FHFA Establishes New Housing Goals for GSEs

By: Jann Swanson •

The Federal Housing Finance Agency (FHFA), conservator of Freddie Mac and Fannie Mae (the Enterprises) has established its final housing goals for the Enterprises in 2010-2011.  FHFA is required by the Housing and Economic Recovery Act of 2008 (HERA) to set such goals for targeted segments of the mortgage market

The new rules establish three goals for single-family, owner-occupied home purchases; one for low-income families, another for very low-income families, and a third for families living in geographical areas with lower-income populations, areas with high concentrations of minority residents, or federal declared disaster areas.  The goal for disaster areas contains a sub-goal to ensure that the needs of lower-income and minority areas are addressed.  A goal has also been established for those low-income families who are refinancing single-family, owner-occupied mortgages.

The preliminary goals were published for comment on February 26.  The permanent goals did not change for low-income and very low-income home purchase mortgages; however, the final goal for low-income refinances has been adjusted downward, reflecting recent market conditions.

The benchmarks for the four single-family goals are expressed as minimum goal-qualifying mortgage shares of home purchase or refinance mortgages acquired by the Enterprises.  They are:

  • 27 percent for the low-income home purchase goal;
  • 8 percent for the very low-income family home purchase goal;
  • A percentage to be set annually by FHFA for the low-income/high minority/disaster areas home purchase goal (with a sub-goal of 13 percent to measure acquisitions in low-income/high minority areas only); and
  • 21 percent for the low-income family refinance goal.

HERA requires that FHFA consider seven factors in setting the single-family housing goals:

  • national housing needs;
  • economic, housing and demographic conditions including expected market developments;
  • the performance and effort of the Enterprises toward achieving the housing goals in previous years;
  • the ability of the Enterprise to lead the industry in making mortgage credit available;
  • such other reliable mortgage data as may be available;
  • the size of the purchase money conventional mortgage market or refinance market serving each of the types of families described, relative to the size of the overall purchase and refinance markets;
  • The need to maintain the sound financial condition of the Enterprises.

The final multifamily goals reflect the current market conditions and are lower than those proposed initially:

  • Fannie Mae's goal is to acquire mortgages that finance at least 177,750 low-income and 42,750 very low-income rental units.
  • Freddie Mac's goal is to acquire mortgages that finance at least 161,250 low-income and 21,000 very low-income rental units.
  • The Enterprises must also report on their acquisition of mortgages involving low-income units in small (5 to 50 unit) properties.

As was the case with the proposed rule, the final goals prohibit credit for purchase of mortgages in private-label securities including commercial mortgage-backed securities, and revise the counting treatment for loan modifications by allowing credit under the low-income refinance goal for permanent Making Home Affordable loan modifications.

FHFA said it expects the Enterprises to continue to fulfill their core statutory purposes including their support for affordable housing but does not intend for that they should undertake uneconomic or high-risk activities in support of the goals.