NFHA and Advocates Submit Comment Letter to FHFA on Enterprise Equitable Housing Finance Plans

FOR IMMEDIATE RELEASE 

October 27, 2021 

Media Contact: Izzy Woodruff | 202-898-1661 | IWoodruff@nationalfairhousing.org 

NFHA and Advocates Submit Comment Letter to FHFA on Enterprise Equitable Housing Finance Plans 

Washington, D.C. — The National Fair Housing Alliance (“NFHA”) and a diverse group of civil rights and consumer advocates have submitted a detailed and comprehensive comment letter to the Federal Housing Finance Agency (“FHFA”) in response to its Request for Input (“RFI”) on the Enterprises’ Equitable Housing Finance Plans (“Equity Plans”), which require Fannie Mae and Freddie Mac (the “Enterprises” or the “GSEs”) to prepare and implement three-year plans to advance equity in housing finance. 

“We applaud FHFA for requiring the GSEs to take this important step to issue Equitable Housing Finance Plans, with a particular focus on reducing the racial and/or ethnic homeownership gap and reducing underinvestment and property undervaluation in formerly redlined areas,” said Lisa Rice, President and CEO of the National Fair Housing Alliance (NFHA). “Today, families of color lag far behind wealthier and white communities that were advantaged by lending discrimination supported by our federal government’s lengthy history of mortgage policies and private actions that led to vast disparities in homeownership and wealth. The GSEs’ Equity Plans must build out their important public mission, including supporting innovative programs to increase credit access for borrowers of color. The GSEs should also eliminate LLPAs and adopt less discriminatory credit scoring models, both of which have a disparate impact on borrowers of color. Finally, fair lending supervision must be strengthened and fully enforced.” 

The advocates believe the GSEs’ Equity Plans should do the following: 

• Support Eliminating Loan Level Price Adjustments (“LLPAs”). The LLPA pricing framework is inherently unfair as it places the burden of the GSEs’ financial recovery and future catastrophic risk disproportionately on Black, Latino, Asian American and Pacific Islander, and Native American borrowers, even though they were the victims of the financial crisis, not the cause. Now that the GSEs have fully repaid the government for the 2008 bailout, the GSEs should support eliminating the LLPAs as they are a barrier that unnecessarily increases the cost of homeownership. 
• Support Innovative Programs to Increase Access for Black and Brown Borrowers, including First Generation Homebuyer Programs and Race-Conscious Special Purpose Credit Programs. For decades, federally-sanctioned discrimination in the housing finance system largely denied borrowers of color access to homeownership and other wealth-building opportunities. Moreover, the GSEs have long had a very disappointing record of purchasing mortgages from Black and Latino borrowers. As a result, Black and Latino families often have less intergenerational wealth for themselves and their children. The GSEs should support targeting loans and down payment assistance to first generation homebuyers, including by ensuring liquidity for first generation homebuyer loans similar to the liquidity provided for first time home buyer programs. In addition, the GSEs should create purchase programs for race-conscious Special Purpose Credit Programs mortgages to ensure liquidity for this market. 
• Search for and Adopt Credit Score Models That Are Less Discriminatory. The GSEs have long required lenders to use an outdated credit score model even though this model has a disparate impact and less discriminatory alternatives exist. The GSEs should ensure that the process for validating and approving other less discriminatory credit score models moves as quickly as possible. 
• Ensure That Appraisal Guidelines Do Not Perpetuate Bias. Given the important role that appraisals play for communities of color, the GSEs should ensure that appraisal guidelines mitigate any potential fair lending risk and any potential harm to people and communities of color. For example, the sales comparison approach may perpetuate the history of undervaluing homes in communities of color. The GSEs should review other approaches, such as the cost of rebuilding, that might ensure more equitable outcomes. 
• Create Programs to Provide Liquidity for Small Dollar Mortgages. The lack of liquidity for small dollar mortgage loans has a disparate impact on borrowers of color and entire cities and regions across the nation, who are more likely to need and apply for these loans. Accordingly, the GSEs should create programs to provide liquidity for small dollar mortgage loan programs. 
• Ensure That Servicing and REO Policies Are Fair and Non-Discriminatory. As with the Great Recession, the effects of the pandemic have fallen the hardest on Black and Brown borrowers. The GSEs should support equitable mortgage servicing, including reducing racial or ethnic disparities in loan modifications and loss mitigation. Also, the GSEs should ensure that all policies for the maintenance and marketing of REO properties are fair and non-discriminatory. 
• Support Elevating the Office of Fair Lending Oversight to a Fully-Staffed Division. Discrimination continues to plague and distort the housing market. To create a strong and effective fair lending supervision program and to ensure that the GSEs equitably serve the whole of the national housing finance market, the GSEs should support creating a Division of Fair Lending Oversight that is co-equal to the Division of Enterprise Regulation (which oversees the safety and soundness mission). 
• Support Increased Transparency regarding the Fair Lending Examination Findings. The GSEs should ask FHFA to release a comprehensive report on the GSEs’ compliance with the nation’s fair housing and fair lending laws that is at least as detailed as the information provided regarding the safety and soundness examinations and the diversity and inclusion examinations, which are documented in the annual report. 

The response was issued jointly by the following organizations: 

• Americans for Financial Reform Education Fund 
• Autistic Self Advocacy Network 
• Center for Community Progress 
• Consumer Action 
• Consumer Federation of America  
• Illinois People’s Action 
• Integrated Community Solutions, Inc. 
• Long Island Housing Services, Inc. 
• MICAH- Metropolitan Interfaith Council on Affordable Housing 
• National CAPACD- National Coalition for Asian Pacific American Community Development 
• National Coalition for The Homeless 
• National Consumer Law Center (on behalf of its low-income clients) 
• National Fair Housing Alliance 
• Poverty and Race Research Action Council 
• Prosperity Now 

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The National Fair Housing Alliance (NFHA) is the country’s only national civil rights organization dedicated solely to eliminating all forms of housing and lending discrimination and ensuring equal opportunities for all people. As the trade association for over 200 fair housing and justice-centered organizations throughout the U.S. and its territories, NFHA works to dismantle longstanding barriers to equity and build diverse, inclusive, well-resourced communities.