FHFA Establishes New Housing Goals for GSEs

The Federal HousingrnFinance Agency (FHFA), conservator of Freddie Mac and Fannie Mae (thernEnterprises) has established its final housing goals for the Enterprises inrn2010-2011.  FHFA is required by thernHousing and Economic Recovery Act of 2008 (HERA) to set such goals for targetedrnsegments of the mortgage market</p

The new rulesrnestablish three goals for single-family, owner-occupied home purchases; one forrnlow-income families, another for very low-income families, and a third for familiesrnliving in geographical areas with lower-income populations, areas with highrnconcentrations of minority residents, or federal declared disaster areas.  The goal for disaster areas contains arnsub-goal to ensure that the needs of lower-income and minority areas arernaddressed.  A goal has also beenrnestablished for those low-income families who are refinancing single-family,rnowner-occupied mortgages.</p

The preliminaryrngoals were published for comment on February 26.  The permanent goals did not change forrnlow-income and very low-income home purchase mortgages; however, the final goalrnfor low-income refinances has been adjusted downward, reflecting recent marketrnconditions.</p

The benchmarks forrnthe four single-family goals are expressed as minimum goal-qualifying mortgagernshares of home purchase or refinance mortgages acquired by the Enterprises.  They are:</p<ul class="unIndentedList"<li27 percent for the low-income home purchaserngoal;</li<li8 percent for the very low-income family homernpurchase goal;</li<liA percentage to be set annually by FHFA for thernlow-income/high minority/disaster areas home purchase goal (with a sub-goal ofrn13 percent to measure acquisitions in low-income/high minority areas only); and</li<li21 percent for the low-income family refinancerngoal.</li</ul

HERA requires thatrnFHFA consider seven factors in setting the single-family housing goals:</p<ul class="unIndentedList"<linational housing needs;</li<lieconomic, housing and demographic conditionsrnincluding expected market developments;</li<lithe performance and effort of the Enterprisesrntoward achieving the housing goals in previous years;</li<lithe ability of the Enterprise to lead thernindustry in making mortgage credit available;</li<lisuch other reliable mortgage data as may bernavailable;</li<lithe size of the purchase money conventionalrnmortgage market or refinance market serving each of the types of familiesrndescribed, relative to the size of the overall purchase and refinance markets;</li<liThe need to maintain the sound financialrncondition of the Enterprises.</li</ul

The final multifamily goals reflect the current marketrnconditions and are lower than those proposed initially:</p<ul class="unIndentedList"<liFannie Mae's goal is to acquire mortgages thatrnfinance at least 177,750 low-income and 42,750 very low-income rental units.</li<liFreddie Mac's goal is to acquire mortgages thatrnfinance at least 161,250 low-income and 21,000 very low-income rental units.</li<liThe Enterprises must also report on theirrnacquisition of mortgages involving low-income units in small (5 to 50 unit)rnproperties.</li</ul

As was the case withrnthe proposed rule, the final goals prohibit credit for purchase of mortgages inrnprivate-label securities including commercial mortgage-backed securities, andrnrevise the counting treatment for loan modifications by allowing credit underrnthe low-income refinance goal for permanent Making Home Affordable loanrnmodifications.</p

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

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