2022-2024 Enterprise Housing Goals
| Citation | 86 FR 47398 |
| Record Number | 2021-18008 |
| Published date | 25 August 2021 |
| Court | Federal Housing Finance Agency |
Federal Register, Volume 86 Issue 162 (Wednesday, August 25, 2021)
[Federal Register Volume 86, Number 162 (Wednesday, August 25, 2021)]
[Proposed Rules]
[Pages 47398-47417]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-18008]
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Proposed Rules
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.
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Federal Register / Vol. 86, No. 162 / Wednesday, August 25, 2021 /
Proposed Rules
[[Page 47398]]
FEDERAL HOUSING FINANCE AGENCY
12 CFR Part 1282
RIN 2590-AB12
2022-2024 Enterprise Housing Goals
AGENCY: Federal Housing Finance Agency.
ACTION: Proposed rule.
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SUMMARY: The Federal Housing Finance Agency (FHFA) is issuing a
proposed rule with request for comments on the housing goals for Fannie
Mae and Freddie Mac (the Enterprises) for 2022 through 2024. The
Federal Housing Enterprises Financial Safety and Soundness Act of 1992
(the Safety and Soundness Act) requires FHFA to establish annual
housing goals for mortgages purchased by the Enterprises. The housing
goals include separate categories for single-family and multifamily
mortgages on housing that is affordable to low-income and very low-
income families, among other categories. The existing housing goals for
the Enterprises include benchmark levels through the end of 2021. This
proposed rule would establish new benchmark levels for the housing
goals and subgoals for 2022 through 2024. The proposed rule would also
replace the low-income areas subgoal with separate area-based subgoals
targeting the individual components of the low-income areas subgoal
(minority census tracts and low-income census tracts). Finally, the
proposed rule would make several technical changes to definitions and
other provisions to conform the regulation to existing practice.
DATES: FHFA will accept written comments on the proposed rule on or
before October 25, 2021.
ADDRESSES: You may submit your comments on the proposed rule,
identified by regulatory information number (RIN) 2590-AB12, by any one
of the following methods:
Agency Website: www.fhfa.gov/open-for-comment-or-input.
Federal eRulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments. If you submit your
comment to the Federal eRulemaking Portal, please also send it by email
to FHFA at [email protected] to ensure timely receipt by FHFA.
Include the following information in the subject line of your
submission: Comments/RIN 2590-AB12.
Hand Delivered/Courier: The hand delivery address is:
Clinton Jones, General Counsel, Attention: Comments/RIN 2590-AB12,
Federal Housing Finance Agency, 400 Seventh Street SW, Washington, DC
20219. Deliver the package at the Seventh Street entrance Guard Desk,
First Floor, on business days between 9 a.m. and 5 p.m.
U.S. Mail, United Parcel Service, Federal Express, or
Other Mail Service: The mailing address for comments is: Clinton Jones,
General Counsel, Attention: Comments/RIN 2590-AB12, Federal Housing
Finance Agency, 400 Seventh Street SW, Washington, DC 20219. Please
note that all mail sent to FHFA via U.S. Mail is routed through a
national irradiation facility, a process that may delay delivery by
approximately two weeks.
FOR FURTHER INFORMATION CONTACT: Ted Wartell, Associate Director,
Housing & Community Investment, Division of Housing Mission and Goals,
(202) 649-3157, [email protected]; Padmasini Raman, Supervisory
Policy Analyst, Housing & Community Investment, Division of Housing
Mission and Goals, (202) 649-3633, [email protected]; Kevin
Sheehan, Associate General Counsel, Office of General Counsel, (202)
649-3086, [email protected]; or Marshall Adam Pecsek, Assistant
General Counsel, (202) 649-3380, [email protected]. These are
not toll-free numbers. The mailing address is: Federal Housing Finance
Agency, 400 Seventh Street SW, Washington, DC 20219. The telephone
number for the Telecommunications Device for the Deaf is (800) 877-
8339.
SUPPLEMENTARY INFORMATION:
I. Comments
FHFA invites comments on all aspects of the proposed rule and will
take all comments germane to the proposed rule into consideration
before issuing a final rule. Copies of all such comments will be posted
without change, including any personal information you provide such as
your name, address, email address, and telephone number, on FHFA's
public website at http://www.fhfa.gov. In addition, copies of all such
comments received will be available for examination by the public
through the electronic rulemaking docket for this proposed rule also
located on the FHFA website.
Commenters are encouraged to review and comment on all aspects of
the proposed rule, including the proposed single-family housing goals
and subgoals benchmark levels, the proposed multifamily housing goals
benchmark levels, and the other proposed changes to the regulation.
II. Background
A. Statutory and Regulatory Background for the Existing Housing Goals
The Safety and Soundness Act requires FHFA to establish several
annual housing goals for both single-family and multifamily mortgages
purchased by the Enterprises.\1\ The annual housing goals are one
measure of the extent to which the Enterprises are meeting their public
purposes, which include ``an affirmative obligation to facilitate the
financing of affordable housing for low- and moderate-income families
in a manner consistent with their overall public purposes, while
maintaining a strong financial condition and a reasonable economic
return.'' \2\
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\1\ See 12 U.S.C. 4561(a).
\2\ See 12 U.S.C. 4501(7).
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Since 2010, FHFA has established annual housing goals for
Enterprise purchases of single-family and multifamily mortgages
consistent with the requirements of the Safety and Soundness Act. The
structure of the housing goals and the rules for determining how
mortgage purchases are counted or not counted are defined in the
housing goals regulation.\3\ The most recent rule established benchmark
levels for the housing goals for 2021.\4\
[[Page 47399]]
This proposed rule would establish benchmark levels for 2022-2024.
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\3\ See 12 CFR part 1282.
\4\ See 85 FR 82881 (Dec. 21, 2020). Prior to the rule
establishing housing goals for 2021, the most recent rule
establishing Enterprise housing goals applied to years 2018 through
2020. See 83 FR 5878 (Feb. 12, 2018). The 2020 final rule extended
the housing goals benchmark levels applicable to 2018-2020 through
2021 only, a departure from historical FHFA practice of establishing
goals at three-year intervals. As stated in the preamble to the 2020
final rule, this choice was motivated by the unique market
conditions created by the COVID-19 pandemic. 85 FR at 82881 (``Due
to the severe nature of the COVID-19 pandemic and associated
economic uncertainty, FHFA is establishing benchmark levels for the
Enterprise single-family and multifamily housing goals for calendar
year 2021 only.'')
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Single-family goals. The single-family goals defined under the
Safety and Soundness Act include separate categories for home purchase
mortgages for low-income families, very low-income families, and
families that reside in low-income areas.\5\ The Safety and Soundness
Act defines ``low-income area'' \6\ to include: (1) Families in low-
income census tracts, defined as census tracts with median income less
than or equal to 80 percent of area median income (AMI); \7\ (2)
families with incomes less than or equal to AMI who reside in minority
census tracts (defined as census tracts with a minority population of
at least 30 percent and a tract median income of less than 100 percent
of AMI); \8\ and (3) families with incomes less than or equal to 100
percent of AMI who reside in designated disaster areas.\9\ The
Enterprise housing goals regulation also includes a subgoal, within the
low-income areas goal, that is limited to families in low-income census
tracts and moderate-income families in minority census tracts.\10\ FHFA
is proposing a change to the structure of the low-income areas subgoal,
as further discussed in Section III.A. below. Performance on the
single-family home purchase goals is measured as the percentage of the
total home purchase mortgages purchased by an Enterprise each year that
qualify for each goal or subgoal. There is also a separate goal for
refinancing mortgages for low-income families, and performance on the
refinancing goal is determined in a similar way.
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\5\ 12 U.S.C. 4562(a)(1).
\6\ 12 U.S.C. 4502(28).
\7\ 12 U.S.C. 4502(28); 12 CFR 1282.1 (par. (i) of definition of
``families in low-income areas'').
\8\ 12 U.S.C. 4502(29); 12 CFR 1281.1 (par. (ii) of definition
of ``families in low-income areas'' and definition of ``minority
census tract'').
\9\ 12 U.S.C. 4502(28); 12 CFR 1281.1 (definition of
``designated disaster area'' and par. (iii) of definition of
``families in low-income areas'').
\10\ 12 CFR 1282.12(f).
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Under the Safety and Soundness Act, the single-family housing goals
are limited to mortgages on owner-occupied housing with one to four
units total. The single-family goals cover conventional, conforming
mortgages, defined as mortgages that are not insured or guaranteed by
the Federal Housing Administration or another government agency and
with principal balances that do not exceed the conforming loan limits
for Enterprise mortgages.
Two-part evaluation approach. The performance of the Enterprises on
the housing goals is evaluated using a two-part approach, comparing the
goal-qualifying share of the Enterprise's mortgage purchases to two
separate measures: A benchmark level and a market level. In order to
meet a single-family housing goal, the percentage of mortgage purchases
by an Enterprise that meet each goal must equal or exceed either the
benchmark level or the market level for that year. The benchmark level
is set prospectively by rulemaking based on various factors set forth
in the Safety and Soundness Act.\11\ The market level is determined
retrospectively for each year, based on the actual goal-qualifying
share of the overall market as measured by the Home Mortgage Disclosure
Act (HMDA) data for that year. The overall market that FHFA uses for
setting both the prospective benchmark level and the retrospective
market level consists of all single-family owner-occupied conventional
conforming mortgages that would be eligible for purchase by either
Enterprise. It includes loans purchased by the Enterprises as well as
comparable loans held in a lender's portfolio. It also includes any
loans that are part of a private label security (PLS), although very
few such securities have been issued for conventional conforming
mortgages since 2008.
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\11\ See 12 U.S.C. 4562(e).
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While both the benchmark level and the retrospective market level
are designed to measure the current year's mortgage originations, the
performance of the Enterprises on the housing goals includes all
Enterprise purchases in that year, regardless of the year in which the
loan was originated. This includes providing housing goals credit when
the Enterprises acquire qualified seasoned loans. (Seasoned loans are
loans that were originated in prior years and acquired by the
Enterprise in the current year.)
Multifamily goals. The multifamily goals defined under the Safety
and Soundness Act include categories for mortgages on multifamily
properties (properties with five or more units) with rental units
affordable to low-income families and mortgages on multifamily
properties with rental units affordable to very low-income families.
The Enterprise housing goals regulation also includes a small
multifamily low-income subgoal for properties with 5-50 units. The
multifamily housing goals include all Enterprise multifamily mortgage
purchases, regardless of the purpose of the loan. The multifamily goals
evaluate the performance of the Enterprises based on numeric targets,
not percentages, for the number of affordable units in properties
backed by mortgages purchased by an Enterprise. The Enterprise housing
goals regulation does not include a retrospective market level measure
for the multifamily goals, due in part to a lack of comprehensive data
about the multifamily market. As a result, FHFA currently measures
Enterprise multifamily goals performance against the benchmark levels
only.
The Safety and Soundness Act requires that affordability for rental
units under the multifamily goals be determined based on rents that
``[do] not exceed 30 percent of the maximum income level of such income
category, with appropriate adjustments for unit size as measured by the
number of bedrooms.'' \12\ The Enterprise housing goals regulation
considers the net rent paid by the renter and, therefore, nets out any
subsidy payments that the renter may receive, including housing
assistance payments.
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\12\ See 12 U.S.C. 4563(c). This affordability definition is
sometimes referred to as the ``Brooke Amendment,'' which states that
to be affordable at the 80 percent of AMI level, the rents must not
exceed 30 percent of the renter's income which must not exceed 80
percent of AMI. See https://www.huduser.gov/portal/pdredge/pdr_edge_featd_article_092214.html for a description of the Brooke
Amendment and background on the notion of affordability embedded in
the housing goals.
