Rule2021-28168
2022-2024 Single-Family and 2022 Multifamily Enterprise Housing Goals
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
December 28, 2021
Effective
February 28, 2022
Issuing agencies
Federal Housing Finance Agency
Abstract
The Federal Housing Finance Agency (FHFA) is issuing a final rule on the single-family housing goals for Fannie Mae and Freddie Mac (the Enterprises) for 2022 through 2024, as well as the multifamily housing goals for 2022. 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 final rule establishes the benchmark levels for each of the single- family housing goals and subgoals for 2022 through 2024. The final rule also replaces 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). The final rule establishes the multifamily housing goals for 2022 only. For the small low-income multifamily subgoal, the final rule establishes separate benchmarks for Fannie Mae and Freddie Mac. Finally, the final rule makes several technical changes to definitions and other provisions to conform the regulation to existing practice.
Full Text
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<title>Federal Register, Volume 86 Issue 246 (Tuesday, December 28, 2021)</title>
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[Federal Register Volume 86, Number 246 (Tuesday, December 28, 2021)]
[Rules and Regulations]
[Pages 73641-73658]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2021-28168]
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FEDERAL HOUSING FINANCE AGENCY
12 CFR Part 1282
RIN 2590-AB12
2022-2024 Single-Family and 2022 Multifamily Enterprise Housing
Goals
AGENCY: Federal Housing Finance Agency.
ACTION: Final rule.
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SUMMARY: The Federal Housing Finance Agency (FHFA) is issuing a final
rule on the single-family housing goals for Fannie Mae and Freddie Mac
(the Enterprises) for 2022 through 2024, as well as the multifamily
housing goals for 2022. 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
final rule establishes the benchmark levels for each of the single-
family housing goals and subgoals for 2022 through 2024. The final rule
also replaces 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). The
final rule establishes the multifamily housing goals for 2022 only. For
the small low-income multifamily subgoal, the final rule establishes
separate benchmarks for Fannie Mae and Freddie Mac. Finally, the final
rule makes several technical changes to definitions and other
provisions to conform the regulation to existing practice.
DATES: The final rule is effective on February 28, 2022.
[[Page 73642]]
FOR FURTHER INFORMATION CONTACT: Ted Wartell, Associate Director,
Housing & Community Investment, Division of Housing Mission and Goals,
(202) 649-3157, <a href="/cdn-cgi/l/email-protection#421627266c15233036272e2e02242a24236c252d34"><span class="__cf_email__" data-cfemail="550130317b0234272130393915333d33347b323a23">[email protected]</span></a>; Padmasini Raman, Supervisory
Policy Analyst, Housing & Community Investment, Division of Housing
Mission and Goals, (202) 649-3633, <a href="/cdn-cgi/l/email-protection#fbab9a9f969a88929592d5a99a969a95bb9d939d9ad59c948d"><span class="__cf_email__" data-cfemail="075766636a66746e696e2955666a666947616f616629606871">[email protected]</span></a>; Kevin
Sheehan, Associate General Counsel, Office of General Counsel, (202)
649-3086, <a href="/cdn-cgi/l/email-protection#c08ba5b6a9aeee93a8a5a5a8a1ae80a6a8a6a1eea7afb6"><span class="__cf_email__" data-cfemail="3b705e4d52551568535e5e535a557b5d535d5a155c544d">[email protected]</span></a>; or Marshall Adam Pecsek, Assistant
General Counsel, (202) 649-3380, <a href="/cdn-cgi/l/email-protection#773a1605041f161b1b5927121404121c37111f111659101801"><span class="__cf_email__" data-cfemail="125f7360617a737e7e3c42777161777952747a74733c757d64">[email protected]</span></a>. These are
not toll-free numbers. The mailing address is: Federal Housing Finance
Agency, 400 Seventh Street SW, Washington, DC 20219. For TTY/TRS users
with hearing and speech disabilities, dial 711 and ask to be connected
to any of the contact numbers above.
SUPPLEMENTARY INFORMATION:
I. Background
A. Statutory and Regulatory Background for the Existing Housing Goals
The Safety and Soundness Act requires FHFA to establish annual
housing goals for several categories of both single-family and
multifamily mortgages purchased by Fannie Mae and Freddie Mac.\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\ FHFA
established housing goals levels for 2021 in a final rule published on
December 21, 2020.\3\ FHFA proposed housing goals for 2022-2024 in a
proposed rule published on August 25, 2021.\4\
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\1\ See 12 U.S.C. 4561(a).
\2\ See 12 U.S.C. 4501(7).
\3\ See 85 FR 82881 (Dec. 21, 2020).
\4\ See 86 FR 47398 (Aug. 25, 2021).
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Single-family goals. The single-family goals as 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. 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.
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 (FHA) or another government agency
and with principal balances that do not exceed the loan limits for
Enterprise mortgages.
The performance of the Enterprises on the single-family housing
goals is evaluated using a two-part approach, which compares the goal-
qualifying share of the Enterprise's mortgage purchases to two separate
measures: A benchmark level established by FHFA regulation; and a
market level that FHFA computes retrospectively based on Home Mortgage
Disclosure Act (HMDA) data.
Multifamily goals. The multifamily goals as defined under the
Safety and Soundness Act include separate categories for mortgages on
multifamily properties (properties with five or more units) with rental
units affordable to low-income families and for mortgages on
multifamily properties with rental units affordable to very low-income
families. FHFA has also established by regulation a small multifamily
low-income subgoal for multifamily properties with 5-50 units. 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
regulation establishes benchmark levels for the multifamily goals and
subgoals, but it does not include a retrospective market level measure
for the multifamily goals and subgoals, due in part to a lack of
comprehensive data about the multifamily market. Thus, in contrast to
the single-family goals, FHFA currently measures Enterprise multifamily
goals performance against the benchmark levels only.
