The Duty to Serve Program is designed to support housing in underserved markets, specifically targeting very low-, low-, and moderate-income families earning no more than 100 percent of the area median income. This initiative awards Duty to Serve credit for activities that address these housing needs within specific high-need and high-opportunity areas, as defined by the Duty to Serve regulation. These areas are categorized into four main types: Rural Areas, Indian Tribe Areas, High Opportunity Areas, and Areas of Concentrated Poverty.
The Duty to Serve regulation provides precise definitions for each of these categories, ensuring that the program effectively reaches its intended beneficiaries. Understanding these definitions is crucial for stakeholders involved in housing finance and community development. This article will outline the specific geographical definitions that qualify for Duty to Serve credit within each category. For detailed insights into loan performance and acquisitions related to Duty to Serve, refer to the Duty to Serve Performance Data web page.
Rural Areas Defined
According to the FHFA’s Duty to Serve regulation, a “rural area” is defined primarily based on census tracts and metropolitan statistical area designations from the Office of Management and Budget. The definition encompasses two main scenarios:
- Census tracts outside of a Metropolitan Statistical Area: Any census tract located outside of an area designated as a metropolitan statistical area by the Office of Management and Budget is considered rural.
- Census tracts within a Metropolitan Statistical Area but outside Urbanized Areas: This includes census tracts within a metropolitan statistical area that are not within the metropolitan statistical area’s Urbanized Areas, as designated by the U.S. Department of Agriculture’s Rural-Urban Commuting Area Code #1. It also excludes tracts with a housing density exceeding 64 housing units per square mile for USDA’s RUCA Code #2.
It’s important to note that effective July 1, 2023, amendments to the Duty to Serve regulation expanded the definition of “rural area” to include all “colonia census tracts” that would not otherwise meet the standard definition. This change ensures that these underserved communities are also eligible for Duty to Serve credit. Detailed geographical specifications that meet the amended Rural Areas definition are available via provided links.
Indian Tribe Areas Defined
The Duty to Serve regulation specifically recognizes members of Federally recognized Indian tribes living in Indian areas as a high-needs rural population. Fannie Mae and Freddie Mac are authorized to serve these populations within rural areas under the Duty to Serve program. The designation of Indian Areas is critical for targeting support to these communities with unique housing challenges. Specific geographical locations meeting the Indian Areas definition are accessible through dedicated resources.
High Opportunity Areas Defined
The FHFA’s Duty to Serve regulation promotes residential economic diversity by supporting mortgage financing in High Opportunity Areas. These areas are defined as locations that offer residents enhanced opportunities for economic and social mobility. For the Duty to Serve program, High Opportunity Areas include:
- Areas designated by Housing and Urban Development (HUD) as “Difficult Development Areas” (DDAs). DDAs are areas with high construction costs and other challenges to development.
- Areas identified in a state or local Qualified Allocation Plan as high opportunity areas, provided their poverty rate is lower than the threshold established by FHFA. These areas are recognized at the state and local level for their potential to foster upward mobility.
Geographical details for areas meeting the High Opportunity Areas definition are provided through accessible links, facilitating the identification of these key locations for investment and support.
Areas of Concentrated Poverty Defined
Areas of Concentrated Poverty are another critical focus of the Duty to Serve regulation, aiming to foster residential economic diversity. These areas are defined as census tracts that exhibit high poverty rates and require targeted support to improve housing and economic conditions. For the purposes of Duty to Serve, Areas of Concentrated Poverty include census tracts designated by HUD as either:
- Qualified Census Tracts (QCTs). QCTs are defined based on income and poverty criteria set by HUD.
- Racially or Ethnically Concentrated Areas of Poverty (R/ECAPs). R/ECAPs are census tracts with significant minority populations and high poverty rates.
This designation applies during any year covered by an Underserved Markets Plan or in the year preceding a Plan’s effective date, ensuring consistent identification and support. Specific geographies that align with the Area of Concentrated Poverty definition can be found through provided resources.
Small Financial Institutions Defined
While the primary focus is on geographical areas, the Duty to Serve regulation also addresses the role of Small Financial Institutions. A “small financial institution” is defined as a financial institution with total assets less than $304 million. This definition is relevant to the Duty to Serve program as it acknowledges the capacity and scope of smaller institutions in serving underserved markets. A list of small financial institutions meeting this definition, including depository institutions, credit unions, Community Development Financial Institutions, and some Agricultural Credit Associations, is available via provided links. Non-depository mortgage banks are generally not included in this list.
Conclusion
The Duty to Serve program utilizes specific and detailed definitions to identify areas with high needs and high opportunities. By clearly defining Rural Areas, Indian Tribe Areas, High Opportunity Areas, and Areas of Concentrated Poverty, the program ensures that resources are directed effectively to support housing for very low-, low-, and moderate-income families in underserved markets. Understanding these definitions is essential for participating institutions and stakeholders to effectively engage with the Duty to Serve program and contribute to its goals of equitable housing finance. The provided data resources for each defined area offer valuable tools for identifying eligible geographies and implementing targeted housing initiatives.