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B. Adjusting the Housing Goals
If, after publication of the final rule establishing the housing
goals for 2022-2024, FHFA determines that any of the single-family or
multifamily housing goals should be adjusted in light of market
conditions, to ensure the safety and soundness of the Enterprises, or
for any other reason, FHFA will take any steps that are necessary and
appropriate to adjust that goal such as reducing the benchmark level
through the processes in the existing regulation. FHFA may take other
actions consistent with the Safety and Soundness Act and the Enterprise
housing goals regulation based on new information or developments that
occur after publication of the final rule.
For example, under the Safety and Soundness Act and the Enterprise
housing goals regulation, FHFA may reduce the benchmark levels in
response to an Enterprise petition for reduction for any of the single-
family or multifamily housing goals in a particular year based on a
determination by FHFA that: (1) Market and economic conditions or the
financial condition of the Enterprise require a reduction; or (2)
[[Page 47400]]
efforts to meet the goal or subgoal would result in the constraint of
liquidity, over-investment in certain market segments, or other
consequences contrary to the intent of the Safety and Soundness Act or
the purposes of the Enterprises' charter acts.\13\
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\13\ See 12 CFR 1282.14(d).
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The Safety and Soundness Act and the Enterprise housing goals
regulation also take into account the possibility that achievement of a
particular housing goal may or may not have been feasible for an
Enterprise to achieve. If FHFA determines that a housing goal was not
feasible for an Enterprise to achieve, then the statute and regulation
provide for no further enforcement of that housing goal for that
year.\14\
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\14\ See 12 CFR 1282.21(a); 12 U.S.C. 4566(b).
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If FHFA determines that an Enterprise failed to meet a housing goal
and that achievement of the housing goal was feasible, then the statute
and regulation provide FHFA with discretionary authority to require the
Enterprise to submit a housing plan describing the specific actions the
Enterprise will take to improve its housing goals performance.
C. Housing Goals Under Conservatorship
On September 6, 2008, FHFA placed each Enterprise into
conservatorship. Although the Enterprises remain in conservatorship at
this time, they continue to have the mission of supporting a stable and
liquid national market for residential mortgage financing. FHFA has
continued to establish annual housing goals for the Enterprises and to
assess their performance under the housing goals each year during
conservatorship.
III. Summary of Proposed Rule
A. Benchmark Levels for the Single-Family Housing Goals
This proposed rule would establish the benchmark levels for the
existing single-family housing goals for 2022-2024 as follows:
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Proposed
Current benchmark
Goal Criteria benchmark level for 2022-
level for 2021 2024 (percent)
(percent)
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Low-Income Home Purchase Goal................. Home purchase mortgages on 24 28
single-family, owner-occupied
properties, to borrowers with
incomes no greater than 80 of
area median income (AMI).
Very Low-Income Home Purchase Goal............ Home purchase mortgages on 6 7
single-family, owner-occupied
properties, to borrowers with
incomes no greater than 50 of
AMI.
Low-Income Refinancing Goal................... Refinancing mortgages on single- 21 26
family, owner-occupied
properties, to borrowers with
incomes no greater than 80 of
AMI.
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The proposed rule would replace the existing low-income areas
subgoal with two new area-based subgoals and corresponding benchmark
levels. Implementation of the two new subgoals would modify the
methodology for measuring the Enterprises' performance in these areas.
The first of the proposed subgoals would establish a benchmark level
for Enterprise purchases of mortgage loans on properties in minority
census tracts, made to borrowers with incomes no greater than 100
percent of AMI. The second of the proposed subgoals would establish a
benchmark level for Enterprise purchases of (i) mortgage loans on
properties in low-income census tracts that are not minority census
tracts, as well as (ii) mortgage loans on properties in low-income
census tracts that are minority census tracts, made to families with
incomes greater than 100 percent of AMI. The proposed rule would
establish the new subgoal benchmark levels for 2022-2024 as follows:
------------------------------------------------------------------------
Proposed
benchmark
Subgoal Criteria level for 2022-
2024 (percent)
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Minority Census Tracts Subgoal.... Home purchase 10
mortgages on single-
family, owner-
occupied properties
to borrowers with
income no greater
than 100 percent of
AMI in minority
census tracts.\1\
Low-Income Census Tracts Subgoal.. (i) Home purchase 4
mortgages on single-
family, owner-
occupied properties
to borrowers
(regardless of
income) in low-
income census
tracts\2\ that are
not minority census
tracts, and (ii)
home purchase
mortgages on single-
family, owner-
occupied properties
to borrowers with
incomes greater
than 100 percent of
AMI in low-income
census tracts that
are also minority
census tracts.
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\1\ Census tracts that have a minority population of at least 30 percent
and a median income of less than 100 percent of AMI.
\2\ Census tracts where the median income is no greater than 80 percent
of AMI.
In addition, FHFA will continue to establish by notice to the
Enterprises an annual benchmark level for the low-income areas housing
goal that takes into account loans from disaster areas. The proposed
rule would make one clarifying change to the definition of ``designated
disaster area,'' as described below.
B. Proposed Benchmark Levels for the Multifamily Housing Goals
The proposed rule would establish the benchmark levels for the
[[Page 47401]]
multifamily goal and subgoals for 2022-2024 as follows:
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Proposed
Current benchmark
Goal Criteria benchmark level for 2022-
level for 2021 2024 (units)
(units)
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Low-Income Goal............................... affordable to families with 315,000 415,000
incomes no greater than 80
percent of AMI in multifamily
rental properties with
mortgages purchased by an
Enterprise.
Very Low-Income Subgoal....................... affordable to families with 60,000 88,000
incomes no greater than 50
percent of AMI in multifamily
rental properties with
mortgages purchased by an
Enterprise.
Small Multifamily Low-Income Subgoal.......... affordable to families with 10,000 23,000
incomes no greater than 80
percent of AMI in small
multifamily rental properties
(5 to 50 ) with mortgages
purchased by an Enterprise.
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C. Other Proposed Changes
The proposed rule would make minor technical changes to some
regulatory definitions and counting rules. These changes would be non-
substantive changes intended to conform the regulation to existing FHFA
practices in measuring the performance of the Enterprises under the
housing goals.
D. Summary of Responses to the ANPR and Public Listening Session
In December 2020, FHFA published an Advance Notice of Proposed
Rulemaking (ANPR) requesting public comment on several questions
related to potential changes to the Enterprise housing goals
regulation.\15\ FHFA invited comments in the ANPR on four specific
questions identified below, as well as on any other issues that
commenters thought should be addressed as part of the rulemaking to
establish the housing goals benchmark levels for 2022 and beyond.
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\15\ See 85 FR 82965 (Dec. 21, 2020).
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FHFA also held a public listening session in March 2021 to solicit
additional input on the Enterprise housing goals regulation. FHFA
received 16 letters in response to the ANPR and heard from 12 external
speakers during the listening session. The comments provided through
the letters and by the speakers addressed a range of topics related to
the Enterprise housing goals and access to mortgages for low-income
borrowers. FHFA appreciates the time and effort that commenters put
into responses and has incorporated elements of the feedback received
into the proposed rule. Some of the topics raised in the comments
require further research or analysis, and FHFA may consider these
issues in future rulemaking cycles. A summary of the comments received
is included below. All comments received, as well as the transcript of
the public listening session, are available at FHFA's website.\16\
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\16\ See https://www.fhfa.gov/Videos/Pages/FHFA-Public-Listening-Session-Enterprise-Housing-Goals-ANPR.aspx.
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Question 1: Are there categories of loans that should be excluded
from receiving housing goals credit under the Federal Housing
Enterprises Financial Safety and Soundness Act of 1992 (Safety and
Soundness Act) provisions on ``unacceptable business and lending
practices''?
Numerous commenters opposed excluding loans from receiving housing
goals credit because of certain credit or underwriting features like
loan-to-value or debt-to-income ratios. Several commenters stressed
their belief that loans that meet safety and soundness standards and
are eligible for purchase by the Enterprises should be eligible for
housing goals credit. In addition, many of the commenters argued that
loans that are eligible for Qualified Mortgage (QM) status should also
be eligible for housing goals credit. Two commenters stressed that FHFA
should not exclude particular categories of loans from receiving
housing goals credit unless the performance of the loan products is
unsustainable. Other commenters supported excluding certain loans from
receiving housing goals credit. For example, one commenter argued that
mortgages with loan-level pricing adjustments should not receive
credit. Another commenter recommended that FHFA require the Enterprises
to use a historical mortgage default rate matrix to limit certain types
of acquisitions.
Several commenters expressed concerns about the January 2021
amendments to the Senior Preferred Stock Purchase Agreements between
the Enterprises and the U.S. Department of the Treasury (PSPAs), which
place new limits on risk-layering in loans eligible for purchase by the
Enterprises. The commenters stressed the potential negative impact the
amendments to the PSPAs could have on communities and borrowers of
color and encouraged FHFA to evaluate the effect of the new
restrictions on the housing goals. The commenters also requested that
FHFA provide more data on the impact of the housing goals by income and
race or ethnicity in light of the changes to the PSPAs. One commenter
requested that FHFA conduct annual evaluations of how its policies,
including the PSPAs, impact the ability of the Enterprises to meet the
housing goals and satisfy their charter missions. Several commenters
raised concerns about the Enterprises' ability to meet the housing
goals in light of FHFA's recently adopted capital regulation, which
they believe will increase mortgage costs and, in turn, decrease access
to mortgage credit for lower-income or lower-wealth borrowers and
borrowers of color.
Question 2: Are there ways to determine whether the low-income
areas home purchase subgoal has resulted in the displacement of
residents from certain communities, or to measure the extent of any
such displacement? Should FHFA consider modifying the low-income areas
home purchase subgoal to address such concerns? If so, how?
FHFA provided an analysis of whether the low-income areas home
purchase subgoal has resulted in the displacement of residents from
certain communities in the ANPR based on HMDA data. The data showed
that both low-income areas and high-minority areas have increasing
shares of borrowers with incomes at or above 100 percent of AMI.\17\
The data also showed that the share of loans made to borrowers with
incomes greater than 100 percent of AMI and residing in low-income
census tracts increased from
[[Page 47402]]
40.7 percent in 2010 to 42.8 percent in 2016, but declined to a low of
37 percent in 2019. Numerous commenters broadly agreed with the
description of trends provided in the ANPR and encouraged FHFA to
continue to provide data on this issue. A few commenters requested that
FHFA provide additional data pertaining to the race and ethnicity of
borrowers for loans that meet this subgoal. Two commenters recommended
that FHFA analyze Census Bureau data over the next five years in an
effort to determine if displacement is occurring in certain
communities. Another commenter recommended that FHFA, in coordination
with other regulators, monitor home sales prices, resident incomes, and
other data to determine the impact of the subgoal.
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\17\ Note that loans to borrowers with incomes over 100 percent
of AMI do not qualify for the minority areas component of the
subgoal.
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Although one commenter recommended leaving the subgoal in its
current form, citing its benefits to socioeconomic diversity, several
commenters expressed concern about the Enterprises receiving housing
goals credit for loans to borrowers who meet no standard other than
living in a low-income area. A number of commenters recommended that
FHFA continue to monitor and analyze trends regarding whether the low-
income areas home purchase subgoal has resulted in the displacement of
residents. Other commenters suggested revising the subgoal to ensure
that FHFA allows housing goals credit only for loans to borrowers at or
below 80 percent of AMI. One commenter explicitly stated that the
housing goals targets should be based only on income, not geography.
