Sponsors (48)
The bill makes it materially easier and more affordable for homeowners to build and finance ADUs and expands the secondary market support for those loans—potentially increasing housing supply—but it raises meaningful taxpayer and systemic risk, increases borrower leverage and foreclosure exposure, and may produce local planning challenges if implementation and oversight are not tightly managed.
Homeowners can add and finance accessory dwelling units (ADUs) using federally insured second liens and may include up to 50% of projected ADU rent in loan calculations, making ADU projects more affordable and financially feasible.
Fannie Mae and Freddie Mac can purchase and securitize loans under this program, expanding the secondary market which can lower mortgage rates and increase lending liquidity for prospective homebuyers.
The program caps the annual insurance premium at 1% (or lower), making borrowing costs more predictable and potentially more affordable for borrowers using the insured second liens.
Taxpayers face added financial risk because HUD-insured second liens could generate losses for the federal insurance program if borrowers default.
Homeowners who take insured second liens increase overall leverage on their properties, raising foreclosure risk for borrowers if ADU rental income or property values decline.
Allowing GSEs to buy and securitize these loans increases government-sponsored enterprises' exposure to this loan type, raising systemic/taxpayer risk if market stress occurs—and the FHFA's restriction threshold may be high enough to delay timely action.
Based on analysis of 3 sections of legislative text.
Creates a HUD-insured second-lien program for ADU construction and permits GSE purchase/securitization of those loans, with limits, premium caps, and reporting.
Introduced July 21, 2025 by Sam T. Liccardo · Last progress July 21, 2025
Creates a HUD-backed insurance program to cover certain second liens used to finance construction of accessory dwelling units (ADUs) on single-family properties, with limits on insured amounts, a cap on annual premiums, and reporting requirements. It also authorizes the Federal Housing Finance Agency to allow Fannie Mae and Freddie Mac to purchase and securitize loans insured under this program, while giving the FHFA Director authority to prohibit such purchases if they pose excessive market risk.