Keith Wiley
Lance George
Housing Assistance Council

Sam Lipshutz
Amazon.com, Inc.

The Federal Housing Finance Agency’s (FHFA) Duty to Serve (DTS) regulations require Fannie Mae and Freddie Mac (the Government-Sponsored Enterprises, or GSEs) to engage in efforts that increase liquidity in home mortgage lending markets for select rural, high-need areas. Unincorporated communities along the U.S.-Mexico border, known as “colonias,” are one of these high-need areas. Colonias are informal housing development communities, usually with majority Hispanic populations, that experience extremely high poverty rates and substandard living conditions. These communities may lack drinking water, sewer treatment services, paved streets, high-quality housing, and standard mortgage finance. As a result, they contain some of the worst living conditions in the United States. Policies like DTS seek to ameliorate through better access to affordable mortgage financing.

This paper explores an effort, supported by Fannie Mae, to plan, target, and evaluate their DTS efforts in colonias. The approach focuses on the concept of “Colonias Investment Areas,” which are census tracts containing government recognized colonias. Activities in these Colonias Investment Areas will then be viewed as impacting colonias. A review of housing and mortgage lending data describes Colonias Investment Areas, noting their differences and their commonalities. The data show there is still a need for more affordable home lending options in areas with substandard housing. The ensuing policy discussion details the strengths and limitations of the colonias investment approach and challenges, such as limited housing and reliance on informal self-help construction, that could hinder efforts. Policies that support assisted self-help housing and small-dollar lending might be part of an effective solution.