FHFA requires GSEs to submit annual equity plans

The Federal Housing Finance Agency (FHFA) will require the government sponsored enterprises to submit annual plans to advance equity in housing finance for the next three years.

The first annual plan, which the GSEs must submit and implement in less than four months, must specifically include plans to reduce the racial or ethnic homeownership gap and reduce underinvestment or undervaluation in areas that were formerly redlined.

Along with submitting plans to their conservator, Fannie Mae and Freddie Mac will report on their progress toward their goals. FHFA will make both the plans and the progress reports available to the public.

“For generations, discriminatory practices like redlining have prevented communities of color from building wealth through homeownership,” said FHFA Acting Director Sandra Thompson. “By identifying the barriers to equitable and sustainable housing finance opportunities and setting goals for addressing those barriers, the Enterprises, consistent with safety and ​soundness, can responsibly reduce the racial and ethnic disparities in homeownership and wealth that still exist today.”

The plans will be updated annually. In addition to the areas it requires the GSEs to focus on, the FHFA suggested some additional topics that the GSEs might want to include.

The list of possible priorities, which FHFA said was not exhaustive, includes reducing racial disparities in acceptance rates for the GSE underwriting systems; reducing racial disparities in the share of loans the GSEs purchase relative to the market; reducing underinvestment in underserved areas that weren’t redlined; and conducting and publishing data and research on advancing equity and sustainable housing opportunities.

Requiring the GSEs to submit annual plans to tackle equity is the latest step the agency has taken in service to the Biden administration’s agenda of narrowing the racial homeownership gap.

Since a Supreme Court decision gave the president the ability to fire the FHFA director at will, the agency has come under more direct control of the Biden administration. Within hours of the opinion, the previous director, who was not aligned with furthering the Biden administration’s agenda, was out of a job. The Biden administration appointed Thompson, a veteran regulator, later that day.

As background for the GSEs’ new annual plans, FHFA pointed to an executive order President Joe Biden signed on January 20, which mandated the federal government take a  “comprehensive approach to advancing equity for all, including people of color and others who have been historically underserved, marginalized, and adversely affected by persistent poverty and inequality.”

In August, the Department of Housing and Urban Development announced they would team up to coordinate on fair housing investigations. As a result of the agreement, the agencies will share resources, such as supervisory data on fair lending examinations of the GSEs. HUD already analyzes changes to the underwriting process to ensure there is not disparate impact.

HUD’s collaborations with FHFA are crucial to expanding access to homeownership, HUD Secretary Marcia Fudge said.

“This is a major step in bringing more equity to the housing finance industry,” said Fudge. “HUD is pleased to work alongside FHFA and others on a comprehensive approach to building a more equitable housing finance system.”

The FHFA will accept public comment on the new initiative until Oct. 25, 2021. The first progress reports are due the following year, on April 1, 2023. The FHFA will conduct a virtual listening session at the end of September.

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