FHFA updates Duty to Serve rules impacting Southern border communities

The Federal Housing Finance Agency announced it had finalized changes to its Duty to Serve program, which allow Fannie Mae and Freddie Mac to earn credits towards thos for their activity in underserved areas along the U.S.-Mexico border. 

New regulations update the definition of rural areas to now include all colonia census tracts, whose description itself was also clarified. Often unincorporated areas, colonias are generally described by government housing agencies as "rural communities within the U.S.-Mexico border region that lack adequate water, sewer or decent housing, or a combination of all three," although new FHFA rules do not restrict them to a designated geography. 

"The implementation of this rule strengthens our commitment to promoting affordable, equitable and sustainable housing in underserved and rural communities," said FHFA Director Sandra L. Thompson in a press release.

The changes take effect on July 1.

The Duty to Serve program was put into place to ensure government-sponsored enterprises develop initiatives for manufactured homes, affordable housing preservation and rural properties, in order to support mortgage financing to low- and moderate-income communities in those markets. Past proposals of duty to serve had been subject to criticism from many housing groups, who said they did not go far enough in providing greater affordability. 

"FHFA will continue to ensure that enterprise Duty to Serve activities meet the needs of people living in colonias," Thompson added.

The agency proposed the updates in September, opening up the new rules to public comment for 60 days. During that period, both Fannie Mae and Freddie Mac came out publicly in support of the changes. 

Other comments, most also in support, came from housing groups as well as community organizations along the Texas-Mexico border, who welcomed a clearer definition of what constitutes a colonia.  

"Shifting to a more stable definition enables the GSEs to design and implement more intentional engagement with colonias, significantly deepening impact," wrote United Way of Southern Cameron County, located in Brownsville, Texas.

"Since the passage of NAFTA in 1994, the character of colonias shifted as new unincorporated communities arose as result of the explosive economic and demographic expansion along the U.S.-Mexico border. Past definitions failed to account for these shifts." 

Another commenter, though, said it was "time to stop mandating more risk" for the GSEs. 

The amended rules largely align with the GSEs' own equitable housing plans released last year and arrive following an FHFA release last week that listed updated goals based on a review of 2022 performance. Among the agency's changes was the addition of a Latino Housing Journey program aimed at addressing obstacles communities face toward greater homeownership.