The Federal Housing Finance Agency proposed amending its Enterprise Duty to Serve Underserved Markets regulation to add a definition of \”colonia census tract,\” which would serve as a census tract-based proxy for any \”colonia,\” and to amend the phrase \”high-needs rural region\” within the regulation by substituting colonia census tract for colonia.
The proposed rule, released today, would also revise the definition of \”rural area\” in the regulation to include all colonia census tracts no matter their whereabouts. These changes will make activities by Fannie Mae and Freddie Mac in most colonia census tracts eligible for duty to serve credit. The intent from the changes would be to facilitate the enterprises' capability to operationalize their activities and aid in increasing liquidity in underserved communities.
According to Fannie Mae's Housing Assistance Council, the word colonias continues to be applied generally to unincorporated communities across the U.S.-Mexico border in California, Arizona, New Mexico and Texas which are characterized by high poverty rates and substandard living conditions.
FHFA has identified two main challenges that have hindered Fannie and Freddie's activities in colonias. The first challenge is an operational one which prevents the enterprises from easily identifying and verifying duty to serve-eligible loan purchases and outreach activities in colonias. The second challenge is related to the ability of the duty to serve program to effectively target households in colonias due to their under-inclusion in the regulation's current province definition. Consequently, the amount of single-family and multifamily loan purchases in colonias that received duty to serve credit continues to be \”limited or non-existent,\” according to FHFA's proposed rulemaking notice.
