Affordable Housing Programs Face Compliance Puzzle: Fannie Mae vs. HUD HOME Rules

Durham, NC —     Fannie Mae published its selling Guide on November 5, 2025 . to the surprise of many nonprofit builders and HOME Funds providers, a growing tension between federal housing initiatives and secondary financing guidelines is raising questions for lenders and housing advocates. At the center of the debate: Fannie Mae’s Selling Guide and HUD’s HOME Investment Partnerships Program.

Fannie Mae’s consideration of Community Seconds® program remains a cornerstone for affordable housing, allowing subordinate financing from government agencies, nonprofits, and other approved entities. These loans can cover down payments, closing costs, and even energy-efficient upgrades—provided they meet strict criteria. Among them: the provider cannot be the property seller or any interested party in the transaction.

Meanwhile, HUD’s HOME program which requires the provider to be the owner and seller: this is designed to expand homeownership for low-income families, impose resale or recapture restrictions during an affordability period that can stretch up to 20 years. Under the resale option, a HOME-assisted homeowner must sell to another income-qualified buyer at an affordable price, effectively making them a “restricted seller.” The cost savings in this model requires providers to be the builders as well.

This is where the friction lies. If HOME rules require the provider as owner and seller to enforce affordability or provide financing, Fannie Mae may interpret that as a violation of its prohibition on provider as seller and owner. Luckily, HOME funds can coexist with Community Seconds when structured as a deed restriction from the provider nonprofit, transactions involving resale restrictions, but they must comply with Fannie Mae’s shared equity guidelines, adding layers of complexity for lenders and providers. Shared Equity Certification | Fannie Mae

Industry experts say the solution lies in careful structuring. “If the HOME assistance is delivered by the jurisdiction or nonprofit subrecipient and resale restrictions are properly documented, these deals can work,” notes one compliance consultant. “But lenders need a clear roadmap.”

As affordable housing programs expand, navigating these overlapping rules will be critical to ensuring both compliance and access for first-time buyers. Fannie Mae has launched a Shared equity Certification program that may help with this transition. Subordinate financing deeds of trust may now be a thing of the past for nonprofit HOME funds builders.