B. Adjusting the Housing Goals
If, after publication of this final rule, FHFA determines that any
of the single-family or multifamily housing goals should be adjusted
due to market conditions that are beyond current expectations, 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 of any of the single-
family or multifamily housing goal benchmark levels 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) 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.\5\
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\5\ See 12 CFR 1282.14(d); 12 U.S.C. 4564(b).
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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.\6\
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\6\ 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.\7\
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\7\ See 12 CFR 1282.21; 12 U.S.C. 4566(c).
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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.
[[Page 73643]]
II. Discussion of Proposed Rule and Public Comments
FHFA published a Notice of Proposed Rulemaking (NPRM or proposed
rule) in the Federal Register on August 25, 2021 that proposed new
benchmark levels for each of the single-family and multifamily housing
goals. The NPRM also proposed the replacement of the existing single-
family 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). The NPRM also
included proposed technical changes to the regulation.\8\ The public
comment period on the proposed rule ended on October 25, 2021.
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\8\ See 86 FR 47398 (Aug. 25, 2021).
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Overview. FHFA received 24 comment letters from 27 organizations
and individuals in response to the proposed rule. Comments were
submitted by both Fannie Mae and Freddie Mac, as well as by five
nonprofit organizations, and ten trade associations representing
lenders, home builders, credit unions, and other mortgage market
participants. FHFA also received four comment letters from policy
advocacy organizations, with one letter representing the views of three
organizations and another representing the views of two organizations.
Individuals submitted the remaining six comments. FHFA has reviewed and
considered all of the comments. A number of comments raised issues
unrelated to the housing goals or beyond the scope of the proposed
rule, and those comments are not addressed in this final rule. Specific
provisions of the proposed rule, and the comments received on those
provisions, are discussed below and throughout this final rule.
Single-family benchmark levels. FHFA proposed increases to the
benchmark levels for the single-family housing goals. FHFA also
proposed establishing a new area-based subgoals structure, which
divided the existing low-income area purchase subgoal into two subgoals
(a minority census tracts subgoal and a low-income census tracts
subgoal). A majority of commenters, including Fannie Mae and Freddie
Mac, expressed overall support for the proposed benchmark levels for
the single-family goals, including the area-based subgoals. Many of
these commenters characterized their support for the proposed single-
family benchmark levels as ``strong'' and ``enthusiastic.'' Several of
these commenters specifically commended FHFA for proposing higher
benchmark levels, which they described as in-line with the Enterprises'
public missions and responsibilities to provide access to stable and
affordable housing for all communities. Many of these commenters
described the proposed increases in the benchmark levels as the type of
concrete action necessary to address the affordable housing needs the
country is facing, as well as to build a more equitable housing finance
market. Several of them, including Fannie Mae, also described the
proposed higher benchmark levels as reasonable, realistic, and
achievable. Many of the commenters supporting the proposed benchmark
levels described them as appropriately higher and necessary in order to
support the Enterprises' mission to enable equitable and sustainable
access to affordable housing. A number of these commenters focused on
the critical role the goals play in providing credit for low-income and
very low-income borrowers by ensuring that the Enterprises properly
focus on this important aspect of their mission.
Several commenters noted that higher benchmark levels will
incentivize Fannie Mae and Freddie Mac to marshal their considerable
resources and market presence to address the nation's affordable
housing crisis. A number of commenters found the proposed single-family
benchmark levels to be reasonable in relation to the market forecast.
One commenter specifically supported setting the proposed benchmark
levels for the low-income and very low-income purchase goals slightly
above the midpoint of the projected confidence interval in the market
forecast, as discussed in the proposed rule, on the basis that this
will encourage the Enterprises to expend significant effort and execute
thoughtful strategies to meet meaningful, yet attainable, goals.
Single-family home purchase housing goals. Both Fannie Mae and
Freddie Mac commented that the proposed increases in the benchmark
levels for the single-family home purchase housing goals were
substantial compared to the 2018-2020 and 2021 goals. Freddie Mac
specifically noted that the proposed increases would set targets that
exceed past performance by both Enterprises and the market as a whole
in most of the past ten years.
Although Fannie Mae and Freddie Mac expressed support for the
proposed increases to the single-family home purchase benchmark levels,
both Enterprises expressed concerns about uncertainty in the housing
and loan origination markets. Fannie Mae expressed cautious optimism
regarding its ability to achieve the proposed single-family home
purchase benchmarks based on historical performance, while Freddie Mac
committed to making every effort to meet the proposed goals. However,
both Fannie Mae and Freddie Mac emphasized that market factors and
regulatory issues outside the Enterprises' control could pose risks to
their ability to meet the proposed benchmark levels during the period
covered by the final rule. Freddie Mac specifically requested a
designated ``implementation period'' to adjust to the significant
increases in the single-family benchmark levels in light of the current
and foreseeable market conditions. Both Enterprises encouraged FHFA to
consider how external factors could complicate their efforts to achieve
the proposed benchmark levels given the current and forecasted
conditions in the housing and origination markets. They emphasized how
extreme home price appreciation, the shortfall in affordable housing
supply, and disruptions in income and employment stability resulting
from the COVID-19 pandemic could reduce demand and disproportionately
impact lower-income borrowers' mortgage loan eligibility. The
Enterprises also emphasized how secondary market dynamics, such as
lender interest in holding loans in their portfolios rather than
selling them, consumer demand, lender preference for conventional loans
versus non-conventional loans, and the secondary market activities of
other investors will influence the Enterprises' ability to achieve the
proposed benchmark levels.
