Episode 107: FHFA Proposes Major Overhaul of Duty to Serve Rules

The Federal Housing Finance Agency has proposed a sweeping overhaul of the Duty to Serve regulations governing Fannie Mae and Freddie Mac. The proposed rule replaces the existing prescriptive Activities framework with a flexible, principles-based approach — and expands LIHTC credit eligibility across all three Duty to Serve underserved markets. For LIHTC investors, affordable housing developers, and structured finance practitioners, the comment deadline of July 24 and a target effective date of January 1, 2028, make this a near-term priority. Key Takeaways: FHFA proposes to eliminate the current Activities framework entirely, including Statutory and Regulatory Activity lists, Additional Activities, extra credit provisions, and minimum activity requirements from three-year plans. Enterprises would instead be permitted to pursue any action consistent with Duty to Serve, unless FHFA has specifically deemed it ineligible by regulation or case-by-case review. LIHTC investments would earn Duty to Serve credit across all three underserved markets — rural housing, manufactured housing, and affordable housing preservation — up from rural only under the current framework. The restriction on subordinate multifamily liens (previously limited to energy and water improvement financing) would be removed, opening the door to broader layered financing structures for multifamily affordable deals. The income calculation methodology would be revised to more accurately reflect families in areas of concentrated low-income populations, and affordability determinations for manufactured housing communities would be updated. Comments on the proposed rule are due July 24, 2026; regulatory changes are targeted to take effect January 1, 2028. A correction affecting refinancing mortgages that are not arms-length or borrower-driven transactions was posted June 26, 2026. The shift from a prescriptive activity checklist to a principles-based framework with a published ineligible-actions list will fundamentally reshape how Fannie Mae and Freddie Mac structure their Duty to Serve plans — and, by extension, how they engage with LIHTC deals, manufactured housing finance, and preservation transactions. The July 24 comment deadline gives the industry a narrow window to influence what ends up on the ineligible list. Practitioners with active pipeline in any of the three underserved markets should engage now. Subscribe to The Spring Street Brief for daily updates on affordable housing in America.