On March 25, the Federal Housing Finance Agency issued an order terminating special purpose credit programs supported by Fannie Mae and Freddie Mac.
This directive, effective immediately, is a significant policy shift and will affect banks with mortgage-based SPCPs. SPCPs are programs through which financial institutions may consider prohibited-basis information when determining whether to extend credit to economically or socially disadvantaged groups. They are authorized under the Equal Credit Opportunity Act and Regulation B, but not the Fair Housing Act.
In December 2021, the U.S. Department of Housing and Urban Development issued a legal opinion stating that SPCPs that address home mortgage credit needs for economically disadvantaged groups and are designed and implemented in compliance with the ECOA and Regulation B generally do not violate the FHA. In February 2022, multiple federal agencies, including HUD and the FHFA, issued interagency guidance encouraging the use of SPCPs by financial institutions under ECOA and FHA. HUD’s legal opinion authorizing SPCPs under the FHA was removed from HUD’s website in January, but the agency has not yet formally withdrawn the opinion.
According to a post by the agency director on X, formerly Twitter, FHFA now feels the current level of support for SPCPs is “inappropriate for regulated entities in conservatorship,” a reference to the FHFA’s conservatorship of Fannie Mae and Freddie Mac, which are permitted to comply with any contractual provisions regarding prior written notice to lenders.
