In October 2019, Fannie Mae and Freddie Mac announced their plans to invest $750 million in underserved markets. The FHFA objected to the plans, citing issues with lack of clarity on how the funds would be used and inadequate distinctions between who would benefit from the investment.
The UMPs were created by the Enterprises with the intention of providing assistance to low- and moderate- income borrowers and helping them access homeownership opportunities. The intention was to provide loans to those living in areas with limited mortgage resources and little or no access to housing counseling. The UMPs outlined five specific requirements that must be met in order for the Enterprises to make investments: increased availability of credit, improved affordability of credit, an increased understanding of credit options, increased access to responsible leasing, and improved access to housing counseling.
However, the FHFA raised concerns about the lack of clarity surrounding how the funds would be used and questioned the distinction between who would benefit from the investment. The agency also expressed concern over the potential risk of reduced liquidity for the secondary market and the need to maintain sufficient capital in order to protect taxpayers. Additionally, the agency questioned the ability of the Enterprises to monitor the effectiveness of the UMPs in terms of increasing access to credit and improving affordability.
The FHFA's objections add complexity to the UMPs' goal of strengthening underserved markets, as the agency is charged with ensuring safe and sound practices and stability in the secondary mortgage market. As a result, it is unlikely that any changes to the UMPs will occur without their approval. The agency's stance means that the UMPs must address the concerns that have been expressed and collaborate with the FHFA in order to create a plan that meets the requirements.
In summary, the FHFA has expressed opposition to the Fannie Mae and Freddie Mac's Underserved Markets Plans (UMPs) due to a lack of clarity on the use of funds and inadequate distinctions between who would benefit from the investments. The UMPs were created with the intention of providing assistance to low- and moderate- income borrowers and helping them access homeownership opportunities. The FHFA raised concerns about the lack of clarity surrounding how the funds would be used and questioned the distinction between who would benefit from the investment. They also expressed concern over the potential risk of reduced liquidity for the secondary market and the need to maintain sufficient capital in order to protect taxpayers. Despite these objections, the UMPs are still continuing, albeit more slowly, to increase access to homeownership opportunities for low- and moderate-income households by addressing the FHFA's concerns. To ensure that the UMPs are successful, close collaboration between the FHFA and the Enterprises is necessary.
This article was contributed on Oct 20, 2023
