GSEs Try to Boost Affordable Housing Efforts

March 22, 2018

Under an umbrella of higher home prices, mortgage financing giants Fannie Mae and Freddie Mac have recently taken several efforts to try to open up housing options for low- and middle-income buyers. The government-sponsored enterprises have added support for three lower-cost housing options: rural homes, manufactured housing, and the existing stock of affordable homes.

More than 23 percent of Americans live in rural areas. The median incomes in rural areas tend to fall below national levels. Under a Duty to Serve program, Fannie and Freddie will be purchasing more loans in certain low-income areas. Fannie plans to purchase up to 5,000 additional rural single-family loans, and Freddie Mac expects to buy about 3,360 loans by the third year of the program.

“It’s unclear the impact it will have just yet. It’s new to the market, still unproven,” Gerron Levi, director of policy and government affairs at the National Community Reinvestment Coalition, told realtor.com®. “[But] when Fannie and Freddie enter the market and tell lenders, ‘If you make the loan we will purchase it,’ it will facilitate access to credit to those markets. [Private] lenders will be more willing to make loans.”

The GSEs have also made recent moves on the manufactured housing front. More than 17 million Americans live in manufactured homes, according to U.S. Census Bureau data. Manufactured homes cost a median of $73,800, which is about a quarter of the $269,500 median cost of new homes nationwide.

Freddie Mac has called manufactured homes “a critical source of affordable housing.” Fannie Mae plans to purchase an additional 4,540 to 5,540 manufactured-housing loans over three years, which could fuel an extra $500 million or more into the market. Freddie Mac intends to purchase an additional 1,000 more loans, which is 25 percent higher than it currently does. The GSEs announced they also will test out buying loans on homes held as personal property within manufactured housing to see if that makes it easier for low- and moderate-income buyers to get into these homes.

Fannie and Freddie also plan to resume investing in low-income housing tax credits. The credits are tax incentives to spur developers to build more affordable housing. The program was temporarily stopped during the recession.

The National Housing Law Project estimates that the credits provide funding for about 100,000 new affordable housing units each year. They also can create greater support for developers creating Section 8 housing.

Source: “Can Fannie and Freddie Provide a Jolt to Buyers Desperate for Affordable Housing?” realtor.com® (March 22, 2018)