The Federal Housing Finance Agency is proposing to repeal its fair lending, fair housing and equitable housing finance rule, stating it is looking to comply with Pres. Trump’s executive orders. Furthermore, the rule is duplicative, with the laws behind each portion administered by other agencies.
But Jannell Byrd-Chichester, general counsel for the National Fair Housing Alliance and former chief of staff at the FHFA, said the reasoning does not hold water.
“Repeal will harm everyone”
“Let me be clear about this, the fair lending-fair housing label does not mean that this only affects a limited group of people,” Byrd-Chichester said.
It is not just about race or national origin. “This is a big loss for low and moderate income people, rural people, folks with manufactured housing, all of those categories are adversely impacted by the loss of FHFA’s commitment,” she said.
This action by FHFA is not an abandonment of fair housing, said Peter Idziak, an attorney with Polunsky Beitel Green.
“I wouldn’t read the proposed rescission to indicate that the enterprises are shifting their focus away from affordable housing,” Idziak said. “It’s just where they’re focusing their affordable housing goal is solely on the statutory requirement and moving away from the Biden administration’s sub-focus on underserved communities.”
The document is officially unpublished but available on the Federal Register website. It is scheduled to be published on July 28, and at that time the comment period begins.
When was the rule implemented?
The Biden administration proposed the rule in April 2023 and finalized it in May the following year. This rule, which also included preferred language use, sought to make it tougher for a future administration to roll back measures intended to encourage more equitable access to homeownership through Freddie Mac, Fannie Mae and the Federal Home Loan Banks, according to a report at the time.
The rule had little impact on mortgage lenders but added increased reporting requirements onto the GSEs without any real benefit for consumers, Idziak noted. Thus the change should reduce some administrative costs which lenders might see.
Why FHFA wants to change this rule
In its repeal proposal, the FHFA said the Fair Housing Act is administered by the Department of Housing and Urban Development. Another part of the original rule falls under the Equal Credit Opportunity Act, regulated by the Consumer Financial Protection Bureau. Finally, the Federal Trade Commission is responsible for deceptive acts and practices.
“It is, therefore, unnecessary and redundant for FHFA to publish a regulation requiring compliance with those statutes,” the repeal proposal said. “Duplicative overlap in regulation and statute throughout agency functions is costly for the government and repeal would result in savings.”
Will equitable housing finance plans still be required?
No. The proposal will also repeal requirements for Fannie Mae and Freddie Mac to create, execute and report on equitable housing finance plans.
As a result, the two companies “will benefit from reduced administrative cost, including personnel and outreach,” FHFA said.
The rule may also codify the X post made earlier this year by current Director Bill Pulte that ended the special purpose credit programs offered by the GSEs. Those purchases were part of the 2022-2024 Enterprise Plans.
Who was responsible for fair lending at the GSEs?
Byrd-Chichester was at FHFA when the fair housing office was created by former Director Mel Watt. While it remained in place during the next two directors, it has been affected by the staffing reductions under Pulte.
It was created because the fair housing function did not exist at FHFA and its need was obvious, disputing any overlap exists for regulation of Fannie Mae and Freddie Mac in this area, Byrd-Chichester said.
“It was obvious to us, given the significance of Fannie and Freddie’s outsized role in the mortgage market, that you have expertise in your agency to assure compliance with fair housing, that you have staff, that you have a structure, that you have a process, that you have the ability to examine them on fair lending, fair housing issues, and to hold them accountable on those issues,” Byrd-Chichester said.
The mortgage industry’s response to the repeal
The Mortgage Bankers Association will review the proposal and plans to submit its comments by the yet-to-be-determined deadline, a spokesperson said in a statement.
In the past, however, the trade group commented it “believes properly executed initiatives in the EHFPs can provide useful public roadmaps for GSE efforts to promote affordable housing and create more sustainable homeownership opportunities. EHFP is an important tool that has advanced the GSEs’ mission of supporting affordable housing opportunities for hardworking American families.”