Another commenter recommended allowing only a certain percentage of
loans above 80 percent of AMI to qualify for the subgoal and encouraged
FHFA to analyze the potential impact of different caps (i.e., 100 or
125 percent of AMI).
Question 3: Should FHFA revise the low-income areas home purchase
subgoal to consider loans on properties located in Opportunity Zones,
and if so, how should such loans be treated?
Some commenters supported the idea of the Enterprises receiving
housing goals credit for Opportunity Zone loans for low-income
borrowers. For example, one commenter favored providing housing goals
credit for loans in Opportunity Zones as a way to help encourage
affordable housing investment but did not support giving the
Enterprises extra or double credit for loans in Opportunity Zones.
Other commenters opposed allowing housing goals credit for Opportunity
Zone loans due to the relative newness of the program. One of these
commenters encouraged FHFA to conduct more analysis on the types of
housing developments found in Opportunity Zones before offering housing
goals credit. Another commenter expressed concern about the ultimate
beneficiaries of Opportunity Zones, as well as skepticism that low- or
moderate-income households or communities would benefit from the
program.
Question 4: Is there evidence that the Enterprise housing goals
have helped expand low-income homeownership in the marketplace?
FHFA received a number of comments emphasizing the value of the
housing goals over time and the importance of maintaining Enterprise
focus on these segments of the market. Some commenters stated that
there has been a positive impact on low-income homeownership and the
housing goals have expanded access to low-income households. Other
commenters noted that the housing goals are foundational to the mission
of the Enterprises, as laid out in the statute and their charters.
Another commenter argued for the importance of the housing goals in
incentivizing lending to low-income borrowers.
One commenter stated that the housing goals have served as a
catalyst for expanding banks' abilities to serve low- and moderate-
income borrowers. Another commenter stated that the housing goals have
contributed to increases in Latino home ownership. The commenter also
described the benefits of the Enterprises' efforts to standardize
eligibility criteria and underwriting factors, enabling more low-income
households to obtain credit. The commenter also urged FHFA to monitor
mortgage servicing standards and, if necessary, provide notice of any
mortgage relief or loss mitigation options to ensure that servicers of
Enterprise-backed loans proactively help homeowners who are struggling
with payments.
Several commenters encouraged FHFA to establish higher or more
rigorous housing goals. One of the commenters argued that the
Enterprises could better serve the manufactured housing market segment
through purchasing chattel home loans and homes settled as real estate.
Another commenter encouraged FHFA to support manufactured home consumer
lending through the Enterprise housing goals and the Duty to Serve
program.
A number of commenters encouraged FHFA to review its policies to
ensure there are no unnecessary barriers to meeting the housing goals
and serving low-income households. One commenter specifically focused
on the price of guarantee fees because pricing structures can impact
whether a creditworthy borrower can afford a mortgage. The commenter
highlighted the impact that guarantee fees have with respect to pooling
risk, eliminating excessive risk-based pricing, and encouraging greater
access to sustainable homeownership.
Although the majority of the commenters expressed support for the
housing goals, one commenter argued that they have not been successful
and that the rates of homeownership for low-income households have
declined over the last 30 years. The commenter recommended that FHFA
address risk-layering (i.e., mortgages with multiple characteristics
associated with higher risk) by limiting Enterprise acquisitions of
mortgages for low-income borrowers to mortgages with a projected
mortgage default rate of less than 14 percent and by encouraging 20-
year instead of 30-year mortgages. Another commenter expressed the
belief that the housing goals have had a minimal effect on low-income
homeownership. The commenter argued that the mortgages captured by the
housing goals are not excessively risky and would have been made in the
absence of the housing goals. The commenter also argued that there is
no evidence that the housing goals have created a lower-priced or more
affordable mortgage.
Other Comments
There were additional topics that commenters raised in responses to
the ANPR. For example, a number of commenters claimed that their
responses to certain questions--specifically, those concerning whether
there are categories of loans that should be excluded from the housing
goals, the impact of the low-income areas home purchase subgoal, and
the impact of the Enterprise housing goals over time--were affected by
insufficient access to data. These commenters asserted that they would
have been able to better respond to the questions in the ANPR if they
had access to additional and more comprehensive data about the
composition of housing goals loans and the historical performance of
those loans. One commenter suggested supplementing existing reports
like the Annual Housing Report with data on the risk characteristics
and the performance of loans that receive housing goals credit.
Several commenters focused on the racial homeownership gap between
White households and Black or Latino households and emphasized the
importance of homeownership to family wealth. The commenters cited the
persistently lower rates of
[[Page 47403]]
homeownership for Black and Latino households and requested that FHFA
try to address the gap through the housing goals. One commenter
encouraged FHFA to specifically consider the impact that any changes or
revisions to the housing goals would have on borrowers of color.
Another commenter proposed the creation of a new housing goal to focus
on the racial homeownership gap. A number of commenters also noted the
disproportionate impact the COVID-19 pandemic has had on low-income
households and people of color.
Several commenters expressed concern about whether low-income
borrowers have adequate access to affordable refinancing options,
particularly in light of the recent low interest rate environment. Two
of the commenters suggested that the Enterprises create a streamlined
refinance program in order to ensure that rate/term refinances are more
available to lower-income households.
FHFA appreciates the thoughtful and thorough responses received on
the ANPR and has analyzed the suggestions embedded in the comments.
FHFA has taken these comments into account where relevant and possible
in formulating the current proposed rule. Other comments or
recommendations will require further analysis and the issues raised may
be addressed in future rulemakings.
With respect to requests for additional data, FHFA understands the
value of data in evaluating and assessing the performance of the
Enterprises in achieving the housing goals and is exploring additional
ways to provide data to the public. FHFA intends to provide additional
data on Enterprise loan purchases on the FHFA website. In determining
which data can be provided, FHFA must consider that some data from the
Enterprises are confidential or proprietary and may not be disclosed.
In the rulemaking establishing the housing goals for 2021, FHFA did
not publish the single-family model paper that it usually publishes for
each housing goals rulemaking. FHFA received comments in response to
the proposed 2021 housing goals rule and the ANPR that encouraged FHFA
to publish the single-family model papers in future rulemakings. As
with most previous housing goals rulemakings, FHFA has published the
single-family model paper on its public website in conjunction with
this housing goals proposed rule.\18\
---------------------------------------------------------------------------
\18\ Details on FHFA's single-family market models are available
in the technical report ``The Size of the Affordable Mortgage
Market: 2022-2024 Enterprise Single-Family Housing Goals'' available
at https://www.fhfa.gov/PolicyProgramsResearch/Research/PaperDocuments/Market-Estimates_2022-2024.pdf.
---------------------------------------------------------------------------
In response to comments about the importance of access to
refinancing options for lower income borrowers, FHFA notes that both
Enterprises introduced new refinancing options in April 2021. Eligible
borrowers must have incomes at or below 80 percent of AMI, and the
lender must provide the borrower a savings of at least $50 per month
and at least a 50-basis point reduction in the borrower's interest
rate. FHFA estimates that borrowers who take advantage of this
refinancing option could save an average of $1,200 to $3,000 per
year.\19\ In addition, in July 2021, FHFA announced the elimination of
the Adverse Market Refinance Fee, to help families reduce their housing
costs.\20\
---------------------------------------------------------------------------
\19\ See https://www.fhfa.gov/Media/PublicAffairs/Pages/FHFA-Announces-New-Refinance-Option-for-Low-Income-Families-with-Enterprise-Backed-Mortgages.aspx.
\20\ See https://www.fhfa.gov/Media/PublicAffairs/Pages/FHFA-Eliminates-Adverse-Market-Refinance-Fee.aspx.
---------------------------------------------------------------------------
In response to comments about the racial homeownership gap, FHFA
has taken a number of actions. For example, FHFA held a listening
session on June 29, 2021 to obtain public input on the topic of closing
the gap in sustainable homeownership. FHFA is also publishing on its
website additional data on the race and ethnicity of loans that are
eligible and qualified for housing goals credit. The additional data
should assist those interested in analyzing the current housing goals
performance of the Enterprises. Finally, as noted earlier and described
in greater detail below, FHFA is proposing the creation of new area-
based subgoals that separately measure the Enterprises' purchases of
mortgages in minority census tracts and low-income census tracts. FHFA
is specifically requesting public comment on the proposed area-based
subgoals, as well as all other aspects of this proposed rule.
IV. Single-Family Housing Goals
A. Factors Considered in Setting the Proposed Single-Family Housing
Goal Levels
The Safety and Soundness Act requires FHFA to consider the
following seven factors in setting the single-family housing goals:
1. National housing needs;
2. Economic, housing, and demographic conditions, including
expected market developments;
3. The performance and effort of the Enterprises toward achieving
the housing goals in previous years;
4. The ability of the Enterprises to lead the industry in making
mortgage credit available;
5. Such other reliable mortgage data as may be available;
6. The size of the purchase money conventional mortgage market, or
refinance conventional mortgage market, as applicable, serving each of
the types of families described, relative to the size of the overall
purchase money mortgage market or the overall refinance mortgage
market, respectively; and
7. The need to maintain the sound financial condition of the
Enterprises.\21\ FHFA has considered each of these seven statutory
factors in setting the proposed benchmark levels for each of the
single-family housing goals and subgoals.
---------------------------------------------------------------------------
\21\ See 12 U.S.C. 4562(e)(2)(B).
---------------------------------------------------------------------------
In setting the proposed benchmark levels for the single-family
housing goals, FHFA typically relies on statistical market models to
evaluate these statutory factors and generate a point forecast for each
goal as well as a confidence interval for the point forecast. FHFA then
considers other statutory factors, as well as other relevant policy
issues, to select a specific point forecast within the confidence
interval as the proposed benchmark level.
In proposing the benchmark levels for the single-family housing
goals for 2022-2024, FHFA considered the statutory factors, including
the current economic conditions, national housing needs, recent market
developments, and the past performance of the Enterprises on the
housing goals.
Market forecast models. The purpose of FHFA's market forecast
models is to forecast the market share of the goal-qualifying mortgage
originations in the market for the 2022-2024 period. The models are
intended to generate reliable forecasts rather than to test various
economic hypotheses about the housing market or to explain the
relationship between variables. Therefore, following standard practice
among forecasters and economists at other federal agencies, FHFA
estimates a reduced-form equation for each of the housing goals and
fits an Autoregressive Integrated Moving Average (or ARIMA) model to
each goal share. The models look at the statistical relationship
between (a) the historical market share for each single-family housing
goal or subgoal, as calculated from monthly HMDA data, and (b) the
historical values for various
[[Page 47404]]
factors that may influence the market shares, such as interest rates,
inflation, house prices, home sales, the unemployment rate, and other
factors. The models then project the future value of the affordable
market share using forecast values of the model inputs. Separate models
are developed for each of the single-family housing goals and subgoals.
FHFA has employed similar models in past rulemaking cycles to
generate market forecasts. The models are developed using monthly
series generated from HMDA and other data sources, and the resulting
monthly forecasts are then averaged into an annual forecast for each of
the three years in the goal period. The models rely on 16 years of HMDA
data, from 2004 to 2019, the latest year for which public HMDA data was
available at the time of model construction. FHFA will be updating the
models with HMDA data for 2020 while developing the final rule.
Additional discussion of the market forecast models can be found in a
research paper, available at http://www.fhfa.gov/PolicyProgramsResearch/Research/.\22\
---------------------------------------------------------------------------
\22\ Details on FHFA's single-family market models will be
available in the technical report ``The Size of the Affordable
Mortgage Market: 2022-2024 Enterprise Single-Family Housing Goals''
available at https://www.fhfa.gov/PolicyProgramsResearch/Research/PaperDocuments/Market-Estimates_2022-2024.pdf.
