GSEs Now Champion Fair And Equitable Housing

FHFA PROVIDED FRAMEWORK FOR PROJECTS WITH GREEN IMPROVEMENTS TO SATISFY MISSION-DRIVEN CRITERIA

By GEORGIA INSTITUTE OF TECHNOLOGY, SPECIAL TO MORTGAGE BANKER MAGAZINE

Mortgage Banker Magazine interviewed Evan E. Blau, a partner of Manhattan-based Cassin & Cassin, and chair of the firm’s Agency Lending and Affordable Housing practice on the topic of Federal Housing Finance Agency’s recently release of the 2023 Scorecard for Fannie Mae, Freddie Mac, and their joint venture, Common Securitization Solutions.

Blau focuses on representing lenders in the financing of multifamily properties through the Fannie Mae Delegated Underwriting & Servicing program and the Freddie Mac Seller-Servicer program, with an emphasis on affordable housing, credit enhanced tax-exempt bond structures, green financing, moderate rehabilitation, student housing, manufactured housing, and conventional loan programs.

Q. The Federal Housing Finance Agency recently released the 2023 Scorecard for Fannie Mae, Freddie Mac, and their joint venture, Common Securitization Solutions. What are some of the highlights of the scorecard?

FHFA, Fannie Mae, and Freddie Mac have championed their missions of promoting affordable housing in general. I think one of the newer highlights is that we are starting to see a focus on not only affordable housing, but housing in general that is fair and equitable. I applaud them for their focus on promoting a healthy equitable housing market to all.

Q. The 2023 scorecard outlined two equally weighted objectives: promoting sustainable and equitable access to affordable housing and operating the agency lending business in a safe and sound manner. How is the former accomplished? With regards to the latter, are there concerns about operating the GSEs in “a safe and sound manner?” If so, what are the concerns?

Fannie Mae and Freddie Mac have promoted green efficiency products that many of their borrowers have utilized in the financing of green improvements at their projects. This year in releasing the multifamily loan volume, FHFA provided framework for projects with green improvements to satisfy their missiondriven criteria. In terms of equitable housing, both Fannie Mae and Freddie Mac enacted Equitable Housing Finance Plans, and I think implementing those will help to further achieve those goals. In terms of operating the GSEs in a safe and secure manner, the only concern I think I would have is overall health of the US economy. Capital markets transactions have somewhat stalled due to rising rates and inflation. I think Fannie Mae and Freddie Mac have operated tremendously in difficult markets in the past and will continue to do so in the future.

Q. What implications does the FHFA’s scorecard carry for the agency lending and affordable housing sectors as we head in 2023? While the GSEs have always been missiondriven institutions, I do think over the last 5-10 years they have become more mission critical. As we have seen with their affordable housing goals over time, the GSEs have increased their focus on more affordable housing and missiondriven transactions. I think they will continue with this arc and growth in the future. Who knows, we could see a time where 75-80% of their loans are mission based.

Q. What insight can you provide into what the GSE’s implementation of these objectives might look like and how the FHFA may coordinate enforcement efforts for the criteria?

I think the GSEs have always been creative in their creation and implementation of new lending products to satisfy the market, but also serve their affordable housing goals. A great example of this is the Fannie Mae MTEB and Freddie Mac TEL products. This creative ingenuity will help them develop and foster future loan products, while strengthening existing ones, in the future. I would look at FHFAs role as an enforcer, but more of a collaborator in their oversight of this process.

Q. The FHFA also wants the GSEs to continue research to identify at-risk borrowers, properties, and communities to inform policy and improve climate-resiliency efforts. Is this an insurance issue? An issue dealing with building codes? What role can the GSEs play? That is a good question. I would expect this could be insurance, but also we have seen climate events over the last decade or so that have had a profound effect on communities. From Superstorm Sandy to flooding in Houston, climate events never that possible are occurring with greater frequency. Perhaps the GSEs can better inform these Borrowers and communities of this new norm.