“First-of-its-Kind” Collaboration Between HUD and the FHFA

On August 12, 2021, the U.S. Department of Housing and Urban Development (HUD) and the Federal Housing Finance Agency (FHFA) joined forces under a Memorandum of Understanding (MOU) which is the first of its kind. The two Agencies will work in tandem to solidify the enforcement of fair housing and fair lending requirements in the United States. HUD Secretary Marcia L. Fudge stated, “Today’s signing is an important and historic step to advance and strengthen the enforcement of our nation’s fair housing and fair lending requirements.” In order to better enforce fair housing and fair lending requirements, HUD and FHFA plan to promote information sharing, coordination on investigations, compliance reviews and ongoing monitoring.

Information sharing between the two agencies will occur if appropriate on both current and contemplated fair lending investigations. Communication between the two Agencies will be through liaisons representing both HUD and FHFA. In addition, each Agency will determine the role of legal counsel in all MOU-related activities. All information exchanged pursuant to the MOU shall remain the property of the Providing Agency and Confidential Information will remain confidential unless it becomes publicly available through authorized means. The sharing of Confidential Information does not constitute public disclosure.

Coordination on investigations will occur with advance notice and ample opportunity for an Agency to comment on matters which directly impact fair lending compliance. Each Agency will strive to provide the other Agency notice prior to opening a fair lending investigation. Additionally, the Agencies will provide periodic digests of information on consumer complaints. An actual copy of the complaint may be provided upon request. As it pertains to compliance and monitoring, the Agencies may coordinate and share information to review activities related to underwriting and appraisal guidelines. If disagreements arise about any aspect of the coordinated reviews, the Agencies may choose to proceed independently.

The MOU is valid through December 31, 2025 with the option to terminate early by providing written notice 30 calendar days in advance. Despite the collaborative nature of this MOU, each Agency will act independently in carrying out its duties. There will not be any transfer of resources, funds, personnel, property or services between the two Agencies. As the Biden Administration works to address housing discrimination, this MOU expands resources to improve oversight and compliance within the mortgage finance system.

Lenders’ fair lending policies, procedures and data are already scrutinized and examined by the CFPB, HUD and state regulators. Fannie and Freddie are now joining in on the fun per this MOU. A typical Fannie Mae MORA review includes heavy emphasis on a lender’s quality control and internal audit functions, while Freddie’s CORE reviews are largely focused a lender’s ability to catch red flags, change management and their quality control plan. We wait to see just exactly what Fannie and Freddie will require from lenders regarding fair lending data analysis.