FHFA Publishes Framework To Establish FHLBank Housing Goals

The Federal Housing Finance Agency (FHFA) has submitted arnproposed rule to establish a framework for affordable housing goals for the 12rnFederal Home Loan Banks (FHLBanks) it oversees for publication in the Federal Register.  FHFA is mandated to establish such goals bothrnfor FHLBanks and for the two government sponsored enterprises, Fannie Mae andrnFreddie Mac, under provisions of the Housing and Economic Recovery Act (HERA)rnof 2008.  Publication of the rules willrnsignal the beginning of a 45 day period during which the public is invited tornreview the rules and submit comments.

The purposed rule would define four housing goals for thernBanks purchase of mortgages under the system's Acquired Member Assets (AMA)rnPrograms on a basis similar to that used for the GSEs.  The rule would require three separate goalsrnfor purchase money mortgages that would separately measure performance on loansrnto low-income families, for families in low income areas, and for veryrnlow-income families.  A separate goal forrnrefinancing mortgages would measure performance on refinancing for low-incomernfamilies.

FHFA is proposing to establish a volume threshold that wouldrnneed to be met by a Bank before it would be subject to the proposed housingrngoals.  This threshold is intended tornensure that Banks with significant AMA volume in any year would be subject tornthe housing goals while banks with a relatively low annual volume ofrnAMA-approved mortgages can continue to serve all PFIs without being subject tornthese goals.  FHFA said it believes that thernhousing goal mission objective of expanding access to mortgage finance tornlow-income families and families in low-income areas be balanced against thernBanks' need to provide liquidity to small members and the communities theyrnserve.  FHFA is proposing that thisrnvolume threshold be set at $2.5 billion.

The rule would establish single-family housing goals thatrninclude an assessment of a Bank's performance as compared to the actual sharernof the market that fits the criteria for each goal.  FHFA is proposing to calculate therngoals-qualifying shares of the district-level primary mortgage market using allrnmortgages originated within the geographic boundaries of each district forrnproperties located in that district.  Allrnmortgages purchased by a Bank that meet the requirements of the proposedrnregulation would count toward the Banks goals regardless of where the mortgagesrnare located, but the market share against which the Bank's performance would bernevaluated would be the market share of mortgages located in the district.  A Bank would meet its housing goal if its annualrnperformance meets or exceeds the actual share of the market in that districtrnthat fits the criteria for one of the four goals for the year.  The housing goals would not apply until anrnindividual Bank reaches the dollar volume threshold of $2.5 billion. 

The proposed housing goals are to be market based in arnmanner largely consistent with the goals for the GSEs, measuring the Banks'rnsingle-family housing goals performance relative to the actual goals-qualifyingrnshares of the primary mortgage market during the year in their districts.  The public information on therngoals-qualifying shares will not be available until the release of HomernMortgage Disclosure Act (HMDA) data in late summer of the following year sornFHFA will conduct a monthly survey of single-family mortgage originations andrnmake that data available to the public.  FHFArnsaid that this is likely to provide detailed information more frequently and inrna timelier manner than does the public release of HMDA data.

HERA requires FHFA to set interim goals for 2009 and 2010rnthat facilitate an orderly transition to out years.  FHFA said it has decided to establish goalsrnfor 2010 and beyond in order to reduce the administrative and monitoringrnchallenges of establishing and then changing policies and procedures.

Plain and Simple: the FHFA is telling us that the FHLBs are going to play a bigger role in the housing industry in the future!

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