TheMReport

22 | TH E M R EP O RT FEATURE D uty to Serve is a broad mandate for creating sustainable housing oppor- tunities for very low-income, low-income, and moderate-income families in rural areas, and for those buying manufactured homes. It's also a guide to preserving more af - fordable housing throughout the country. To us, Duty to Serve is a welcome opportunity to guide the mortgage industry in looking at housing issues in new ways, un - derstanding the broader problems facing these markets, and applying a new generation of solutions. We recognize that the chal - lenges of providing a stable supply of affordable homes are many and complex—the distribution and availability of affordable mortgage financing among them. Duty to Serve addresses many areas of affordable hous - ing on both the single-family and multifamily fronts, and both Freddie Mac divisions are actively working to address the unique challenges in these areas. Freddie Mac's single-family business is already engaged with seller/ servicers, industry groups, com - munity organizations, multiple levels of government, and other dedicated organizations that are deeply knowledgeable about these underserved markets. Together, we're testing, refining, and implementing innovative ways to responsibly support affordable housing opportunities. Defining Duty to Serve T he Housing and Economic Recovery Act (HERA) of 2008 established for both Fannie Mae and Freddie Mac a duty to increase liquidity and improve the distribution of capital for mortgage financing in rural housing, manufactured housing, and affordable housing preserva - tion. Congress charged the Fed- eral Housing Finance Agency (FHFA) with implementing this obligation. The FHFA regulation directs Freddie Mac and Fannie Mae to establish plans to lead the development of loan products and flexible underwriting guidelines to facilitate secondary financ - ing in these three markets. We will be working throughout the remainder of the year to final - ize our plan by incorporating the feedback we receive from interested parties and FHFA. Our activities may change based on public and FHFA input, safety and soundness considerations, and market and economic conditions. We want to be responsive to feedback, mindful of protecting the taxpayer, and nimble in the face of changes to the broader market. We hope to implement our Duty to Serve plan as early as January 1, 2018. The Affordable Housing Crisis T he gaps in affordable hous- ing across the country threaten to overwhelm individu- als, families, and communities. Often called an affordable hous- ing crisis, it's impacting millions of American families, and the problem is expected to continue to grow. It's generally accepted that families shouldn't devote more than 30 percent of their income to housing, yet it's unavoidable for many Americans. The U.S. Department of Housing and Urban Development estimates that 12 million households pay more than 50 percent of their annual income for housing. This housing cost burden is among the most significant barriers to homeowner - ship, making it difficult to save for a down payment and pay down other debts. Home affordability has three primary components: home prices, borrower income, and interest rates. Home prices are increasing, and the inventory of for-sale homes is low. U.S. house price growth averaged 6.4 percent from March 2016 to March 2017, according to the Freddie Mac House Price Index. Total housing starts through the first quarter of 2017 were the highest since 2007, but they're still low relative to long-run demand. For-sale hous - ing inventory, especially of starter homes, is currently at its lowest level in over 10 years. Unfortunately, incomes aren't keeping up with the rising prices. Since January 2000, home prices have risen a bit faster than incomes, though recently home price growth has outpaced in - come growth by a wider margin. Interest rates, the last compo- nent of home affordability, are also increasing. On June 14, the Federal Reserve raised its bench - mark interest rate by a quarter- point, the third such increase in six months. These factors rein - force the importance of our focus on rural housing, manufactured housing, and affordable housing preservation. We're approaching Duty to Serve in the spirit of our broader Duty Calls Freddie Mac has a duty to serve the American homebuyer, and with a series of action plans that's just what the GSE plans to do. By Danny Gardner

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