---------------------------------------------------------------------------
Current market outlook. There are many factors that impact the
affordable housing market as a whole, and changes to any one of them
could significantly impact the ability of the Enterprises to meet the
goals. In developing the market models, FHFA used Moody's forecasts as
the source for macroeconomic variables where available.\23\ In cases
where Moody's forecasts were not available (for example, the share of
government-insured/guaranteed home purchases and the share of
government-insured/guaranteed refinances), FHFA generated and tested
its own forecasts as in past rulemakings.\24\ Elements that impact the
models and the determination of benchmark levels are discussed below.
---------------------------------------------------------------------------
\23\ The macroeconomic outlook described herein is based on
Moody's forecasts as of July 2021.
\24\ This refers to the mortgages insured or guaranteed by
government agencies such as the Federal Housing Administration,
Department of Veterans Affairs, and Rural Housing Service.
---------------------------------------------------------------------------
Interest rates are very important determinants of the trajectory of
the mortgage market. In an effort to continue its support of the U.S.
economy and promote maximum employment and price stability, the Federal
Reserve reiterated at its April 2021 meeting its commitment to seeking
to achieve maximum employment and inflation at 2 percent in the long
run by maintaining its target for the federal funds rate at between 0
percent and 0.25 percent until its goals are achieved.\25\ The target
was first lowered to this level in March 2020 to mitigate the effects
of the COVID-19 pandemic.\26\ Moody's July 2021 forecast assumes that
this target is maintained until the third quarter of 2022, and then
projects that mortgage interest rates--in particular the 30-year fixed
rate, which is closely tied to the federal funds rate and the 10-year
Treasury note yield--will rise gradually from the current historic low
of 3.1 percent in 2020 to 4.3 percent by 2024.\27\
---------------------------------------------------------------------------
\25\ See https://www.federalreserve.gov/newsevents/pressreleases/monetary20210428a.htm.
\26\ See https://www.federalreserve.gov/newsevents/pressreleases/monetary20200315a.htm.
\27\ See Exhibit 1 in the technical report ``The Size of the
Affordable Mortgage Market: 2022-2024 Enterprise Single-Family
Housing Goals'' available at https://www.fhfa.gov/PolicyProgramsResearch/Research/PaperDocuments/Market-Estimates_2022-2024.pdf.
---------------------------------------------------------------------------
Moody's July 2021 forecast projects that the unemployment rate will
gradually fall from its 2020 peak to 4.0 percent in 2024. Moody's also
forecasts a modest increase in per capita disposable nominal income
growth--from $53,081 in 2020 to $59,365 in 2024. Furthermore, Moody's
estimates that the inflation rate will be in the 2.2-2.4 percent range
from 2022 through 2024.
The combination of low interest rates, high deferred demand, and
low supply fueled by the pandemic pushed house prices up by 18.0
percent in May 2021 relative to May 2020, based on FHFA's purchase-only
House Price Index (HPI).\28\ Moody's July 2021 forecast of the same HPI
index expects house prices to increase at the annual rates of 4.0, 3.7,
and 1.5 percent in 2022, 2023, and 2024, respectively.
---------------------------------------------------------------------------
\28\ See https://www.fhfa.gov/AboutUs/Reports/Pages/US-House-Price-Index-July-2021.aspx.
---------------------------------------------------------------------------
Taken together, the expected increase in mortgage interest rates
and house prices likely will impact the ability of low- and very low-
income households to purchase homes. Housing affordability, as measured
by Moody's forecast of the National Association of Realtors' (NAR)
Housing Affordability Index (HAI), is projected to decline from an
index value of 166.3 in 2020 to 135.4 in 2024. Lower values of the HAI
imply that affordability has worsened.\29\ The third leg of the housing
affordability stool is the supply of affordable housing, but this had
not kept pace with the growth of the demographic demand even before the
advent of the COVID-19 pandemic.
---------------------------------------------------------------------------
\29\ NAR's HAI is a national index. It measures, nationally,
whether an average family could qualify for a mortgage on a typical
home. A typical home is defined as the national median-priced,
existing single-family home as reported by NAR. An average family is
defined as one earning the median family income. The calculation
assumes a down payment of 20 percent of the home price and a monthly
payment that does not exceed 25 percent of the median family income.
An index value of 100 means that a family earning the median family
income has exactly enough income to qualify for a mortgage on a
median-priced home. An index value above 100 signifies that a family
earning the median family income has more than enough income to
qualify for a mortgage on a median-priced home. A decrease in the
index value over time indicates that housing is becoming less
affordable.
---------------------------------------------------------------------------
In many ways, 2020 was an unusual year as it saw record volumes of
both home purchase and home refinance loans. Low interest rates coupled
with rising house prices created an incentive for many homeowners to
refinance, resulting in a surge in refinance activity in 2020. The
refinance share of overall mortgage originations since 2001 increased
from a low of 28 percent in 2018 to 61 percent in 2020. Moody's
forecasts this share to sharply decline to 42 percent in 2021, and
continue to decline to 39 percent in 2022, and then to 31 percent and
24 percent in 2023 and 2024, respectively.
The economic forecast from Moody's described above is largely
consistent with that provided by other forecasters. According to the
Bureau of Economic Analysis (BEA), real Gross Domestic Product (GDP)
grew by 33.4 percent in the third quarter of 2020, following two
quarters of losses. GDP growth was strong in the subsequent quarters,
including the second quarter of 2021 when it grew by 6.5 percent
according to the advance estimate released by the BEA.\30\ According to
the most recent estimate published by the Congressional Budget Office
(CBO), GDP is projected to grow by 7.4 percent in 2021, after which GDP
growth is projected to decline to 3.1 percent in 2022, and then remain
under 2 percent through 2031.\31\
---------------------------------------------------------------------------
\30\ See https://www.bea.gov/news/2021/gross-domestic-product-second-quarter-2021-advance-estimate-and-annual-update.
\31\ See https://www.cbo.gov/publication/57339.
---------------------------------------------------------------------------
According to the Bureau of Labor Statistics (BLS), the unemployment
rate peaked at 14.8 percent in April 2020, and fell to 5.9 percent in
June 2021.\32\ CBO projects this number to be 4.6 percent in the fourth
quarter of 2021 and that employment will surpass its pre-pandemic level
in mid-2022.
---------------------------------------------------------------------------
\32\ Accessed on 7/29/2021 at https://www.bls.gov/news.release/empsit.nr0.htm.
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FHFA continues to monitor how these changes in the housing market
and recent legislation may impact various segments of the market,
including those targeted by the housing goals.
[[Page 47405]]
Post-model adjustments. While FHFA's models can address and
forecast many of the statutory factors that can make affordability for
single-family homeownership more challenging for low-income and very
low-income households, including increasing interest rates and rising
property values, some factors are not captured in the models. FHFA,
therefore, considers additional factors when selecting the benchmark
level within the model-generated confidence interval for each of the
single-family housing goals. Some of these additional factors may
affect a subset of the market rather than the market as a whole. These
factors include the effectiveness of COVID-19 vaccination efforts and
the path of the virus, as well as other factors that might contribute
to an uneven economic recovery, demographic trends, and the
Enterprises' share of the mortgage market. Variability in these factors
can also have a substantial impact on the ability of the Enterprises to
meet the housing goals. Consequently, as discussed further below, FHFA
will carefully monitor these factors and consider the potential impact
of market shifts or larger trends on the ability of the Enterprises to
achieve the housing goals.
Demographic trends. The impact that specific demographic changes,
like the housing demand patterns of millennials or the growth of
minority households, will have on the housing market is not included
explicitly in the market forecast models. Millennials have made up the
largest share of home purchase mortgage applications for the past five
years.\33\ This generation's share of mortgage purchase applications
rose about 2 to 4 percentage points a year from 33 percent in 2014 to
47 percent 2019, but jumped dramatically in 2020 to 54 percent.\34\
---------------------------------------------------------------------------
\33\ See Pradhan, Archana April 2021. ``Millennials Lead the
Pack for Home Purchases,'' CoreLogic Blog accessed on 5/25/2021 at
https://www.corelogic.com/blog/2021/4/millennials-lead-the-pack-for-home-purchases.aspx.
\34\ Id. (``while half of the increase is consistent with the
natural growth rate seen since 2014, the additional half of the 2020
jump was likely driven by the pandemic. In other words, the increase
was accelerated by record low mortgage interest rate [sic] and
flexibility to work remotely.'').
---------------------------------------------------------------------------
Enterprises' share of the mortgage market. The Enterprises' overall
share of the mortgage market is subject to fluctuation. During the
mortgage market bubble, the Enterprises' share of the market dropped to
about 43 percent in 2005. That share rose to about 65 percent in 2012,
but declined to about 55 percent in 2015. This share remained
relatively stable until 2019, then jumped to 66 percent in 2020, as the
Enterprises continued to acquire mortgages even as other private market
participants stepped back.
[GRAPHIC] [TIFF OMITTED] TP25AU21.000
As shown in Graph 1, over the same time period, the total
government share of the mortgage market (including the Federal Housing
Administration, Department of Veterans Affairs, and Rural Housing
Service) has generally been expanding, albeit with a recent
contraction. In 2015, the total government share accounted for about 30
percent of overall mortgage originations, considerably up from about 5
percent a decade earlier. That share was relatively stable until 2019,
then declined to 22 percent in 2020.
Past Performance of the Enterprises
Table 1 provides the annual performance of both Enterprises on the
single-family housing goals between 2010 and 2020. Throughout this
proposed rule, Enterprise performance data for 2020 is preliminary.
FHFA will
[[Page 47406]]
make final determinations on Enterprise performance later in 2021.
[GRAPHIC] [TIFF OMITTED] TP25AU21.001
B. Proposed Benchmark Levels for the Single-Family Housing Goals for
2022-2024
FHFA is proposing to establish the following benchmark levels for
the single-family housing goals and subgoals for 2022-2024.
1. Low-Income Home Purchase Goal
The low-income home purchase goal is based on the percentage of all
single-family, owner-occupied home purchase mortgages purchased by an
Enterprise that are for low-income families, defined as families with
incomes less than or equal to 80 percent of AMI. The proposed rule
would set the annual low-income home purchase goal benchmark level for
2022 through 2024 at 28 percent.
[[Page 47407]]
[GRAPHIC] [TIFF OMITTED] TP25AU21.002
As shown in Table 2, both Enterprises exceeded both the benchmark
and market levels in 2018 and 2019. Although FHFA will not officially
determine the 2020 housing goals performance of the Enterprises until
later in 2021, both Enterprises exceeded the benchmark level in 2020.
The low-income home purchase market levels have increased steadily
since 2016. FHFA's current model forecasts that the market for this
goal in 2020 will continue to increase and end up between 27 and 31.6
percent. From 2022 through 2024, the proposed goal period, the current
forecast is expected to decline slightly from these peaks and stay
around 26 percent for each of the three years. As noted previously and
in the accompanying market model paper, this forecast is based on the
2019 HMDA data and Moody's forecasts as of July 2021 and will be
updated before the release of the final housing goals rule.
FHFA is proposing a benchmark level for the low-income home
purchase goal of 28 percent, which is above the middle point of the
market forecast but well within the confidence interval for each year.
This proposed benchmark level is significantly higher than the
benchmark level of 24 percent that has been in place each year since
2015. FHFA is proposing a higher benchmark level for this goal in order
to encourage the Enterprises to continue to find ways to support lower
income borrowers without compromising safe and sound lending standards.
