The Federal Housing Finance Agency (FHFA) has established new housing goals for Fannie Mae and Freddie Mac for 2010-2011. The Housing and Economic Recovery Act of 2008 (HERA) required the government-sponsored enterprises' (GSEs) regulator to establish housing goals for the companies for targeted segments of the mortgage market.
In previous years, the Department of Housing and Urban Development (HUD) set overall goals that measured the combined performance of single-family and multifamily mortgages. In contrast, the new goals required by HERA target specific segments of those markets, as well as reflect conservatorship requirements to ensure the GSEs focus on core business activities, the FHFA says.
The final rule establishes three single-family, owner-occupied home-purchase mortgage goals for low-income families, very-low-income families, and families living in geographical areas with lower-income populations, areas with high concentrations of minority residents and federally declared disaster areas. The latter goal also includes a specialized subgoal to ensure that the GSEs address housing needs in lower-income and minority areas. The final rule also contains a goal for single-family, owner-occupied refinance mortgages for low-income families.
The home purchase and refinance goals are expressed as minimum goal-qualifying mortgage shares of home-purchase or refinance mortgages acquired by the GSEs.
The benchmark goal levels for the low- and very-low-income home-purchase goals did not change from the proposed housing goals rule. However, the final rule adjusts the low-income refinance goal downward, reflecting recent market conditions.
The benchmarks for the four single-family goals are as follows:
- 27% for the low-income home-purchase goal,
- 8% for the very-low-income family home-purchase goal,
- a percentage to be set annually by the FHFA for the low-income/high minority/disaster areas home-purchase goal (with a subgoal of 13% to measure acquisitions in low-income/high minority areas only), and
- 21% for the low-income family refinance goal.
The following 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 rental units and 42,750 very-low-income rental units.
- Freddie Mac's goal is to acquire mortgages that finance at least 161,250 low-income rental units and 21,000 very-low-income rental units.
The FHFA's final rule also offers two measures for goal compliance. The final rule sets a benchmark measure, as well as a retrospective market-based measure, to assess each GSE's performance relative to the actual goals-qualifying share of the primary mortgage market.
A GSE can satisfy a particular goal by meeting either of these measures. Previously, the GSEs' housing goal levels were set only prospectively.
The final rule prohibits housing goals credit for purchases of mortgages in private-label securities, including commercial mortgage-backed securities.
The final rule additionally revises the counting treatment in the proposed rule for loan modifications by allowing credit under the low-income refinance goal for permanent Making Home Affordable loan modifications.
The FHFA notes in the final rule that it expects to take future regulatory action to address the housing goals treatment of purchases of multifamily loans that aid the conversion of properties that have affordable rents to properties that have less affordable, market-rate rents.
SOURCE: Federal Housing Finance Agency