Wanted: Diverse Subcontractors for Fannie, Freddie and the Fed

Attention all providers of real estate, financial, marketing, IT, professional and travel services: If your business qualifies as a “diverse supplier” under one of the programs specific to Fannie Mae, Freddie Mac, and the Federal Home Loan Banks, the prime contractors doing business with those entities will probably want to know about it.
In late 2010, the Federal Housing Finance Agency extended its final rule requiring that Fannie Mae, Freddie Mac, and the Federal Home Loan Banks promote diversity and the inclusion of minorities and women in contracting at all levels through the establishment of the “Office of Minority and Women Inclusion” provision (Section 1116) in the Housing and Economic Recovery Act (HERA). The final rule was made effective January 28, 2011. The establishment of the final rule requiring an Office of Minority and Women Inclusion at each institution is intended to lead to more subcontracting opportunities for small, women-owned and minority-owned businesses in the near future.

Fannie, Freddie and the each of the Federal Home Loan Banks each must establish its own Office of Minority and Women Inclusion or assign an office to promote the diversity and inclusion efforts required by the HERA provision. Each office has to promulgate minimum requirements for its diversity program and must include an annual report to FHFA regarding opportunities and outreach efforts to minority and women-owned businesses.
These three organizations will acknowledge as “diverse” those proposed subcontractors who hold third-party certifications and government certification. In addition, Fannie Mae will accept certifications from any level of government (federal, state, municipal), as well as certifications from certain organizations, such as the Women’s Business Enterprise National Council (WBENC). Fannie Mae also has a procedure in place for “self-certification.” At this time, Freddie Mac and the Federal Home Loan Banks do not.

As a result, prime contractors should be looking to develop relationships with potential subcontractors who qualify as “diverse.” How hard they will have to look, however, remains to be seen. There are no quotas or other benchmarks, and the reporting authorities (Fannie, Freddie and the Fed) only have vague requirements to show that they have acted in good faith and can show that their contractors have actively reached out to minority and women-owned businesses in subcontracting out additional services. It will be interesting to see how much enforcement and monitoring takes place.

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