FHFA recognizes that there may be challenges to meeting the goal,
particularly in light of the recovery from the global pandemic. FHFA
will continue to monitor the Enterprises in its capacities as regulator
and as conservator, and if FHFA determines that the benchmark level for
the low-income home purchase goal is not feasible for the Enterprises
to achieve in light of market conditions, or for any other reason, FHFA
will take appropriate steps to adjust the benchmark level.
2. Very Low-Income Home Purchase Goal
The very low-income home purchase goal is based on the percentage
of all single-family, owner-occupied home purchase mortgages purchased
by an Enterprise that are for very low-income families, defined as
families with incomes less than or equal to 50 percent of AMI. The
proposed rule would set the annual very low-income home purchase goal
benchmark level for 2022 through 2024 at 7 percent.
[GRAPHIC] [TIFF OMITTED] TP25AU21.003
As shown in Table 3, both Enterprises exceeded the benchmark level
in 2018 and 2019. In 2018, Fannie Mae exceeded both the benchmark and
market levels, and in 2019, Freddie Mac exceeded both the benchmark and
market levels. In 2020, both Fannie Mae and Freddie Mac exceeded the
benchmark levels. FHFA will officially determine the 2020 market
performance of the Enterprises later in 2021.
[[Page 47408]]
Like the low-income home purchase market levels, the very low-
income home purchase market levels have increased steadily since a low
in 2016 of 5.4 percent. FHFA's current model forecasts that the market
for this goal in 2020 will continue to increase and end up between 6.5
and 8.1 percent. From 2022 through 2024, the proposed goal period, the
current forecast is expected to decline slightly from these peaks and
stay between 6.4 and 6.8 percent for each of the three years. This
forecast is based on the latest data available and will be updated
before the release of the final housing goals rule.
FHFA is proposing a benchmark level for the very low-income home
purchase goal of 7 percent, which is close to the market forecast and
well within the confidence interval for each year. This proposed
benchmark level is an increase from the benchmark level of 6 percent
that has been in place each year since 2015. FHFA is proposing a
slightly higher benchmark level in order to encourage the Enterprises
to continue to find ways to support very low-income borrowers without
compromising safe and sound lending standards. FHFA recognizes that
there may be challenges to meeting the goal, particularly in light of
the recovery from the global pandemic. FHFA will continue to monitor
the Enterprises in its capacities as regulator and as conservator, and
if FHFA determines that the benchmark level for the low-income home
purchase goal is not feasible for the Enterprises to achieve in light
of market conditions, or for any other reason, FHFA will take
appropriate steps to adjust the benchmark level.
3. Proposed Area-Based Subgoals
The proposed rule would establish two new area-based subgoals, each
with its own benchmark level. The new minority census tracts subgoal
would specifically assess the Enterprises' performance in minority
areas with respect to loans for families with incomes no greater than
100 percent of AMI. The new low-income census tracts subgoal would
assess the Enterprises' performance in low-income census tracts. The
low-income census tracts subgoal would not include any loans that would
qualify for the minority census tracts subgoal. In other words, the
low-income census tracts subgoal would be limited to: (1) Loans in low-
income census tracts that are not minority census tracts, and (2) loans
to borrowers above 100 percent of AMI in low-income census tracts that
are also minority census tracts. The two proposed subgoals would
replace the existing low-income areas home purchase subgoal and address
some of the issues that FHFA previously identified in the 2018-2020
proposed rule as well as in Question 2 of the recent ANPR (2020)
discussed in Section III.D. above.\35\
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\35\ See https://www.fhfa.gov/SupervisionRegulation/Rules/Pages/Enterprise-Housing-Goals-Advance-Notice-of-Proposed-Rulemaking.aspx.
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The previous subgoal structure allowed the Enterprises to count all
single-family, owner-occupied home purchase mortgages purchased that
were either: (1) For families in low-income areas, defined to include
census tracts with median income less than or equal to 80 percent of
AMI; or (2) for families with incomes less than or equal to AMI who
reside in minority census tracts (defined as census tracts with a
minority population of at least 30 percent and a tract median income of
less than 100 percent of AMI). As a result, borrowers could qualify
under either or both conditions. Over the years, this has meant that
many goal-qualifying loans purchased by the Enterprises were for higher
income families (over 100 percent of AMI) rather than for families at
or below 100 percent of AMI. The proposed rule would modify the
previous structure and refocus Enterprise efforts towards minority
census tracts and families at or below 100 percent of AMI. The new
subgoal structure would require the Enterprises to achieve both of the
new subgoal benchmark levels each year. FHFA will continue to establish
the overall low-income areas housing goal on an annual basis by adding
together the benchmark levels for the minority census tracts subgoal
and the low-income census tracts subgoal, along with the disaster areas
increment determined by FHFA each year.
The proposed rule would establish the benchmark levels for the new
subgoals for 2022-2024 as follows:
----------------------------------------------------------------------------------------------------------------
Proposed
benchmark
Subgoal Criteria level for 2022-
2024 (percent)
----------------------------------------------------------------------------------------------------------------
Minority Census Tracts Subgoal........... Home purchase mortgages on single-family, owner- 10
occupied properties to borrowers with income no
greater than 100 percent of AMI in minority census
tracts.\1\.
Low-Income Census Tracts Subgoal......... (i) Home purchase mortgages on single-family, owner- 4
occupied properties to borrowers (regardless of
income) in low-income census tracts \2\ that are not
minority census tracts, and (ii) home purchase
mortgages on single-family, owner-occupied
properties to borrowers with incomes greater than
100 percent of AMI in low-income census tracts that
are also minority census tracts.
Minority Census Tracts Subgoal........... Home purchase mortgages on single-family, owner- 10
occupied properties to borrowers with income no
greater than 100 percent of AMI in minority census
tracts.\1\.
----------------------------------------------------------------------------------------------------------------
\1\ Census tracts that have a minority population of at least 30 percent and a median income of less than 100
percent of AMI.
\2\ Census tracts where the median income is no greater than 80 percent of AMI.
FHFA recognizes that, in the past, some loans acquired by the
Enterprises were from locations considered both minority and low-income
census tracts and, as a result, would have been counted under either
criterion. The proposed rule would define the new subgoals so that a
loan could not be counted under both of the new subgoals. Under the
proposed rule, for loans purchased from areas that meet the criteria
for both minority and low-income census tracts, the borrower's AMI
would determine under which subgoal the loan would be eligible. If the
borrower's income is less than or equal to 100 percent of AMI, the loan
would be counted towards the minority census tracts subgoal, and if the
borrower's income is above 100 percent of AMI, the loan would be
counted towards the low-income census tracts subgoal. FHFA believes
that requiring the Enterprises to specifically and separately target
loans for families living in minority and low-income census tracts will
result in better and more transparent reporting on both of these
categories.
FHFA will continue to set a benchmark level for the overall low-
[[Page 47409]]
income areas housing goal that will include mortgages to families with
incomes less than or equal to 100 percent of AMI who are located in
federally declared disaster areas.\36\ The proposed rule would define
the low-income areas housing goal to be the sum of (i) the benchmark
level for the new minority census tracts subgoal, (ii) the benchmark
level for the new low-income census tracts subgoal, and (iii) a
disaster areas increment set in accordance with existing practice.
Because the minority census tracts subgoal and the low-income census
tracts subgoal are defined with no overlap between them, the proposed
definition of the overall low-income areas housing goal is exactly
equivalent to the current low-income areas housing goal. The disaster
low-income areas housing goal benchmark level is set annually by FHFA
separately from this rulemaking. Each year, FHFA notifies the
Enterprises by letter of the benchmark level for that year, and this
practice will continue.
---------------------------------------------------------------------------
\36\ Disaster declarations are listed on the FEMA website at
https://www.fema.gov/disasters.
---------------------------------------------------------------------------
The tables below provide recent performance of both Enterprises in
these subgoal areas.
----------------------------------------------------------------------------------------------------------------
Recent performance (percent)
Minority census tracts subgoal -----------------------------------------------
2018 2019 2020
----------------------------------------------------------------------------------------------------------------
Market.......................................................... 9.0 9.2 9.2
Fannie Mae Performance.......................................... 11.0 10.7 10.1
Freddie Mac Performance......................................... 9.0 9.5 9.2
----------------------------------------------------------------------------------------------------------------
Source: FHFA's tabulation of Home Mortgage Disclosure Act (HMDA) and Enterprises' data.
----------------------------------------------------------------------------------------------------------------
Recent performance (percent)
Low-income census tracts subgoal -----------------------------------------------
2018 2019 2020
----------------------------------------------------------------------------------------------------------------
Market.......................................................... 9.1 8.9 8.5
Fannie Mae Performance.......................................... 9.1 8.8 8.3
Freddie Mac Performance......................................... 8.3 8.5 8.0
----------------------------------------------------------------------------------------------------------------
Source: FHFA's tabulation of Home Mortgage Disclosure Act (HMDA) and Enterprises' data.
The proposed rule would establish the benchmark level for the
minority census tracts subgoal at 10 percent. This proposed benchmark
level is slightly higher than the Enterprises' recent performance, when
measured as if the proposed subgoal had been in place. FHFA is
proposing this higher benchmark level to ensure that the Enterprises
are targeting the needs of communities of color and to emphasize the
importance of improving access to credit in these communities.
The proposed rule would establish the benchmark level for the low-
income census tracts subgoal at 4 percent. This proposed benchmark
level is lower than the Enterprises' recent performance, when measured
as if the proposed subgoal had been in place. FHFA is proposing this
lower benchmark level due to concerns about incentivizing purchases of
loans to higher-income borrowers in low-income areas. However, this
proposed benchmark level is intended to encourage the Enterprises to
continue providing critically needed access to credit in low-income
areas.
FHFA believes that the proposed benchmark levels for each of the
new area-based subgoals are feasible and would not be disruptive to the
market. FHFA specifically requests comments on the new proposed subgoal
structure and the proposed benchmark levels.
4. Low-Income Refinancing Goal
The low-income refinancing goal is based on the percentage of all
single-family, owner-occupied refinance mortgages purchased by an
Enterprise that are for low-income families, defined as families with
incomes less than or equal to 80 percent of AMI. The proposed rule
would set the annual low-income refinancing housing goal benchmark
level for 2022 through 2024 at 26 percent.
[[Page 47410]]
[GRAPHIC] [TIFF OMITTED] TP25AU21.004
As shown in Table 4, both Enterprises exceeded the benchmark level
for the low-income refinancing goal in 2018 and 2019. In 2020, Fannie
Mae exceeded the benchmark level, while Freddie Mac did not. Fannie Mae
exceeded the market levels for this goal in 2018 and 2020, but not in
2019. Freddie Mac has trailed the market level each year from 2018
through 2020. As noted, 2020 data reflects FHFA's preliminary
determination of Enterprise performance on this goal.
FHFA is proposing a benchmark level for the low-income refinancing
goal of 26 percent, which is close to the market forecast and well
within the confidence interval for each year. This proposed benchmark
level is an increase from the current benchmark level of 21 percent,
but on the lower end of the range of estimates for 2023 and 2024. FHFA
is proposing a slightly lower benchmark level due to the
unpredictability of future interest rates and refinancing volumes,
which result in greater volatility in the low-income shares for
refinancing mortgages than what is typical for the home purchase
mortgage market. FHFA will continue to monitor the Enterprises in its
capacities as regulator and as conservator, and if FHFA determines that
the benchmark level for the low-income refinancing goal is not
feasible, then FHFA will take appropriate steps to adjust the benchmark
level.
