Comment Detail

Comment

March 11, 2016

Alfred M. Pollard, Esq.
General Counsel
Federal Housing Finance Agency
400 Seventh Street SW, 8th Floor
Washington, DC 20024
By email through www.fhfa.gov/open-for-comment-or-input

Re: Comments on RIN 2590-AA27 - Proposed Rule on Enterprise Duty to Serve Underserved Markets 12 CFR Part 1282 : Enterprise Housing Goals; Federal Register Publish Date: 12/18/2015; Federal Register Citation: 80 FR 79181

Dear Mr. Pollard:

I appreciates the opportunity to comment on the Proposed Rule on the Enterprises Duty to Serve Underserved Markets.

Our comments and answers therefore to the Proposed Rule will be directed mostly at those obligations proposed under the rule which affect Enterprise activities related to supporting the affordable housing market, particularly as they relate to the disposition of foreclosed properties owned by the Enterprises.

First, however, I need to comment on the threshold issue of what duties are not included in the Proposed Rule and should be: the duty of the Enterprises to the communities and the affordable housing market in which the Enterprises own foreclosed properties not to harm those communities and those markets and in fact, assist those communities to stem the negative impact of Enterprise ownership of foreclosed properties. The FHFA should make it a regulatory duty for the Enterprises to convert Enterprise owned foreclosed properties into affordable housing. Not to add such a duty would be ignoring the “elephant in the room” as the Enterprises continue to contribute to investor ownership of their foreclosed properties, which drives families from their homes, decreases the rate of owner-occupancy in our neighborhoods, and severly negatively impacts the supply and availability of affordable housing as each property is lost to invetor owners.

In 2012, Fannie Mae was the largest owner of foreclosed properties in Greater Four Corners. To this day, it is still a major owner of foreclosed properties across Boston, Massachusetts, and the country.

As you know, when COHIF tried to purchase five properties in Dorchester from Fannie Mae to save the families in those homes from being displaced, Fannie Mae rejected COHIF’s offers at every turn for three years and then placed the properties on auction.com to be auctioned to the highest bidder. Investors purchased all of the properties and within hours of purchase, began evicting families, some of which were only tenants caught up in the foreclosure crisis of their former owners – some of whom Fannie Mae officials had met face to face. One of those families is now facing homelessness as replacement housing for a large multi-generational family at an affordable rent does not exist in Boston. After Fannie Mae placed those initial five properties on auction.com, they auctioned off thousands more.

The devastating effect of Fannie Mae’s ownership of those properties for the families who lived in them and for the low-income community of color where those properties are located cannot be overstated. The effect that Fannie Mae’s practices had and continue to have on the affordable housing market is perverse, given the Enterprises statutory and regulatory duties to serve the market in the first place.

As one of the largest owners of foreclosed properties across the country, the Enteprises’ statutory and regulatory duties regarding the ownership and disposition of those properties needs to be included in this Proposed Rule as it will affect Enterprise behavior for three years.

The Rule should establish the following requirements of the Enterprises:

1. A first right of refusal for non-profits and public entities who wish to purchase foreclosed Enterprise properties at a fair price provided the non-profits agree to long-term affordable housing deed restrictions. The FHFA and the Enterprises have used the requirements of the [Treasury agreement] as the reason why foreclosed properties cannot be sold to non-profits. Yet, the Enterprises continue to be able to do all of their other statutory and regulatory work and requirements (as outlined in this Rule) without a requirement to make the most money from those endeavors.

2. The elimination of eviction practices in order to sell foreclosed properties vacant. As you know, Fannie Mae and Freddie Mac regularly evict families and individuals in their properties so they can be sold vacant.

In answer to the questions posed by the FHFA:

Questions Answers/Comments

Question #4 The Enterprises should be required to provide grants even while in conservatorship. As the Proposed Rule notes, the Enterprises are now profitable.

