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Serving the Underserved

The question of how the government-sponsored enterprises could serve underserved markets, such as very low-income, low-income, and moderate-income families could recently have come that much closer to finding an answer, according to a report by the Urban Institute.

Next year, the GSEs will have to begin abiding by the new Duty of Serve (DTS) rule, which mandates that Fannie Mae and Freddie Mac improve their role in supporting low-income households, specifically in three areas: manufactured housing, affordable housing preservation, and rural housing. But how do the enterprises go about living up to that mandate? Certain stakeholders have been brainstorming.

The first way Fannie and Freddie can serve the underserved is by providing standardization guidelines to lending for manufactured homes, which make up 9 percent of new single-family starts. Currently, legal, regulatory, and financial concerns make it difficult for GSEs to lend in this area, but standardization could lead to lower costs.

The second way—particularly to rural demographics—is to bring existing loan programs, such as the Low-Income Housing Tax Credit and other loan programs from the U.S. Department of Agriculture to areas outside of an urban environment.

Further, the GSEs could partner with nonprofit organizations and put more investment into community development financial institutions, which historically have a better understanding of the markets that Fannie and Freddie are trying to reach out to. The enterprises could help these organizations secure more capital to invest in their communities.

The biggest thing the GSEs can do, however, once the DTS Rule kicks in is to collect data on the programs put in place so that researchers and policymakers can study its results and continue to brainstorm solutions in order to fill in the gaps. Without research and constant tinkering, the program could have trouble scaling or remaining sustainable.

Other underserved communities that weren’t immediately addressed in the plan include assistance for farm workers, single-family rentals, and small-dollar loans.



About Author: Joey Pizzolato

Joey Pizzolato is the Online Editor of DS News and MReport. He is a graduate of Spalding University, where he holds a holds an MFA in Writing as well as DePaul University, where he received a B.A. in English. His fiction and nonfiction have been published in a variety of print and online journals and magazines. To contact Pizzolato, email [email protected].

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