B) Shared appreciation loan programs administered by community
land trusts, other nonprofit organizations, or state or local
governments or instrumentalities that may or may not partner with a
for-profit institution to invest in, originate, sell, or service shared
appreciation loans.
(ii) A program in paragraph (c)(7)(i) must:
(A) Provide homeownership opportunities to very low-, low-, or
moderate-income families;
(B) Utilize a ground lease, deed restriction, subordinate loan, or
similar legal mechanism that includes provisions stating that the
program will keep the home affordable for subsequent very low-, low-,
or moderate-income families; the affordability term is at least 30
years after recordation; a resale formula applies that limits the
homeowner's proceeds upon resale; and the program administrator or its
assignee has a preemptive option to purchase the homeownership unit
from the homeowner at resale; and
(C) Support homebuyers and homeowners to promote sustainable
homeownership.
(d) Newly available data. When an Enterprise uses data to determine
whether a loan purchase is an eligible action under Sec. 1283.3(c) and
new data is released after the start of a calendar quarter, the
Enterprise need not use the new data until the start of the following
quarter.
Sec. 1283.8 Reservation of authority.
Actions described in a Plan are subject to all applicable laws and
regulations. Nothing in this part permits or requires an Enterprise to
take any action that would otherwise be inconsistent with its
authorizing statute or the Safety and Soundness Act. FHFA's review and
Non-Objection to a proposed Plan does not constitute approval of any
action described in the Plan, and does not restrict FHFA's exercise of
authorities under 12 U.S.C. 4541 (prior approval authority for
products) or any other provision of the Safety and Soundness Act.
Clinton Jones,
General Counsel, Federal Housing Finance Agency.
[FR Doc. 2026-12750 Filed 6-23-26; 8:45 am]
BILLING CODE 8070-01-P