The New Fannie Mae and Freddie Mac Plans
By Ray Leech
The requirement to create the Duty To Serve (DTS) Underserved Markets Plans by Fannie Mae and Freddie Mac was established by Congress in the Housing and Economic Recovery Act of 2008. Both agencies are required to develop ways to improve mortgage access for very low-, low-, and moderate-income families across the three underserved markets. These markets include: Manufactured housing, rural housing, and affordable housing preservation.
As we begin 2025, let’s look at the Fannie Mae and Freddie Mac three-year Plans for 2025 through 2027 and summarize their proposals for manufactured housing.
Fannie Mae Plan
The Fannie Mae plan begins with an overview of the market, pointing out most buyers continue to rely on chattel or personal property loans to finance MH homes.
They identify several areas of focus for their strategic planning, including continuing to support energy-efficient MH home construction, broadening MH eligibility for two-to-four-unit homes as an infill housing solution, and addressing the stability of renters by promoting use of voluntary rent restrictions within MH communities to address workforce housing needs.
Challenges continue in the MH market including how units are titled, which determines how they can be financed, the declining number of MH communities, and the fact that fewer MH homes are being constructed, with the lowest level of production since 2016 — less than 90,000 new homes built in 2023.
As part of its three-year Plan, Fannie Mae set the following targets for purchase money mortgages for MH units:
2025 ………6,300 loans
2026 ………6,800 loans
2027 ………7,400 loans
For comparison, in 2023, Fannie Mae purchased 5,689 purchase money mortgages.
Another objective is to expand the adoption of conventional financing for manufactured homes by addressing the risks of MH lending through updates to their products and processes. This would include adding MH appraisal data to the Collateral Underwriter® (CU) system which helps lenders manage collateral risk as part of their underwriting and QC process.
In the plan, Fannie Mae noted that in 2018, MH units became eligible for the HomeStyle® Renovation and Energy products, but there has been barely any origination of either for MH units. They plan to research why these products have not been utilized more, and determine best practices and possible enhancements to grow this business.
Fannie Mae also wants to increase loan purchases of manufactured housing community units owned by government entities, nonprofit organizations, or residents. And increase purchase of MH loans in communities with rent restrictions, such as Community Land Trusts.
Freddie Mac Plan
Regarding the Freddie Mac plan, it wants to continue moving the single-family manufactured housing market forward in several significant ways.
Increase number of loan purchases secured by manufactured homes titled as real property.
Continue manufactured housing financing offerings and enhance them to expand market support, as appropriate, based on industry feedback and with consideration for safety and soundness.
Integrate a curriculum into their Develop the DeveloperSM program to educate real estate developers on using manufactured homes in new housing developments and as infill. This will increase the number of knowledgeable developers and will lead to increased supply of affordable homes for sale, especially in rural areas.
In the past three years, Freddie Mac had a baseline average of 5,957 loans purchased including 6,248 loans in 2023.
Regarding the goal on purchase loans, it has specified the following targets for the next three years:
2025 ………6,550 loans
2026 ………6,800 loans
2027 ………7,100 loans
Freddie Mac plans to focus on product enhancements to encourage small balance mortgage lending on manufactured homes, based on research completed in 2023. In 2025, it plans to gather feedback from 10 industry participants on this issue, and determine possible product features if needed to support this type of lending product.
As part of their plan, they want to continue to work with communities that have special challenges because the borrowers own the home, but rent the pad on which it sits. Freddie Mac did research on MHCs and claimed to have found issues with tenant protections, which they documented in a white paper in 2019. In 2021, they made a decision to require tenant protections for all future transactions and in the next three years, they plan to encourage the broad adoption of these tenant protections while maintaining sound lending standards. They hope that this requirement will result in tens of thousands of additional pad renters benefiting from protections that they claim typically exceed those provided by state or local law every year.
Finally, to help address affordability challenges, Freddie Mac plans to establish a new loan product that provides more favorable financing to borrowers that agree to the preservation of affordable pad lease rents as a condition of the Freddie Mac loan agreement. This could institute a new market standard for rent preservation that presently does not exist for MHCs.
FHFA Announcement on The GSE Plans
On Nov. 25, 2024, FHFA issued a press release in which FHFA Director Sandra L. Thompson stated:
“These new Plans underscore the commitment of FHFA and the Enterprises to ensure that the housing finance system responsibly supports borrowers and renters across the country. It is critical that innovative ideas for addressing liquidity needs in underserved markets be implemented and scaled up in rural communities and other areas facing access and affordability challenges.”
The release mentions manufactured housing as well, stating: “Both Enterprises’ DTS Plans also enhance their programs for manufactured housing communities to better support owners that voluntarily limit rent increases for leased pads.”
Under the current DTS and FHFA regulations, Fannie Mae or Freddie Mac could modify the plans if future events affect its ability to achieve their initial objectives. MHInsider will continue to monitor the status and progress of these plans in the coming years.
Berkshire Bank Product Manager Raymond Leech has worked in the mortgage industry for more than 30 years, having developed and managed construction and renovation mortgage products, as well as working on FHFA Duty To Serve efforts involving manufactured housing, rural housing, and affordable housing.
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