The Housing and Economic Recovery Act of 2008 (HERA) amended the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 by, among other things, establishing the Federal Housing Finance Agency (FHFA). FHFA replaced the Federal Housing Finance Board (FHFB) and Office of Federal Housing Enterprise Oversight (OFHEO) as the overseer of the Government Sponsored Enterprises (GSEs) best known as Fannie Mae and Freddie Mac. Pursuant to HERA, FHFA put Fannie Mae and Freddie Mac under its conservatorship in September 2008.
Section 1129 of HERA amended section 1335 of the Safety and Soundness Act to require Fannie Mae and Freddie Mac to provide a secondary market for mortgages for very low-, low-, and moderate-income families in three specific underserved markets, known simply as “the Duty to Serve.” Though the first market named is manufactured housing, Congress did not require chattel loans to be included. This presented a problem, since chattel loans are used to finance 70 percent of manufactured homes sold. In addition, section 1335(d)(1) requires FHFA to establish a method for crediting the GSEs compliance with the Duty to Serve underserved markets.
On December 15, 2015, FHFA issued a proposed rule to implement HERA’s Duty to Serve requirements. As required by HERA, the proposed rule would have provided Duty to Serve credit for GSE activities that facilitate a secondary market for mortgages on residential properties in the specified underserved markets. It would also establish a method for crediting the enterprises’ performance each year, on which FHFA would report annually to Congress. However, for the manufactured housing market, Duty to Serve credit would be provided only for GSE activities related to manufactured homes financed as real property and blanket loans for certain categories of manufactured housing communities. The proposed rule did not include chattel lending as an eligible activity under the manufactured housing market, thereby leaving out seventy percent of the market. FHFA merely requested comment on whether the Enterprises should receive Duty to Serve credit for purchasing chattel loans, either on a pilot or an ongoing basis.
With chattel lending relegated to optional “pilot” status in FHFA’s proposed rule, the industry mounted a serious effort to have manufactured home chattel lending added to the final rule as an activity eligible for GSE Duty to Serve credit. With the Manufactured Housing Institute taking the lead, compelling comment letters were submitted to FHFA, and numerous face-to-face meetings were held, not only with FHFA but with the GSEs as well. Working groups were also established with the GSEs to further these discussions.
On December 13, 1016, FHFA issued a final Duty to Serve rule. Apparently the industry’s efforts were ultimately persuasive, as the final rule now provides Duty to Serve credit to Fannie Mae and Freddie Mac for the purchase of chattel manufactured housing loans. The rule does not provide for immediate credit, but rather requires Fannie Mae and Freddie Mac to submit plans detailing how they will carry out their Duty to Serve manufactured housing responsibilities. It is expected that working groups comprised of GSE and industry representatives will continue to help develop the plans the GSEs will be submitting to FHFA to comply with the manufactured housing Duty to Serve. It now seems very likely that the GSEs will be developing a secondary market for chattel loans, a market that has not existed for the past 10 years. This will make these loans both less expensive and more available, and will allow more consumers of lesser means to actually own their own homes.