Area-based subgoals. The NPRM proposed establishing a new area-
based subgoals structure by dividing the existing low-income areas
purchase subgoal into two subgoals: A minority census tracts subgoal
and a low-income census tracts subgoal. Most commenters offered strong
support for the proposed area-based subgoals structure. Several
commenters, including Freddie Mac, applauded FHFA for its focus on
equitable housing finance and efforts to address the minority
homeownership gap through these proposed subgoals. One commenter stated
that the proposed minority census tracts subgoal is a necessary step
toward ensuring the Enterprises fulfill their statutory duty to
facilitate the financing of affordable housing for all low- and
moderate-income families, including families of color. A number of
commenters urged FHFA to increase the benchmark level for the minority
census tracts subgoal above the proposed 10 percent. Two
[[Page 73644]]
commenters recommended an increase in the benchmark level for the
proposed low-income census tracts subgoal above the proposed 4 percent.
Two commenters suggested that restructuring the low-income areas
subgoal as proposed might provide FHFA with data to determine ``whether
the enterprise housing goals are unintentionally contributing to the
displacement of low-income families.''
While no commenters objected to the proposed area-based subgoals
structure, one commenter expressed concern that the proposed low-income
census tracts subgoal would deter the Enterprises from purchasing loans
in minority census tracts for moderate- to high-income minority
borrowers who opt to live in minority census tracts. FHFA notes that
the new subgoals would permit housing goals credit under at least one
of the subgoals for many moderate- and high-income borrowers in
minority census tracts. All loans to moderate-income borrowers (defined
as having incomes no greater than 100 percent of area median income
(AMI)) in minority census tracts would be eligible for credit under the
minority census tracts subgoal, and in minority census tracts that are
also low-income census tracts, loans to borrowers with incomes above
100 percent of AMI would be eligible for credit under the low-income
census tracts subgoal. While it is true that loans to higher income
borrowers in minority census tracts that are not low-income census
tracts would not be eligible for credit under either subgoal, FHFA does
not expect this to create a significant disincentive for Enterprise
purchases of such loans.
Another commenter recommended future inclusion of race and
ethnicity of borrowers into housing goal formulation and modification.
FHFA will continue to monitor Enterprise performance on the housing
goals and the demographics of borrowers with goals-qualifying loans.
FHFA may explore avenues that may be permitted under applicable law in
future housing goals rulemakings.
Single-family low-income refinancing goal. In addition to their
support for the proposed increases in the benchmark levels for the
single-family home purchase goals, a number of commenters specifically
expressed support for the proposed benchmark level for the single-
family low-income refinancing goal. Several of these commenters
emphasized the crucial role that responsible and affordable refinance
loans play in preserving homeownership and the important role the
Enterprises play in ensuring that more borrowers can benefit from the
current refinance boom to save money on mortgage payments. They
expressed concern that, during the COVID-19 pandemic and a period of
historically low interest rates, the current surge in refinancing is
not adequately reaching lower-income families, lower-wealth families,
and borrowers with smaller loan balances. To address these concerns,
these commenters recommended that FHFA and the Enterprises help reduce
the cost of refinancing by ensuring that rate-term refinances are more
available, but not more costly, for lower-income families who would
save greatly on mortgage payments. They also urged FHFA and the
Enterprises to create a streamlined refinance program for low-balance
mortgages to ensure that affordable refinances are more accessible to
borrowers, and particularly those of color. One commenter that
supported the proposed benchmark level for the single-family low-income
refinancing goal expressed optimism that the proposed higher benchmark
level would encourage the Enterprises to purchase refinance mortgages
from credit unions and other financial institutions whose mission is to
serve their local communities. Another commenter urged FHFA to increase
the benchmark level for the low-income refinancing goal from the
proposed 26 percent to 28 percent to help ensure that the Enterprises
can respond to current market conditions and promote fair access to
affordable housing effectively. One commenter recommended that FHFA
increase the income level for mortgages eligible for the low-income
refinance goal from 80 percent of AMI to 100 percent of AMI and provide
more support to more low[hyphen]income homeowners looking to refinance.
FHFA notes that while this proposal would be beyond the scope of the
current rule, FHFA will continue to consider the needs of moderate-
income households that are seeking to refinance loans.
Several commenters expressed support for the higher proposed
benchmark level while acknowledging that interest rates are forecast to
increase in the years 2022-2024. Two of these commenters described the
proposal, which set the low-income refinancing goal slightly below the
midpoint of the confidence interval in the market forecast, as
appropriate given the greater volatility in refinance projections and
the sizable increase over the current benchmark level of 21 percent.
One of these commenters endorsed FHFA's proposal to set the benchmark
level lower than the projected market level due to fluctuations in
interest rates.
Fannie Mae expressed concern over the proposed low-income refinance
benchmark level, characterizing the proposed increase over the current
benchmark level as significant. Fannie Mae stated that the
unpredictability of future interest rates and refinancing volumes could
have a significant impact on the low-income refinance share of the
market. Fannie Mae further stated that this volatility makes it
difficult to determine the likelihood of the Enterprises' ability to
meet the proposed benchmark level, particularly in 2023 and 2024.
Fannie Mae also stated that meeting the proposed benchmark level may be
challenging if future refinance volume stalls because homeowners who
have taken advantage of historically low interest rates will have less
incentive to refinance their loans, especially those lower income
borrowers with low loan balances. FHFA emphasizes that the Enterprises
are required to meet the lower of the benchmark level or the market
level for each single-family goal. Therefore, if the benchmark level
that FHFA set is higher than the market level, then the Enterprise can
still meet this goal by exceeding the market level, even if it falls
short of the benchmark. However, if FHFA sets a low benchmark level in
the context of an expected strong or high market level, then FHFA would
be not be meeting its statutory obligation to set meaningful and robust
goals to ensure that an appropriate share of Enterprise refinance
acquisitions are loans made to low-income borrowers.