Question #27 Preservation should be interpreted to allow Duty to Serve credit for Enterprise support for the purchase or refinance of existing rental properties where units are to be converted from market rate to affordable, with long-term affordability regulatory agreements. This should include a priority for the conversion of Enterprise foreclosed small multi-family (including 1-4 family) properties into long-term affordable housing, especially as Enterprise loans (meant to serve the affordable housing market) were used in the original acquisition of the properties.

In addition, credit should be given to the Enteprises forsupport of permanent loans to first-time LMI home-ownership purchases that contain similar deed restrictions or other long-term affordability restrictions through a ground lease, etc.. The City of Boston includes deed restrictions on their home ownership assisted projects, not just rental projects.

Question #29 Yes; Enterprise credit for purchase of permanent take out loans for existing buildings where units are being converted from market rate to affordable should be allowed. Long-term should be defined as at least 15 years, with longer periods of affordability encouraged. The definition of small multifamily properties should be expanded to include 2-4 unit homes as well in order to qualify.

Question #30 Yes; the Enterprises can be given additional credit when one of the statutorily enumerated programs is used in conjunction with the purchase by a non-profit or public entity of Enterprise foreclosed properties.

Question #33 Enterprises should be given additional credit for providing a subsidy/grant/write down of the cost of a sale of a HUD/FHA financed Enterprise foreclosed property to a non-profit or public entity. In other words, if the Enterprise will write down the price necessary to meet the FHA threshold purchase price, then they should be given credit.

Question #38 Enterprises should be given credit for supporting local and state (non-HUD) programs that serve the purpose of this duty, i.e., to expand and support the affordable housing market. For example, the City of Boston is set to announce a rental acquisition program. The program needs to offer low-interest loans in conjunction with the subsidy offered for the program to work. The Enterprises could provide those low-interest loans through a local affiliate.

Enterprises should also be given credit for making their statutorily required deposits to the National Housing Trust Fund.

Question # 46 1-4 family homes should be included in the small multifamily affordable housing pereservation activities.

Question #47 Yes.

Question #51 Yes. Enterprise support for multifamily properties that include energy improvements resulting in a reduction in the tenant’s energy and water consumption and utility costs should be a Regulatory Activity.

Question #59 Yes. Enterprise support for single-family properties that include energy improvements resulting in a reduction in the homeowner’s or tenant’s energy and water consumption and utility costs should be a Regulatory Activity.

Question #64 Enterprises should be able to receive credit under long-term affordable homeownership preservation for providing blanket loans or individual loans to low- or moderate-income buyers in limited equity housing cooperatives and buyers on community land trusts.

Question #66 Yes; affordable homeownership support should be a Regulatory Activity.

Question #67 Like the Grounded Solutions Network, we recommend that the Enterpises also:
1. Make changes to existing Selling Guides in order to provide clarity and confidence on how to originate and sell loans to borrowers in shared equity programs to the Enterprises.

2. Modify Selling Guides to ensure that loans to borrowers in shared equity programs are eligible for purchase by the Enterprises, as some shared equity programs are inadvertently being excluded currently.
3. Review and modify underwriting to ensure the ready- and eligible-buyers are able to get first mortgages for shared equity homes.

4. Develop more explicit, detailed, clear, and standardized products and Selling Guides that would facilitate a streamlined lending process for buyers in shared equity homeownership programs.

5. Provide training to lenders and appraisers on shard equity-related products and requirements.

6. Promote lending institutions to originate shared equity loans.

7. Offer automated underwriting for all shared equity-related products.

8. Minimize reps and warranty requirements for loans made to borrowers in shared equity programs.

9. Factor the lower default rates into pricing for shared equity loans and find additional ways to incentivize lenders.

10. Explore the creation of a Shared Equity Loan Fund that may directly or indirectly invest in the creation of new shared equity homes for low- and moderate-income buyers.

Thank you again for this opportunity to comment on the Proposed Rule. If you have any questions, please feel free to contact me. We look forward to improvements the FHFA can make regarding Enterprise behavior and practices.

Sincerely,

Stanford Fraser

Cc: Maryland Congressional Delegation