V. Multifamily Housing Goals
A. Factors Considered in Setting the Proposed Multifamily Housing Goal
Levels
In setting the proposed benchmark levels for the multifamily
housing goals, FHFA has considered the statutory factors outlined in
Section 1333(a)(4) of the Safety and Soundness Act. These factors
include:
1. National multifamily mortgage credit needs and the ability of
the Enterprises to provide additional liquidity and stability for the
multifamily mortgage market;
2. The performance and effort of the Enterprises in making mortgage
credit available for multifamily housing in previous years;
3. The size of the multifamily mortgage market for housing
affordable to low-income and very low-income families, including the
size of the multifamily markets for housing of a smaller or limited
size;
4. The ability of the Enterprises to lead the market in making
multifamily mortgage credit available, especially for multifamily
housing affordable to low-income and very low-income families;
5. The availability of public subsidies; and
6. The need to maintain the sound financial condition of the
Enterprises.\37\
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\37\ 12 U.S.C. 4563(a)(4).
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Unlike the single-family housing goals, performance on the
multifamily housing goals is measured solely against a benchmark level
set by FHFA, without any retrospective market measure. The absence of a
retrospective market measure for the multifamily housing goals results,
in part, from the lack of comprehensive data about the multifamily
mortgage market. Unlike the single-family mortgage market, where HMDA
provides a reasonably comprehensive dataset about single-family
mortgage originations each year, the multifamily mortgage market (and
the affordable multifamily mortgage market segment) has no comparable
single, unified source with coverage extending across many years. As a
result, it is difficult to correlate different datasets that rely on
different reporting metrics.
The lack of comprehensive data for the multifamily mortgage market
is even more acute with respect to the segments of the market that are
targeted to low-income families, defined as families with incomes at or
below 80 percent of AMI, and very low-income families, defined as
families with incomes at or below 50 percent of AMI.
Another difference between the single-family and multifamily
housing goals is that while there are separate single-family housing
goals for home purchase and refinancing mortgages, the multifamily
housing goals include all Enterprise multifamily mortgage purchases,
regardless of the purpose of the loan. In addition, unlike the single-
family housing goals, the multifamily housing goals are measured based
on the total number of affordable units in properties financed by
multifamily mortgage loans rather than on a percentage of affordable
units in properties financed by multifamily mortgage loans. The use of
total number of eligible units rather than percentages requires that
FHFA take into account the expected size of the overall multifamily
mortgage market and the affordable share of the market, as well as the
expected volume of the Enterprises' overall multifamily purchases (in
dollar terms) and the affordable share of those purchases.
Methodology. FHFA sets the multifamily benchmark levels by
estimating the minimum number of affordable rental units in multifamily
properties financed by mortgage loans purchased by each Enterprise that
would be needed to ensure a strong focus on affordability by the
Enterprises in the proposed goal period. FHFA achieves this by
considering the required statutory factors, a number of which are
related, as discussed below. For the proposed 2022-2024 goal
[[Page 47411]]
period, FHFA also took into account the PSPA limit on each Enterprise's
multifamily mortgage acquisitions, which is $80 billion over a trailing
52-week period and requires that 50 percent of that amount be mission-
driven mortgages, as determined by FHFA.\38\ Much of the analysis below
describes trends in the overall multifamily mortgage market as they
apply to setting the proposed benchmark levels. FHFA recognizes that
these general trends may not apply to the same extent to all segments
of the multifamily mortgage market.
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\38\ See https://home.treasury.gov/news/press-releases/sm1236.
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Affordability in the multifamily mortgage market. There are several
factors that make it difficult to accurately forecast the affordable
share of the multifamily mortgage market. First, the portion of the
overall multifamily mortgage market that provides housing units
affordable to low-income and very low-income families may vary from
year-to-year. Second, the competition between purchasers of mortgages
within the multifamily mortgage market overall may differ from the
competition within the affordable multifamily mortgage market segment.
Finally, the volume for the affordable multifamily mortgage market
segment also will depend on the availability of affordable housing
subsidies.
FHFA determines affordability based on a family's rent and utility
expenses not exceeding 30 percent of AMI.\39\ Using this measure,
affordability for families living in rental units has decreased in
recent years for many families. According to the Joint Center for
Housing Studies (JCHS), in its 2020 State of the Nation's Housing
Report, prior to 2020, the composition of housing stock had already
negatively affected affordability. For example, the report stated that
while housing stock grew by 7.5 million units between 2004 and 2019,
most of these additions were in single-family rentals or properties
with 20 units or higher, whereas the number of units in two- to four-
unit buildings declined by 38,000 units. The units in larger
multifamily buildings tend to have higher median rents.\40\ The supply
of apartments with rents of $600 or lower declined by 2.5 million
between 2004 and 2019, unlike apartments with rents of over $1,000,
which increased by 10.4 million units within the same time period,
according to the JCHS report.
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\39\ See 12 U.S.C. 4563(c).
\40\ ``The State of the Nation's Housing 2020,'' Joint Center
for Housing Studies of Harvard University, December 2020, p. 32,
available at https://www.jchs.harvard.edu/sites/default/files/reports/files/Harvard_JCHS_The_State_of_the_Nations_Housing_2020_Report_Revised_120720.pdf.
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The JCHS study of the rental market noted the growing presence of
cost-burdened renters in certain income segments. Although, in 2019,
the share of tenants that paid more than 30 percent of household income
for rental housing decreased, at close to 50 percent, that number was
still high. Specifically, the share of cost-burdened households with
incomes between $25,000 and $74,999 increased between 2011 and
2019.\41\ This is significant because the housing goals statute defines
affordability at the 30 percent threshold.\42\
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\41\ ``The State of the Nation's Housing 2020,'' Joint Center
for Housing Studies of Harvard University, December 2020, p. 1,
available at https://www.jchs.harvard.edu/sites/default/files/reports/files/Harvard_JCHS_The_State_of_the_Nations_Housing_2020_Report_Revised_120720.pdf.
\42\ See 12 U.S.C. 4563(c).
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The supply gap in affordable units combined with the prevalence of
cost-burdened renters has led to an erosion of affordability, with
fewer units qualifying for the housing goals. This affordability gap is
also reflected in the falling share of the low-income multifamily units
backing loans purchased by the Enterprises. While 77 percent of the
multifamily units financed by mortgages purchased by Fannie Mae in 2011
were low-income, that share dropped steadily in the intervening years
to 64 percent in 2017, rising to 69 percent in 2020. At Freddie Mac,
the low-income share also peaked in 2011 and 2012 at 79 percent, and
decreased gradually to 65 percent in 2017, rising to 71 percent in
2020.
Financing for affordable multifamily buildings--particularly those
that are affordable to very low-income families--often uses an array of
state and federal housing subsidies, such as low-income housing tax
credits (LIHTCs), tax-exempt bonds, Section 8 rental assistance, or
soft subordinate financing.\43\ Investor interest in tax credit equity
projects of all types and in all markets has been strong in recent
years, especially in markets in which bank investors are seeking to
meet Community Reinvestment Act (CRA) goals. Consequently, there should
continue to be opportunities in the multifamily mortgage market to
provide permanent financing for properties with LIHTCs during the 2022-
2024 period. Additionally, there should be opportunities for market
participants, including the Enterprises, to purchase mortgages that
finance the preservation of existing affordable housing units
(especially for restructurings of older properties that reach the end
of their initial 15-year LIHTC compliance periods and for refinancing
properties with expiring Section 8 Housing Assistance Payment
contracts).
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\43\ LIHTCs are a supply-side subsidy created under the Tax
Reform Act of 1986 and is the main source of new affordable housing
construction in the United States. LIHTCs are used for the
acquisition, rehabilitation, and/or new construction of rental
housing for low-income households. LIHTCs have facilitated the
creation or rehabilitation of approximately 2.4 million affordable
units since inception of the program in 1986.
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Availability of public subsidies. Multifamily housing assistance is
primarily available in two forms--demand-side subsidies which either
directly assist low-income tenants (e.g., Section 8 vouchers) or
provide project-based rental assistance (Section 8 contracts), and
supply-side subsidies which support the creation and preservation of
affordable housing (e.g., public housing and LIHTCs). The availability
of public subsidies impacts the overall affordable multifamily housing
market, and significant changes to historic programs could impact the
ability of the Enterprises to meet the housing goals. The Enterprises
also play a role in providing liquidity to facilitate the preservation
of public subsidies, like expiring Section 8 Housing Assistance Payment
contracts and LIHTC properties reaching the end of the use restricted
affordability period.
The need for public subsidies persists as the number of cost-
burdened renters remains high, at over 20 million renter households in
2019.\44\ The Center for Budget Policy Priorities estimates that only
one in four households eligible for federal housing assistance
currently receives it.\45\
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\44\ The State of the Nation's Housing 2020,'' Joint Center for
Housing Studies of Harvard University, December 2020, p. 6,
available at https://www.jchs.harvard.edu/sites/default/files/reports/files/Harvard_JCHS_The_State_of_the_Nations_Housing_2020_Report_Revised_120720.pdf.
\45\ See https://www.cbpp.org/research/housing/more-housing-vouchers-most-important-step-to-help-more-people-afford-stable-homes.
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Certain public subsidies have been provided since March 2020 to
help the affordable housing sector and low-income households during the
pandemic. The CARES Act provided supplemental unemployment benefits to
help people pay their rent, but those benefits expired on July 31,
2020. In December 2020, the Consolidated Appropriations Act, 2021
reinstated supplemental unemployment benefits through March 14, 2021.
In March, the American Rescue Plan Act of 2021 extended those benefits
through September 6, 2021.
[[Page 47412]]
Multifamily mortgage market. FHFA's consideration of the
multifamily mortgage market addresses the size of and competition
within the multifamily mortgage market, as well as the subset of the
multifamily mortgage market affordable to low-income and very low-
income families. The pandemic has impacted the multifamily affordable
housing market and renters across the country. In February 2021, the
Mortgage Bankers Association (MBA) estimated that multifamily mortgage
originations declined by 17 percent in 2020 relative to the previous
year. The MBA also anticipated a partial recovery in 2021, with total
multifamily mortgage originations projected to be $323 billion, a 7
percent increase from 2020 but still below the 2019 level of $364
billion.\46\
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\46\ See https://www.mba.org/2021-press-releases/february/mba-forecast-commercial/multifamily-lending-to-increase-11-percent-to-486-billion-in-2021; https://newslink.mba.org/cmf-newslinks/2020/november/mba-commercial-multifamily-newslink-nov-12-2020/mba-forecast-2020-commercial-multifamily-lending-down-34-from-2019-record-volumes/.
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In addition, MBA's February forecast anticipated an economic
rebound in 2021 that should bring stability to the market and projected
that multifamily mortgage lending should almost fully rebound in 2022
to $358 billion, just shy of the 2019 level. Despite that overall
expected rebound, recent multifamily housing trends point to likely
prolonged and diverse impacts in subsegments. According to the National
Multifamily Housing Council's tabulation of American Community Survey
microdata, in 2019 about 45.4 percent of renter households (20 million
households) lived in multifamily properties, defined as structures with
five or more rental units with the remaining renter households living
in 1-4 unit single-family structures.\47\ Nationally, on a year-over-
year basis, rent growth slowed during the pandemic to 0.3 percent in
2020, according to CoStar data. Growth accelerated in the first half of
the year, with the second quarter of 2021 growing by 7.1 percent
relative to one year earlier. Vacancy rates rose during the pandemic
but have begun to decline in 2021.
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\47\ Accessed on 5/18/2021 at https://www.nmhc.org/research-insight/quick-facts-figures/quick-facts-resident-demographics/household-characteristics.