Multifamily benchmark levels. The NPRM proposed increases in the
benchmark levels for all three multifamily goals. A significant number
of commenters supported these proposed increases in the benchmark
levels. The commenters characterized the proposed benchmark levels as
reasonable and attainable, notwithstanding known market challenges,
like the cost of materials, labor shortages and supply chain issues.
Several of the commenters stated that the significant and growing need
for affordable rental housing across the country aligns with the
missions of the Enterprises and should be a priority in the near
future. One commenter stated that while the proposed increases in the
benchmark levels would be an improvement, FHFA should set the
multifamily benchmark levels even higher, citing both the need for more
affordable rental housing and the Enterprises' recent performance on
these goals. Two commenters expressed concern that the proposed
benchmark levels would be too high relative to previous levels.
[[Page 73645]]
Measuring multifamily goals. Several commenters suggested
expressing the multifamily goals in percentages or dollar volumes
instead of numbers of units. Those proposals are outside the scope of
this rulemaking, and the final rule does not change how the multifamily
goals are measured. FHFA may consider changes to the structure or
measurement of the multifamily housing goals in future rulemaking to
establish multifamily benchmark levels for 2023 and beyond.
Duration of goals. A number of commenters recommended that FHFA
establish the housing goals more frequently than once every three
years. Several of these commenters urged FHFA to set the multifamily
goal benchmark levels annually, rather than for three years as set
forth in the proposed rule. One of these commenters stated that because
the 2022-2024 goals are subject to the lasting uncertainty in housing
markets due to the COVID-19 pandemic, FHFA should issue one-year
multifamily goal benchmark levels applicable to 2022. This commenter
argued that a shorter goal duration could also mitigate the potential
need for FHFA to adjust longer-term housing goal benchmark levels if
unforeseen changes to market conditions arise. Other commenters also
recommended a one-year multifamily goal duration, stating that the
proposed increases to the benchmark levels may be too high and the
three-year time frame too long and may cause the Enterprises to act
irrationally if the market dynamics change during the three-year
period. One commenter urged FHFA to set two-year benchmark levels for
both the single-family and multifamily goals. The commenter reasoned
that because forecasts are more accurate in shorter time frames, two-
year goals could allow for more aggressive, but feasible, benchmark
levels within the upper range of loan purchase forecasts.
Small multifamily subgoal. FHFA received several comment letters,
including from Freddie Mac, supporting the proposed increase in the
small multifamily housing goal benchmark level. Fannie Mae highlighted
concerns around the proposed increase in the benchmark level and
identified a potential need to change existing underwriting standards
in order to meet the goal.
Other issues. A number of commenters raised concerns in response to
the proposed rule that, while important to note, have limited
implementation feasibility or relevance in the final housing goals
rulemaking. Additionally, commenters recommended changes to the
proposed rule that are outside the scope of the housing goals, such as
issues related to the Enterprises' Senior Preferred Stock Purchase
Agreements (PSPA) with the U.S. Department of Treasury, and
recommendations for alignment with other regulatory requirements, such
as the Community Reinvestment Act. These comments are further discussed
below.
(i) PSPA amendments. A number of commenters expressed general
concern over the impact of the covenants added to the PSPA in January
2021 on Enterprise housing goals performance. Several of the commenters
recommended permanently suspending these covenants, which were
temporarily suspended by the U.S. Department of Treasury in September
2021, to best support communities of color and bolster Enterprise
performance. One commenter stated that while FHFA has important safety
and soundness responsibilities, those responsibilities should be
exercised using supervisory authority rather than as part of the PSPA.
(ii) Equitable Housing Finance Plans. Several commenters, including
Fannie Mae, commended FHFA's efforts to support sustainable affordable
housing--specifically, FHFA's requirement that the Enterprises prepare
three-year Equitable Housing Finance Plans. The Enterprises' Equitable
Housing Finance Plans, due by December 31, 2021, will identify barriers
to housing opportunities, list measurable objectives and meaningful
goals, and describe plans for meaningful actions to reduce the racial
homeownership gap. FHFA expects that the Equitable Housing Finance
Plans, together with the new housing goals area-based subgoals
structure, will contribute to promoting equitable and wide-reaching
credit opportunities.
(iii) Disaster-related and climate change considerations. One
commenter recommended explicitly including indicators for climate
change and environmental justice into the formulation of Enterprise
housing goals. Citing apparent disproportionate effects of climate
change on historically underserved communities, particularly those of
color, the commenter pushed for consideration of environment-related
risk into housing goal risk assessment. The commenter asserted that
FHFA should take actions to support sustainable affordable housing
initiatives in response to the risks posed by climate change to the
housing finance market, and low- and moderate-income communities and
communities of color in particular. FHFA has been actively engaging
with industry stakeholders and working to evaluate climate and natural
disaster risk management at the Enterprises and will continue to do
so.\9\
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\9\ See <a href="https://www.fhfa.gov/Media/PublicAffairs/Documents/Climate-and-Natural-Disaster-RFI.pdf">https://www.fhfa.gov/Media/PublicAffairs/Documents/Climate-and-Natural-Disaster-RFI.pdf</a>.
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(iv) Manufactured housing loans. The NPRM did not propose targets
specific to the purchase of manufactured housing loans. One commenter
urged FHFA to establish a new manufactured housing single-family
subgoal based on the commenter's claim that the Enterprises' separate
Duty to Serve plans and performance do not adequately support
manufactured housing finance. Fannie Mae suggested that FHFA allow
housing goals credit for rented units within manufactured housing
communities.
FHFA recognizes the importance of manufactured housing as a
significant source of affordable housing and homeownership. However,
the final rule does not establish a new manufactured housing single-
family subgoal and does not allow housing goals credit for rented units
in manufactured housing communities. The multifamily Conservatorship
Scorecard cap currently requires at least 50 percent of an Enterprise's
multifamily loan purchases to be mission-driven, affordable housing,
including manufactured housing communities. In addition, the
Enterprises' proposed Duty to Serve plans include Enterprise
manufactured home loan purchases for 2022-2024. FHFA will continue to
evaluate the treatment of loans on manufactured housing communities and
may consider changes in connection with the Enterprises' Duty to Serve
efforts.
