The Mortgage Bankers Association is backing the Federal Housing Finance Agency's proposal to overhaul the Duty to Serve program. It urged regulators to preserve safeguards as they shift from strict regulatory requirements to a more flexible approach focused on results.   

In a letter submitted on the final day of public commenting, MBA said the proposal could improve the program's effectiveness while reducing administrative burdens. However, several changes could unintentionally narrow the program's impact or create operational challenges for lenders if they are implemented without additional flexibility. 

"MBA supports the Enterprise' DTS mandate and efforts to improve the program by expanding its effectiveness and impact, reducing administrative burdens, and improving efficiency," the trade group wrote. 

Congress created the Duty to Serve program in the Housing and Economic Recovery Act of 2008 to require Fannie Mae and Freddie Mac to improve access to mortgage credit for manufactured, rural and affordable housing. The rule was finalized in 2016 and since then the government-sponsored enterprises have submitted three-year plans outlining how they will meet those obligations. 

The proposed rule would replace the existing framework beginning with the Enterprises' 2028-2030 plans. Instead of requiring Fannie Mae and Freddie Mac to complete specific regulatory activities, FHFA would allow them to pursue actions that advance their obligations.

The shift toward a principles-based approach supports more innovative, market-driven solutions to affordable housing challenges, according to the MBA.

AMI changes raise affordable housing concerns

The proposed changes come as housing researchers have raised concerns about how affordability is measured and how those calculations influence federal housing policy. 

Changes to area median income calculations could impact which households and properties qualify as affordable under federal housing programs, according to the Urban Institute. They can also influence how policy makers identify underserved communities and direct resources and influence how the GSEs measure progress towards affordable housing goals. 

MBA also objected to several procedural changes included in the proposal. The association asked FHFA to retain the current 60-day public comment period for Enterprise Duty to Serve plans rather than reducing it to 45 days, arguing lenders and other stakeholders need time to evaluate the three-year strategic plans. 

"MBA encourages FHFA to adopt a 'do no harm' approach to ensure that the proposed rule does not lead to unintended consequences," the association wrote, adding that changes should not "narrow the scope, impact, or effectiveness" of the Duty to Serve program. 

Chattel lending remains key issue

MBA asked FHFA to proceed cautiously as it considers expanding the definition of manufactured housing beyond traditional HUD-code homes to include other factory-built housing, such as modular homes. 

"Financing and collateral policy should evolve alongside product innovation," MBA wrote, while cautioning that expanded eligibility should focus on property types that the GSEs can reliably finance through the secondary market. Some emerging factory-built products rely on ownership or titling structures that currently do not meet purchase requirements. 

An overly broad definition, however, could unintentionally impact properties already well served by the GSEs, MBA says. 

FHFA has highlighted a financing gap in the chattel lending sector, citing a 65.6% denial rate for chattel loan applications compared with 8.8% for site-built homes, along with higher average interest rates. 

While some lenders have raised concerns about credit risk in manufactured housing, other lender groups have supported pilot programs to expand access to financing. 

MBA also urged FHFA to allow greater flexibility for Fannie Mae and Freddie Mac to amend approved plans when market conditions change. The group recommended a data-driven process for revisions rather than limiting changes only to "extraordinary and significant market disruptions."