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Role of the Enterprises. In setting the proposed multifamily
housing goal benchmark levels, FHFA has considered the ability of the
Enterprises to lead the market in making multifamily mortgage credit
available. The Enterprises' share of the overall multifamily mortgage
origination market increased in the years immediately following the
financial crisis, but their share has declined more recently in
response to growing private sector participation. The Enterprises'
share of the multifamily mortgage origination market was approximately
70 percent in 2008 and 2009, compared to 38 percent in 2015.\48\ The
total share has remained at around 40 percent since 2015, due for the
most part to the cap imposed by FHFA in its role as conservator under
the Conservatorship Scorecard, with the exception of 2017 and 2020 when
that share was around 50 percent.
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\48\ Urban Institute, ``The GSEs' Shrinking Role in the
Multifamily Market,'' April 2015, pg. 4: https://www.urban.org/sites/default/files/publication/48986/2000174-The-GSEs-Shrinking-Role-in-the-Multifamily-Market.pdf.
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FHFA and the Enterprises have also taken numerous actions to
support the multifamily housing market and provide relief to renters
since March 2020. For example, on March 23, 2020, FHFA and the
Enterprises announced that forbearance would be available to
Enterprise-backed multifamily property owners on the condition that
they suspend eviction of tenants struggling to pay rent due to the
pandemic.\49\ On June 29, 2020, FHFA announced that the Enterprises
would offer extended forbearance agreements for multifamily property
owners with existing forbearance agreements for up to three months, for
a total forbearance of up to six months.\50\ Under the terms of the
Enterprise forbearance agreements, while mortgage payments are in
forbearance, the landlord must suspend all evictions for renters unable
to pay rent and offer other protections for renters. This forbearance
program was extended several times, with the most recent extension
through September 30, 2021.51 52 53 On May 4, 2020, the
Enterprises published online multifamily property lookup tools so that
tenants could determine if the multifamily property in which they
reside has an Enterprise-backed mortgage and fell under the CARES Act's
120-day eviction moratorium. On August 6, 2020, FHFA announced that
multifamily property owners in new forbearance agreements must inform
tenants in writing about tenant protections, and that the Enterprises
are improving their online multifamily property loan lookup tools.
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\49\ See https://www.fhfa.gov/Media/PublicAffairs/Pages/FHFA-Moves-to-Provide-Eviction-Suspension-Relief-for-Renters-in-Multifamily-Properties.aspx.
\50\ See https://www.fhfa.gov/Media/PublicAffairs/Pages/FHFA-Provides-Tenant-Protections.aspx.
\51\ See https://www.fhfa.gov/Media/PublicAffairs/Pages/FHFA-Extends-COVID-19-Multifamily-Forbearance-through-March-31-2021.aspx.
\52\ See https://www.fhfa.gov/Media/PublicAffairs/Pages/FHFA-Extends-COVID-19-Multifamily-Forbearance-through-June-30-2021.aspx.
\53\ See https://www.fhfa.gov/Media/PublicAffairs/Pages/FHFA-Extends-COVID-19-Multifamily-Forbearance-through-September-30-2021.aspx.
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FHFA expects the Enterprises to continue to demonstrate leadership
in multifamily affordable housing lending by providing liquidity and
supporting housing for tenants at different income levels in various
geographic markets and in various market segments.
Conservatorship limits on multifamily mortgage purchases
(Conservatorship Scorecard cap) and other factors. Beginning in 2015,
as conservator for the Enterprises, FHFA has set a yearly cap under the
Conservatorship Scorecard that limits the total unpaid principal
balance of multifamily loans that each Enterprise may purchase. The
multifamily mortgage purchase cap furthers FHFA's conservatorship goals
of maintaining the presence of the Enterprises as a backstop for the
multifamily finance market while not impeding the participation of
private capital. These targets for the Enterprise purchase share of the
multifamily origination market reflect what is generally considered by
FHFA as an appropriate market share for the Enterprises during normal
market conditions. To encourage the Enterprises to participate in
purchasing loans financing properties in underserved multifamily market
segments, from 2015 through 2019, FHFA excluded several categories of
multifamily business from the cap.
FHFA revised the cap structure in September 2019 by placing a cap
on all multifamily loan purchases (no exclusions) and requiring a
minimum amount of this capped amount to be for affordable and
underserved market segments. The cap was set at $100 billion for each
Enterprise, a combined total of $200 billion, for the five-quarter
period from the fourth quarter of 2019 through the fourth quarter of
2020. In November 2020, FHFA announced the new multifamily loan
purchase cap for the 2021 calendar year of $70 billion for each
Enterprise, a combined total of $140 billion.\54\
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\54\ FHFA Announces 2021 Multifamily Loan Purchase Caps for
Fannie Mae and Freddie Mac, November 17, 2020: https://www.fhfa.gov/Media/PublicAffairs/Pages/FHFA-Announces-2021-MF-Loan-Purchase-Caps-for-Fannie-and-Freddie.aspx.
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The Conservatorship Scorecard cap applies to the entire multifamily
business for each Enterprise without any exclusions. To ensure a strong
focus on affordable housing and underserved markets, the 2021
Conservatorship Scorecard requires that at least 50 percent of each
Enterprises' multifamily
[[Page 47413]]
loan purchases be mission-driven, affordable housing. Multifamily loans
considered to be mission-driven, affordable include: Subsidized/
assisted affordable housing; manufactured housing communities;
affordable units in small multifamily properties; affordable properties
in rural areas; affordable units in seniors housing assisted living
properties; and market rate units affordable to residents at or below
80 percent of AMI. Furthermore, the 2021 Conservatorship Scorecard
requires that a minimum of 20 percent of Enterprise multifamily loan
purchases be affordable to residents at 60 percent of AMI or below.
Multifamily loan purchases that meet the minimum 20 percent requirement
may also count as loan purchases that meet the minimum 50 percent
requirement.55 56
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\55\ Appendix A: Multifamily Definitions to the 2021 Scorecard,
November 17, 2020: https://www.fhfa.gov/Media/PublicAffairs/PublicAffairsDocuments/2021-Appendix-A.pdf.
\56\ 2021 Scorecard for Fannie Mae, Freddie Mac, and Common
Securitization Solutions, February 2021: https://www.fhfa.gov/AboutUs/Reports/ReportDocuments/2021-Scorecard.pdf.
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In addition to the Conservatorship Scorecard cap, FHFA also
incorporated the January 2021 PSPA requirements when determining
appropriate multifamily benchmarks for 2022-2024. These requirements
include a PSPA cap of $80 billion over the prior 52-week period, which
is greater than the current Conservatorship Scorecard cap for 2021 and
places an upper bound on Enterprise share. FHFA will continue to review
its estimates of market size and mission-driven requirements throughout
the year. FHFA may take appropriate action to adjust the multifamily
housing goals benchmark levels should changes to the Conservatorship
Scorecard cap, the PSPAs, or other market conditions warrant an
adjustment, whether in 2021 or in future years.
Maintaining the sound financial condition of the Enterprises. In
setting the proposed multifamily housing goals benchmark levels, FHFA
must balance the role that the Enterprises play in providing liquidity
and supporting various multifamily mortgage market segments with the
need to maintain the Enterprises in sound and solvent financial
condition. The Enterprises have served as a stabilizing force in the
multifamily mortgage market. During the conservatorship period, the
Enterprises' portfolios of loans on multifamily affordable housing
properties have experienced low levels of delinquency and default,
similar to the performance of multifamily loans on market rate
properties. The Enterprises, therefore, should be able to sustain or
increase their volume of purchases of loans on affordable multifamily
housing properties without impacting the Enterprises' safety and
soundness or negatively affecting the performance of their total
mortgage loan portfolios.
FHFA continues to monitor the activities of the Enterprises in
FHFA's capacity as safety and soundness regulator and as conservator.
If necessary, FHFA will make appropriate changes in the multifamily
housing goals benchmark levels to ensure the Enterprises' continued
safety and soundness.
B. Proposed Multifamily Housing Goals Benchmark Levels
Based on FHFA's consideration of the statutory factors described
above and the performance of the Enterprises described in this section,
the proposed rule would establish benchmark levels for the multifamily
housing goals for the Enterprises, as further discussed below. Before
finalizing the benchmark levels for the low-income and very low-income
multifamily goals in a final rule, FHFA will review any additional data
that becomes available about the multifamily housing goals performance
of the Enterprises through 2020, any additional information about the
Conservatorship Scorecard cap for 2022 that is available, and any other
information about the multifamily mortgage market or other factors,
along with any comments on the proposed multifamily housing goals
benchmark levels.
1. Multifamily Low-Income Housing Goal
The multifamily low-income housing goal is based on the total
number of rental units in multifamily properties financed by mortgages
purchased by the Enterprises that are affordable to low-income
families, defined as families with incomes less than or equal to 80
percent of AMI.
Both Enterprises have exceeded the low-income multifamily housing
goal by significant margins in recent years. Taking into account the
Conservator Scorecard cap and PSPA limits, as well as the multifamily
market conditions described above, FHFA is proposing to raise the
multifamily low-income housing goal benchmark level to 415,000 units
for 2022-2024. This proposed benchmark level would be a significant
increase over the benchmark level that has been in place since 2018.
FHFA believes that this proposed increase is appropriate and achievable
for the Enterprise in light of the past performance of the Enterprises
on this housing goal and the current loan purchase volumes that would
be permitted for the Enterprises under the applicable Conservatorship
Scorecard cap and PSPA limits.
[[Page 47414]]
[GRAPHIC] [TIFF OMITTED] TP25AU21.005
2. Multifamily Very Low-Income Housing Subgoal
The multifamily very low-income housing subgoal includes units
affordable to very low-income families, defined as families with
incomes no greater than 50 percent of AMI.
Both Enterprises have exceeded the multifamily very low-income
housing subgoal by significant margins in recent years. Taking into
account the Conservator Scorecard cap and PSPA limits, as well as the
multifamily mortgage market conditions described above, FHFA is
proposing to raise the multifamily low-income housing subgoal benchmark
level to 88,000 units for 2022-2024. This proposed benchmark level
would be a significant increase over the benchmark level that has been
in place since 2018. FHFA believes that this proposed increase is
appropriate and achievable for the Enterprise in light of the past
performance of the Enterprises on this housing subgoal and the current
loan purchase volumes that would be permitted for the Enterprises under
the applicable Conservatorship Scorecard cap and PSPA limits.
[GRAPHIC] [TIFF OMITTED] TP25AU21.006
3. Small Multifamily Low-Income Housing Subgoal
The Enterprise housing goals regulation defines a small multifamily
property as a property with 5 to 50 units. The small multifamily low-
income housing subgoal is based on the total number of units in small
multifamily properties financed by mortgages purchased by the
Enterprises that are affordable to low-income families, defined as
families with incomes less than or equal to 80 percent of AMI.
This subgoal was created in the 2015-2017 housing goals rulemaking,
and initially set at 6,000 units in 2015, gradually increasing to
10,000 units in 2017. Monitoring trends in this multifamily market
segment is challenging, and there is evidence that small multifamily
properties were hit particularly hard in 2020 as a result of the
pandemic. FHFA is proposing to raise the benchmark level for this
subgoal to 23,000 units for 2022-2024. This proposed benchmark level
would be a significant increase over the benchmark level that has been
in place since 2018. FHFA believes that this proposed increase is
appropriate and achievable for the Enterprise in light of the past
performance of the Enterprises on this housing subgoal and the current
loan purchase volumes that would be permitted for the Enterprises under
the applicable Conservatorship Scorecard cap and PSPA limits.
[[Page 47415]]
[GRAPHIC] [TIFF OMITTED] TP25AU21.007
VI. Section-by-Section Analysis of Other Proposed Changes
The proposed rule would also revise other provisions of the
Enterprise housing goals regulation, as discussed below. These proposed
changes are non-substantive technical changes intended to conform the
housing goals regulation text to FHFA's established practices and
procedures in implementing the housing goals.