FHFA also will consider providing additional guidance to the
Enterprises to permit blanket loans on manufactured housing communities
that meet certain conditions to count towards the multifamily housing
goals on a case-by-case basis. It is difficult to accurately determine
a manufactured housing unit's affordability under the housing goals
because bedroom count information on individual manufactured housing
units in the communities is typically not collected by the Enterprises,
and the pad rent alone does not include the full cost of housing for
the residents, which includes paying for their unit financing.
Therefore, the practical question of how to determine housing costs and
affordability, including how to adjust household size for the number of
bedrooms in a unit to accurately apply the rent estimation alternative,
cannot be answered at this time given available data.
[[Page 73646]]
(v) Multifamily workforce housing goal. One commenter suggested
that FHFA establish a multifamily goal targeting support for
multifamily properties rented to households with incomes from 60 to 120
percent of AMI (which is the common definition of incomes for workforce
housing). The commenter recommended that FHFA give the Enterprises
goals credit for purchasing mortgage loans on multifamily rental
properties with a prescribed number of rental units that are affordable
to moderate[hyphen]income families with incomes between 60 and 120
percent of AMI. However, this proposal is outside the scope of this
rulemaking. Therefore, the final rule does not change the structure of
the multifamily housing goals to expand beyond the statutory
requirements for establishing multifamily goals, which limit housing
goals credit to households at or below 80 percent of AMI. FHFA
acknowledges the importance of this market segment and may take
workforce housing into consideration in future rulemakings.
(vi) Qualitative considerations. Fannie Mae and another commenter
proposed incorporating qualitative goals in FHFA's final determinations
for Enterprise annual performance. The commenters argued that analyzing
the Enterprises' qualitative efforts in addition to their quantitative
performance metrics will bolster FHFA's determination of appropriate
remedies for Enterprise noncompliance with housing goals. The
commenters recommended that FHFA give the Enterprises credit for
participation in stakeholder efforts to promote affordable and
sustainable housing. The commenters also suggested that FHFA explore
opportunities for developing qualitative goals in conjunction with the
Enterprises' development and implementation of their Equitable Housing
Finance Plans and their efforts to advance equity in housing finance.
FHFA agrees that the implementation of qualitative measures plays
an important role in the Enterprises' ability to achieve the
quantitative housing goals. In particular, quantitative measures may
not always reflect the impact of market developments outside the
control of the Enterprises that may have a significant impact on the
ability of the Enterprises to meet the housing goals. However, FHFA
continues to believe that the establishment of quantitative benchmark
levels provides clearly defined standards for objectively measuring the
Enterprises' performance. FHFA notes that the qualitative efforts of
the Enterprises in attempting to meet the housing goals are an
appropriate consideration when assessing the feasibility of any housing
goals that an Enterprise fails to achieve, as well as whether to
require an Enterprise to submit a housing plan if the Enterprise fails
to achieve a goal that was feasible.
III. Summary of Final Rule
A. Benchmark Levels for the Single-Family Housing Goals
The final rule establishes the benchmark levels for the single-
family housing goals and subgoals for 2022-2024 as follows:
Table 1--Single-Family Benchmark Levels for 2022-2024
------------------------------------------------------------------------
Final
benchmark
Goal Criteria level for 2022-
2024 (percent)
------------------------------------------------------------------------
Low-Income Home Purchase Home purchase mortgages on 28
Goal. single-family, owner-
occupied properties to
borrowers with incomes no
greater than 80 percent
of AMI.
Very Low-Income Home Home purchase mortgages on 7
Purchase Goal. single-family, owner-
occupied properties to
borrowers with incomes no
greater than 50 percent
of AMI.
Minority Census Tracts Home purchase mortgages on 10
Subgoal. single-family, owner-
occupied properties to
borrowers with incomes no
greater than 100 percent
of AMI, in minority
census tracts \1\.
Low-Income Census Tracts (i) Home purchase 4
Subgoal. 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.
Low-Income Refinancing Goal. Refinancing mortgages on 26
single-family, owner-
occupied properties to
borrowers with incomes no
greater than 80 percent
of AMI.
------------------------------------------------------------------------
\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.
B. Multifamily Housing Goal Levels
The final rule establishes the benchmark levels for the multifamily
goal and subgoals for 2022 as follows:
Table 2--Multifamily Benchmark Levels for 2022
----------------------------------------------------------------------------------------------------------------
Goal Criteria Final benchmark level for 2022
----------------------------------------------------------------------------------------------------------------
Low-Income Goal................... Units affordable to families 415,000 units.
with incomes no greater than 80
percent of AMI in multifamily
rental properties with
mortgages purchased by an
Enterprise.
Very Low-Income Subgoal........... Units affordable to families 88,000 units.
with incomes no greater than 50
percent of AMI in multifamily
rental properties with
mortgages purchased by an
Enterprise.
Small Multifamily Low-Income Units affordable to families Freddie Mac: 23,000 units.
Subgoal. with incomes no greater than 80 Fannie Mae: 17,000 units.
percent of AMI in small
multifamily rental properties
(5 to 50 units) with mortgages
purchased by an Enterprise.
----------------------------------------------------------------------------------------------------------------
[[Page 73647]]
C. Other Proposed Changes
The final rule makes minor technical changes to some regulatory
definitions and counting rules. These changes are non-substantive
changes intended to conform the regulation to existing FHFA practices
in measuring the performance of the Enterprises under the housing
goals.
