Leaders from Fannie Mae and Freddie Mac shared that each organization remains focused on risk management in a flat market with options for liquidity, stability, affordability, and access to capital. They stressed that now more than ever, dynamic market forces these enterprises to focus on consistency in presence and availability to borrowers and lenders.
As the multifamily sector is expected to see major shifts continue in the future, the mortgage industry will need to develop new foreclosure prevention standards that go beyond what the existing options are capable of in the current environment. The rent increases that have been observed recently may become more stable soon, but there remains concern that new inventory appearing on the market will not be affordable and the existing inventory of affordable units shows signs of poor maintenance. These rent increases combined with less-desirable conditions in multi-family housing make renting less appealing, however the high mortgage rates are equally shocking to first-time home buyers, making affordable housing increasingly difficult to find.
Each institution is working on their own plans to assist with the affordable housing problem: Fannie Mae is focusing on challenges that are specific to the Black community—such as down payments, closing costs, financial literacy, and services for the “credit invisible” population—whereas Freddie Mac is working on special purpose credit programs that offer the long-term benefit of an expedited process for lenders. Fannie Mae will be piloting their new program in six cities to test changes to certain fees and cost barriers in order to determine how they can easily implement such a program in other communities
There are several innovations in the industry that Fannie Mae and Freddie Mac hope will have a positive impact on both lenders and borrowers. The announcement and adoption of the new FICO model brings an evolved method of predicting risk. More accurate and inclusive data will expand the pool of eligible homebuyers and offer more options to those who have not been able to be approved for home loans previously. Advancements in underwriting such as data science and AI are already anticipated to grow the capabilities of the process.
However there remain some areas of concern that will need to be monitored. Developers of new technology and tools such as these will need to maintain sensitivity to data privacy while also allowing stakeholders to better understand household financial makeup as an indicator for cash flow potential and risk management. Technology will certainly help implement improvements to manual and obscure processes, but careful implementation and consideration of how they are best used are necessary for lending institutions and mortgage servicers to maintain compliance.