FHFA welcomes comments on these technical changes and any other
technical changes or corrections that are necessary. FHFA may include
additional technical changes or corrections in its final rule based on
comments received.
A. Definition of ``Designated Disaster Area''--Proposed Sec. 1282.1
Section 1282.1 of the current Enterprise housing goals regulation
defines ``designated disaster area'' as ``any census tract that is
located in a county designated by the Federal Government as adversely
affected by a declared major disaster administered by FEMA, where
individual assistance payments were authorized by FEMA.'' While this
definition accurately reflects the types of disasters that FHFA counts
for purposes of calculating the disaster areas increment for the low-
income areas housing goal, the definition does not reflect FHFA's
longstanding practice regarding the types of assistance covered. The
proposed rule would revise the definition of ``designated disaster
area'' to refer to major disasters ``where housing assistance payments
were authorized by FEMA.''
This proposed change to the definition of ``designated disaster
area'' would be consistent with longstanding FHFA practice. Each year,
FHFA identifies the areas that are considered ``designated disaster
areas'' for purposes of the Enterprise housing goals in a dataset
published on FHFA's website that can be used in conjunction with other
information to determine whether mortgages purchased by an Enterprise
would meet the criteria for the low-income areas housing goal.\57\ In
practice, FHFA's identification of ``designated disaster areas'' for
purposes of the Enterprise housing goals has been limited to areas that
the Federal Emergency Management Agency (FEMA) has identified as
eligible for ``housing assistance'' under FEMA's ``Individual and
Households Program'' (IHP). ``Individual assistance'' is an umbrella
term used by FEMA that encompasses a variety of types of assistance in
addition to housing assistance under FEMA's IHP. ``Individual
assistance'' includes other types of assistance under FEMA's IHP, as
well as disaster case management, disaster legal services, and disaster
unemployment assistance, among others.\58\ If FHFA included all areas
for which individual assistance payments were authorized by FEMA, it
would result in areas being included as ``designated disaster areas''
where the relevant disaster did not have any significant direct impact
on the physical housing stock. For example, if FHFA had included all
areas that FEMA identified as eligible for ``individual assistance'' in
2020, every census tract in the United States would have been included
as a ``designated disaster area'' for purposes of the housing goals in
2020 due to assistance related to the COVID-19 pandemic. That outcome
would have been inconsistent with the purposes of the low-income areas
housing goal and with FHFA's longstanding practice. To avoid this
outcome and to clarify the regulation with respect to FHFA's existing
practice, the proposed rule would revise the definition of ``designated
disaster area'' for purposes of the low-income areas housing goal to
refer specifically to ``housing assistance'' rather than to the broader
category of ``individual assistance.''
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\57\ These datasets can be accessed at: https://www.fhfa.gov/DataTools/Downloads/Pages/Underserved-Areas-Data.aspx.
\58\ Individual Assistance Program and Policy Guide (IAPPG),
Version 1.1, FP 104-009-03, May 2021, page 4, accessible at https://www.fema.gov/assistance/individual/program-policy-guide.
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B. Newly Available Data--Proposed Removal of Sec. 1282.15(i)
Section 1282.15(i) of the current Enterprise housing goals
regulation provides that an Enterprise is not required to use new data
related to housing goals treatment of mortgages it purchases until the
start of the quarter after it receives the data. This provision was
adopted originally by the U.S. Department of Housing and Urban
Development (HUD) in its 1995 final rule establishing housing goals
under the Safety and Soundness Act.\59\ However, this provision does
not reflect FHFA's longstanding practice of independently calculating
each Enterprise's housing goals performance on the basis of data
provided to FHFA by the Enterprise. For example, FHFA determines the
AMIs applicable to each census tract on an annual basis and provides
that information to the Enterprises in the first half of each year.
However, in calculating Enterprise housing goals performance for that
year, FHFA applies the new data to all mortgage purchases in that year.
Accordingly, the proposed rule would remove Sec. 1282.15(i) to avoid
any implication that the housing goals regulation requires a particular
method of calculating or applying affordability data such as AMIs. This
proposed change is non-substantive and does not reflect or require any
change in any of
[[Page 47416]]
the processes or standards that FHFA uses to determine Enterprise
housing goals performance each year.
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\59\ See 60 FR 61846 (Dec. 1, 1995). Prior to the creation of
FHFA in 2008, HUD was responsible for mission oversight of Fannie
Mae and Freddie Mac, including the affordable housing goals.
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C. Loan Modifications--Proposed Removal of Sec. 1282.16(c)(10)
Section 1282.16(c)(10) of the current Enterprise housing goals
regulation provides that the permanent modification of a mortgage under
the Home Affordable Modification Program (HAMP) is counted as a
refinancing for purposes of the low-income refinancing goal. Permanent
loan modifications under HAMP are the only type of loan modification
eligible for counting for purposes of the low-income refinancing goal.
The HAMP modification program expired at the end of 2016. The proposed
rule would remove Sec. 1282.16(c)(10) from the housing goals
regulation as it is no longer necessary in light of the expiration of
the HAMP modification program.
VII. Paperwork Reduction Act
The proposed rule would not contain any information collection
requirement that would require the approval of the Office of Management
and Budget (OMB) under the Paperwork Reduction Act (44 U.S.C. 3501 et
seq.). Therefore, FHFA has not submitted the proposed rule to OMB for
review.
VIII. Regulatory Flexibility Act
The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) requires that
a regulation that has a significant economic impact on a substantial
number of small entities, small businesses, or small organizations must
include an initial regulatory flexibility analysis describing the
regulation's impact on small entities. Such an analysis need not be
undertaken if the agency has certified that the regulation will not
have a significant economic impact on a substantial number of small
entities. 5 U.S.C. 605(b). FHFA has considered the impact of the
proposed rule under the Regulatory Flexibility Act. FHFA certifies that
the proposed rule, if adopted as a final rule, will not have a
significant economic impact on a substantial number of small entities
because the rule applies to Fannie Mae and Freddie Mac, which are not
small entities for purposes of the Regulatory Flexibility Act.
List of Subjects in 12 CFR Part 1282
Mortgages, Reporting and recordkeeping requirements.
Authority and Issuance
For the reasons stated in the Preamble, under the authority of 12
U.S.C. 4511, 4513, and 4526, FHFA proposes to amend part 1282 of Title
12 of the Code of Federal Regulations as follows:
CHAPTER XII--FEDERAL HOUSING FINANCE AGENCY
SUBCHAPTER E--HOUSING GOALS AND MISSION
PART 1282--ENTERPRISE HOUSING GOALS AND MISSION
0
1. The authority citation for part 1282 continues to read as follows:
Authority: 12 U.S.C. 4501, 4502, 4511, 4513, 4526, 4561-4566.
0
2. Amend Sec. 1282.1 by revising the definition of ``Designated
disaster area'' to read as follows:
Sec. 1282.1 Definitions.
* * * * *
Designated disaster area means any census tract that is located in
a county designated by the Federal Government as adversely affected by
a declared major disaster administered by FEMA, where housing
assistance payments were authorized by FEMA. A census tract shall be
treated as a ``designated disaster area'' for purposes of this part
beginning on the January 1 after the FEMA designation of the county, or
such earlier date as determined by FHFA, and continuing through
December 31 of the third full calendar year following the FEMA
designation. This time period may be adjusted for a particular disaster
area by notice from FHFA to the Enterprises.
* * * * *
0
3. Amend Sec. 1282.12 as follows:
0
a. Revise paragraphs (c)(2), (d)(2), (e)(2), and (f);
0
b. Redesignate paragraph (g) as paragraph (h);
0
c. Add new paragraph (g); and
0
d. Revise newly redesignated paragraph (h)(2). The revisions and
additions read as follows:
Sec. 1282.12 Single-family housing goals.
* * * * *
(c) * * *
(2) The benchmark level, which for 2022, 2023, and 2024 shall be 28
percent of the total number of purchase money mortgages purchased by
that Enterprise in each year that finance owner-occupied single-family
properties.
(d) * * *
(2) The benchmark level, which for 2022, 2023, and 2024 shall be 7
percent of the total number of purchase money mortgages purchased by
that Enterprise in each year that finance owner-occupied single-family
properties.
(e) * * *
(2) A benchmark level which shall be set annually by FHFA notice
based on the sum of the benchmark levels for the low-income census
tracts housing subgoal and the minority census tracts housing subgoal,
plus an adjustment factor reflecting the additional incremental share
of mortgages for moderate-income families in designated disaster areas
in the most recent year for which such data is available.
(f) Low-income census tracts housing subgoal. The percentage share
of each Enterprise's total purchases of purchase money mortgages on
owner-occupied single-family housing that--
(1) Consists of:
(i) Mortgages in low-income census tracts that are not minority
census tracts; and
(ii) Mortgages for families with incomes in excess of 100 percent
of the area median income in low-income census tracts that are also
minority census tracts;
(2) Shall meet or exceed either:
(i) The share of such mortgages in the market as defined in
paragraph (b) of this section in each year; or
(ii) The benchmark level, which for 2022, 2023, and 2024 shall be 4
percent of the total number of purchase money mortgages purchased by
that Enterprise in each year that finance owner-occupied single-family
properties.
(g) Minority census tracts housing subgoal. The percentage share of
each Enterprise's total purchases of purchase money mortgages on owner-
occupied single-family housing that consists of mortgages for moderate-
income families in minority census tracts shall meet or exceed either:
(1) The share of such mortgages in the market as defined in
paragraph (b) of this section in each year; or
(2) The benchmark level, which for 2022, 2023, and 2024 shall be 10
percent of the total number of purchase money mortgages purchased by
that Enterprise in each year that finance owner-occupied single-family
properties.
(h) * * *
(2) The benchmark level, which for 2022, 2023, and 2024 shall be 26
percent of the total number of refinancing mortgages purchased by that
Enterprise in each year that finance owner-occupied single-family
properties.
0
4. Amend Sec. 1282.13 by revising paragraphs (b) through (d) to read
as follows:
Sec. 1282.13 Multifamily special affordable housing goal and
subgoals.
* * * * *
(b) Multifamily low-income housing goal. The benchmark level for
each
[[Page 47417]]
Enterprise's purchases of mortgages on multifamily residential housing
affordable to low-income families shall be at least 415,000 dwelling
units affordable to low-income families in multifamily residential
housing financed by mortgages purchased by the Enterprise in each year
for 2022, 2023, and 2024.
(c) Multifamily very low-income housing subgoal. The benchmark
level for each Enterprise's purchases of mortgages on multifamily
residential housing affordable to very low-income families shall be at
least 88,000 dwelling units affordable to very low-income families in
multifamily residential housing financed by mortgages purchased by the
Enterprise in each year for 2022, 2023, and 2024.
(d) Small multifamily low-income housing subgoal. The benchmark
level for each Enterprise's purchases of mortgages on small multifamily
properties affordable to low-income families shall be at least 23,000
dwelling units affordable to low-income families in small multifamily
properties financed by mortgages purchased by the Enterprise in each
year for 2022, 2023, and 2024.
Sec. 1282.15 [Amended]
0
5. Amend Sec. 1282.15 by removing paragraph (i).
Sec. 1282.16 [Amended]
0
6. Amend Sec. 1282.16 by removing and reserving paragraph (c)(10).
Sandra L. Thompson,
Acting Director, Federal Housing Finance Agency.
[FR Doc. 2021-18008 Filed 8-24-21; 8:45 am]
BILLING CODE 8070-01-P
