Is HUD and FHFA’s new agreement a game changer?


A new agreement between the Department of Housing and Urban Development (HUD) and the Federal Housing Finance Agency (FHFA) could heighten scrutiny of whether the government sponsored entities’ underwriting engines do enough to further fair housing.

The memo of understanding formalizes the sharing of information, resources, and coordination of existing and potential investigations of entities. It specifically highlights the GSE underwriting and appraisal policies.

On one hand, it’s not surprising that two federal agencies would publicly state their intention to collaborate on fair housing and fair lending enforcement. But the GSE underwriting requirements — specifically, Fannie Mae’s Desktop Underwriter and Freddie Mac’s Loan Prospector — have not been assessed for potential disparate impact under fair housing law.

And given the enormous influence the GSEs have on the mortgage industry, there are outstanding questions about whether their underwriting policies do enough to further fair housing goals. Loans to borrowers of color make up a very small portion of the loans the GSEs acquire. In 2020, 3.06% of loans Fannie Mae acquired were from Black borrowers and 3.8% of the owner-occupied mortgages Freddie Mac purchased were from Black borrowers.

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