New FHFA rule for Fannie Mae, Freddie Mac, and FHL Banks

The FHFA has announced revised final rules applying to Federal Home Loan Banks and the government-sponsored entities, Freddie Mac and Fannie Mae.

• The final rule codifies FHFA's fair lending oversight of Fannie Mae, Freddie Mac (the Enterprises), and the Federal Home Loan Banks (FHLBs). This includes requiring the regulated entities to certify compliance with fair lending, fair housing, and unfair or deceptive acts or practices (UDAP) laws.

• The final rule codifies requirements for the Enterprises to develop 3-year Equitable Housing Finance Plans identifying barriers to housing for underserved communities and setting objectives and meaningful actions to address those barriers. The plans are subject to public input and reporting requirements.

• The FHLBs are required to report annually on any voluntary actions they take to support equitable housing finance but are not subject to the Equitable Housing Finance Plan requirements.

• The final rule requires the Enterprises to collect and report data to FHFA on language preference, housing counseling, and homeownership education for mortgage applicants and borrowers.

• The regulated entities' boards of directors are required to appropriately consider equitable housing, fair lending, and their entities' mission in their oversight responsibilities.

• FHFA will publish an annual narrative assessment evaluating each Enterprise's performance under their Equitable Housing Finance Plans.

This is part of an ongoing effort by FHFA to ensure that every American has equal access to affordable housing loans.

These new rules surpass the already established standards of the Equal Credit Opportunity Act and the Fair Housing Act.

Our Opinion:

This rule provides both challenges and opportunities. On one hand, the chance to expand into new markets and contribute to societal change is attractive. On the other hand, concerns about increased regulatory compliance, default risk, and inappropriate interpretation of the rule need careful consideration. Thus, the discussion around this rule is essential for all stakeholders in the alternative financing industry to comprehend the multifaceted impacts and to prepare strategies accordingly.

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