Duty to Serve

Freddie Mac and, for even longer, Fannie Mae (collectively, “the Enterprises”) have played an essential role in the creation of the modern housing finance system in the United States. In particular, they enabled access to financing to build or purchase rental and owner-occupied housing by increasing market liquidity and streamlining the mortgage lending process through standardization. In recent years, the Enterprises have been required to expand access to affordable housing finance for low- and moderate-income households through the Duty to Serve Program (DTS) that commenced in 2018. The DTS is a logical extension of the Enterprises’ primary mission to improve the function of housing finance markets, and is focused on underserved markets including manufactured housing, rural housing, and affordable housing preservation.

Duty to Serve (DTS), one of the Enterprises’ statutory mission responsibilities, obligates them to provide affordable housing to moderate- and lower-income households, even when doing so is less profitable than the Enterprises’ core business. The Enterprises have just completed the first DTS strategic planning cycle and are poised to embark on a second cycle. The purpose of this paper is to assess progress and to inform external stakeholders; the Enterprises; their regulator, the Federal Housing Finance Agency (FHFA); and the Biden Administration on what has worked and what has not worked in the program’s initial three-year planning cycle. We also recommend adjustments that should be considered in strategic planning for the next cycle.

The recommendations in this working paper can also be found in a Lincoln Institute policy brief Duty to Serve: Early Lessons Learned in Underserved Housing Markets.