IV. Single-Family Housing Goals
A. Factors Considered in Setting the Single-Family Housing Goal
Benchmark 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.\10\
---------------------------------------------------------------------------
\10\ 12 U.S.C. 4562(e)(2)(B).
---------------------------------------------------------------------------
FHFA considered each of these required statutory factors, as
described in detail in the proposed rule, in setting the benchmark
levels for the single-family housing goals.\11\
---------------------------------------------------------------------------
\11\ See 86 FR 47398 (Aug. 25, 2021).
---------------------------------------------------------------------------
FHFA's analysis and goal setting process includes developing
econometric forecast models for each of the single-family housing goal
segments that explicitly take some of the statutory factors into
account, and then considering the other statutory factors and variables
that impact affordable homeownership in selecting the specific
benchmark level.\12\ Many of these factors indicate that low-income and
very low-income households are facing, and will continue to face,
difficulties in achieving homeownership or in refinancing an existing
mortgage. These factors, such as rising home prices and stagnant
household incomes, also impact the Enterprises' ability to meet their
mission and facilitate affordable homeownership for low-income and very
low-income households. Nevertheless, FHFA expects and encourages the
Enterprises to work toward meeting their housing goals requirements in
a safe and sound manner.
---------------------------------------------------------------------------
\12\ See <a href="http://www.fhfa.gov/PolicyProgramsResearch/Research/PaperDocuments/Dec2021_Market-Estimates-2022-2024.pdf">http://www.fhfa.gov/PolicyProgramsResearch/Research/PaperDocuments/Dec2021_Market-Estimates-2022-2024.pdf</a>.
---------------------------------------------------------------------------
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
housing goals. FHFA will continue to monitor the affordable housing
market and take these factors into account when considering the
feasibility of the goals. In developing the market models, FHFA, as in
past rulemakings, used Moody's forecasts as the source for
macroeconomic variables where available.\13\ 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.\14\ Elements that impact the models and the
determination of benchmark levels are discussed in FHFA's market paper
and some of these elements are discussed below.\15\
---------------------------------------------------------------------------
\13\ The macroeconomic outlook described herein is based on
Moody's forecasts as of September 2021.
\14\ 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.
\15\ See <a href="http://www.fhfa.gov/PolicyProgramsResearch/Research/PaperDocuments/Dec2021_Market-Estimates-2022-2024.pdf">http://www.fhfa.gov/PolicyProgramsResearch/Research/PaperDocuments/Dec2021_Market-Estimates-2022-2024.pdf</a>.
---------------------------------------------------------------------------
Interest rates are very important determinants of mortgage market
trajectory. Moody's September 2021 forecast projects that mortgage
interest rates will rise gradually from 2.9 percent in 2021 to 3.7
percent by 2024.\16\ Moody's forecast also projects that the
unemployment rate will gradually fall from its April 2020 peak of 14.8
percent to 3.9 percent in 2024.\17\ Moody's forecast also projects a
modest increase in per capita disposable nominal income growth--from
$52,800 in 2020 to $59,300 in 2024. Furthermore, Moody's forecast
estimates that the inflation rate will be in the 2.3-2.8 percent range
from 2022 through 2024.
---------------------------------------------------------------------------
\16\ Refer to Exhibit 1 in the ``The Size of the Affordable
Mortgage Market: 2022-2024 Enterprise Single-Family Housing Goals,''
available at <a href="http://www.fhfa.gov/PolicyProgramsResearch/Research/PaperDocuments/Dec2021_Market-Estimates-2022-2024.pdf">http://www.fhfa.gov/PolicyProgramsResearch/Research/PaperDocuments/Dec2021_Market-Estimates-2022-2024.pdf</a>.
\17\ U.S. Bureau of Labor Statistics ``Labor Force Statistics
from the Current Population Survey,'' available at: <a href="https://data.bls.gov/timeseries/LNS14000000">https://data.bls.gov/timeseries/LNS14000000</a>.
---------------------------------------------------------------------------
The combination of low interest rates, high deferred demand, and
low supply fueled by the COVID-19 pandemic drove house prices up by
18.5 percent in the third quarter of 2021 relative to the third quarter
of 2020, based on FHFA's purchase-only House Price Index (HPI).\18\
Moody's September 2021 forecast of the same HPI index expects house
prices to increase at the annual rates of 4.0, 1.2, and 0.2 percent in
2022, 2023, and 2024, respectively.
---------------------------------------------------------------------------
\18\ See <a href="https://www.fhfa.gov/Media/PublicAffairs/Pages/US-House-Prices-Rise-18pt5-Percent-over-the-Last-Year-Up-4pt2-Percent-from-2Q.aspx">https://www.fhfa.gov/Media/PublicAffairs/Pages/US-House-Prices-Rise-18pt5-Percent-over-the-Last-Year-Up-4pt2-Percent-from-2Q.aspx</a>.
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Taken together, the expected increase in mortgage interest rates
and house prices will likely 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 166.8 in 2020 to 151.6 in 2024. Lower values of the HAI
imply that housing has become less affordable.\19\ Further, the supply
of affordable housing has not kept pace with the growth of the
demographic demand for affordable housing, even before the COVID-19
pandemic.
---------------------------------------------------------------------------
\19\ 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 in its 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 increased from 28
percent in 2018 to 61 percent in 2020. Moody's forecasts this share to
decline slightly to 59 percent in 2021, subsequently increase to 64
percent in 2022, and then decline to 51 percent and 38 percent in 2023
and 2024, respectively.
[[Page 73648]]
B. Final Single-Family Housing Goal Benchmark Levels
The final rule sets each of the single-family housing goal
benchmark levels at the same levels as in the proposed rule, which are
higher than the corresponding levels that have been in place since
2018. Both Enterprise performance and the overall market shares
generally have exceeded the benchmark levels in those years. FHFA
recognizes that the new higher benchmark levels may require the
Enterprises to expand their efforts to serve these markets in the
future, particularly as market conditions continue to change. However,
FHFA believes that the new benchmark levels are appropriate and
feasible for the Enterprises to achieve in light of their past
performance, FHFA's analysis of the market, and the statutory factors
listed above. FHFA also notes that the Enterprises are required to meet
the lower of the benchmark level or the market level for each single-
family goal. Therefore, if the benchmark level in the final rule is
higher than the market level, an Enterprise can still meet the goal by
exceeding the market level, even if it falls short of the benchmark
level.
FHFA continues to monitor the activities of the Enterprises, both
in FHFA's capacity as regulator and as conservator. If necessary, FHFA
will make appropriate changes in the benchmark levels for the single-
family housing goals to ensure the Enterprises' continued safety and
soundness.
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. Consistent with the
proposed rule and FHFA's market model, the final rule sets the annual
low-income home purchase housing goal benchmark level for 2022-2024 at
28 percent. Although the final benchmark level is significantly higher
than the previous benchmark level of 24 percent and is above the
midpoint of the confidence intervals of the market forecast, FHFA
believes that the higher benchmark level is appropriate to ensure that
the Enterprises fulfill their statutory duty to facilitate the
financing of affordable housing for all low- and moderate-income
families. Additionally, FHFA notes that setting the benchmark level
above the midpoint of the confidence intervals in the market forecast
will help ensure that the two-part benchmark/market level structure of
the goal is meaningful even in a strong market for low-income
borrowers.
[GRAPHIC] [TIFF OMITTED] TR28DE21.000
The current market forecast in Table 3 reflects a 90 percent confidence
level for this goal.\20\
---------------------------------------------------------------------------
\20\ A 90 percent confidence interval suggests that there is a
90 percent probability that the market performance for a given year
will be within the lower bound and upper bound as indicated in Table
3.
---------------------------------------------------------------------------
Recent performance and forecasts. As shown in Table 3, both
Enterprises exceeded both the applicable benchmark and market levels
for this goal in 2018, 2019, and 2020 while the low-income home
purchase market levels were steadily increasing. FHFA's current model
forecasts that the market level for this goal is expected to decline
from the peak in 2020 and remain around 26 percent for each year from
2022-2024.
Proposed rule and comments. The NPRM proposed increasing the
benchmark level for this goal for 2022-2024 from 24 percent, which had
been in place since 2015, to 28 percent. At the time the NPRM was
issued, using data through July 2021, the average market level forecast
for 2022-2024 was 26.5 percent. Since the publication of the proposed
rule, FHFA has updated the model using additional 2020 data from HMDA
and Moody's forecasts as of September 2021. The updated FHFA model
forecasts that the market level for this goal will be slightly lower,
with the average forecast at 25.9 percent.
A majority of the commenters on the proposed rule supported the
proposed higher benchmark levels for the single-family goals, including
the low-income home purchase goal, and no commenters recommended
lowering them. Commenters described the proposed benchmark levels as
reasonable, realistic, and achievable. Both Enterprises expressed
concern that market factors and regulatory issues outside of their
control could pose risks to their ability to meet the proposed
benchmark levels, including for the low-income home purchase goal,
during the three-year term of the rule. FHFA will continue to monitor
the market for this
[[Page 73649]]
goal and take appropriate actions as needed.
One commenter recommended that FHFA raise all of the single-family
benchmark levels and specifically suggested that the single-family low-
income benchmark level be increased to 30 percent. The commenter stated
that the recommended increase in the single-family benchmark levels
would allow the Enterprises to better respond to the current market
conditions and promote fair access to affordable housing effectively.
The commenter further stated that an increase in the benchmark levels
is necessary because the Enterprises have an even more pronounced
responsibility to serve the entire market during times of crisis,
including the current COVID-19 pandemic, through aggressively setting,
or even surpassing, ambitious housing goals. Another commenter stated
that because the Enterprises have routinely equaled or exceeded the
single-family low-income benchmark levels during the last eleven years,
this suggested that the benchmark levels have been too low. The
commenter further noted that the single-family goals should be
established at levels that would likely result in the Enterprises
leading the market but did not specify what the increase to the
proposed single-family low-income benchmark level should be.
FHFA determination. Consistent with the proposed rule, the final
rule sets the benchmark level for the low-income home purchase housing
goal at 28 percent. This is above the average market forecast for the
three years, to encourage the Enterprises to continue to find ways to
support low-income borrowers while not compromising safe and sound
lending standards. Even though this benchmark level is slightly higher
than the average market forecast for this goal, due to the two-part
nature of the goals, the level that will be used to assess the
Enterprises' year-end performance will be the lower of the market level
or the benchmark level. Therefore, the 28 percent benchmark level is
appropriate, reasonable, and supported by the current market forecast.
FHFA recognizes that there may be challenges to meeting the goal,
particularly in light of the recovery from the COVID-19 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.
Consistent with the proposed rule and FHFA's market model, the final
rule sets the annual very low-income home purchase housing goal
benchmark level for 2022-2024 at 7 percent. While this benchmark level
is above the previous benchmark level of 6 percent and is above the
midpoint of the confidence intervals of the market forecast, FHFA has
determined that the benchmark level will serve as an appropriate target
that will channel Enterprise efforts in this market segment. FHFA
recognizes that the various challenges to affordability highlighted
above may require additional effort by the Enterprises to meet the
benchmark level. As with the low-income home purchase goal discussed
above, setting the benchmark level at a higher level will help ensure
that the two-part structure of the goal is meaningful even in a strong
purchase market for very low-income borrowers.
[GRAPHIC] [TIFF OMITTED] TR28DE21.001
The current market forecast in Table 4 reflects a 90 percent confidence
level for this goal.
Recent performance and forecasts. As shown in Table 4, the market
for very low-income home purchase loans has increased each year
beginning in 2018 through 2020, as reflected in HMDA data. During this
timeframe, both Enterprises exceeded the applicable benchmark level for
this goal. Fannie Mae also exceeded the applicable market levels for
this goal for 2018 and 2020 but fell slightly below the market level
for 2019. Conversely, Freddie Mac fell below the applicable market
levels for this goal in 2018 and 2020 but exceeded the market level for
2019. FHFA's current model forecasts that the market level for this
goal is expected to
[[Page 73650]]
remain around 6.2 percent for 2022-2024.
Proposed rule and comments. The NPRM proposed increasing the
benchmark level for this goal for 2022-2024 from 6 percent, which had
been in place since 2015, to 7 percent. At the time the NPRM was
issued, using data through July 2021, the average market level forecast
for 2022-2024 was 6.7 percent. Since the publication of the proposed
rule, FHFA has updated the model using additional 2020 data from HMDA
and Moody's forecasts as of September 2021. The updated FHFA model
forecasts that the market level for this goal will be slightly lower,
with the average forecast at 6.2 percent.
As noted in the low-income goal discussion above, a majority of the
commenters expressed support for the proposed higher benchmark levels
for the single-family goals, including the very low-income home
purchase goal. Several commenters emphasized the importance of
establishing more aggressive targets in order to improve access to
credit for lower-income home buyers. One commenter stated that setting
the proposed very low-income purchase goal slightly above the midpoint
of the projected confidence interval in the market forecast will
encourage the Enterprises to expend significant effort and execute
thoughtful strategies in order to meet meaningful, yet attainable
goals. As noted in the low-income home purchase goal discussion above,
both Enterprises expressed concern that market factors and regulatory
issues outside Enterprise control could pose risks to their ability to
meet the proposed benchmark levels, including for the very low-income
home purchase goal, during the three-year term of the rule.
As previously discussed, one commenter recommended that FHFA raise
all of the single-family benchmark levels. The commenter further
recommended that the single-family very low-income benchmark level be
increased to 10 percent in order to better respond to current market
conditions and to promote fair access to affordable housing
effectively. Another commenter opted not to recommend a specific
increase to the proposed very low-income goal benchmark level but
encouraged FHFA to establish higher single-family benchmark levels that
would likely result in the Enterprises leading the market.
FHFA determination. Consistent with the proposed rule, the final
rule sets the benchmark level for the very low-income home purchase
housing goal at 7 percent. This level should serve as a ``stretch
goal'' to encourage the Enterprises to continue their efforts to
promote safe and sustainable lending to very low-income families. As
noted in the low-income home purchase goal discussion above, there are
significant challenges to housing affordability that may be beyond the
control of the Enterprises that could make this benchmark level a
challenge for the Enterprises to meet. However, given the two-part
nature of the goals, the level that will be likely to constrain the
Enterprises will be the lower of the market level or the benchmark
level. Thus, FHFA is persuaded that setting the benchmark level at 7
percent is appropriate, reasonable, and supported by the current market
forecast. 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 very 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. Minority Census Tracts Subgoal
The minority census tracts subgoal is based on the percentage of
home purchase mortgages on single-family, owner-occupied properties to
borrowers with income no greater than 100 percent of AMI in minority
census tracts. Consistent with the proposed rule and FHFA's market
model, the final rule sets the annual minority census tracts home
purchase subgoal benchmark level for 2022-2024 at 10 percent. While
this benchmark level is above the midpoint of the confidence intervals
of the market forecast, it is important that the Enterprises expand
their focus on this segment of the market. FHFA has determined that the
final benchmark level is reasonable, realistic, and achievable for the
Enterprises.
[GRAPHIC] [TIFF OMITTED] TR28DE21.002
The current market forecast in Table 5 reflects a 95 percent confidence
level for this subgoal.\21\
---------------------------------------------------------------------------
\21\ A 95 percent confidence interval is used for the two new
area-based subgoals, unlike the 90 percent confidence interval used
for the previously established goals.
Recent performance and forecasts. Table 5 provides data on how both
Enterprises would have performed had this new subgoal been in place
during 2018-2020. Specifically, Fannie Mae would have exceeded the
benchmark level each year by a small amount, and Freddie Mac would have
missed the benchmark level each year by a small amount. FHFA's 2021
market forecast for this subgoal is at 9.3 percent, with projected
decreases in 2022 (9.2 percent), 2023 (8.9 percent), and 2024 (8.7
percent). Because this is a new subgoal, the proposed rule did not
include a forecast of the market levels for it. Based on the newly
modeled forecasts using HMDA data and Moody's forecasts as of September
2021, the average forecast for this subgoal for 2022-2024 is 8.9
percent.
Proposed rule and comments. Commenters offered strong support for
this proposed subgoal. Several commenters highlighted the positive
impact the proposed subgoal would have on ensuring the Enterprises
fulfill their statutory duty to facilitate the financing of affordable
housing for all low- and moderate-income families, including families
of color. A number of commenters urged FHFA to set a higher benchmark
level for the subgoal than the proposed 10 percent to increase borrower
assistance and address the
[[Page 73651]]
racial homeownership gap. Several commenters also cited the COVID-19
pandemic as a factor exacerbating racial disparities in homeownership
and advocated for a higher benchmark level to address this issue. FHFA
will continue to monitor data trends for this subgoal during 2022-2024
and will share additional data with the public as appropriate.
FHFA determination. Consistent with the proposed rule, the final
rule sets the annual minority census tracts subgoal benchmark level for
2022-2024 at 10 percent. While this is above the average market
forecast for the three years, the 10 percent benchmark level is
appropriate for ensuring that the Enterprises target the needs of
communities of color, as well as emphasizing the importance of
improving access to mortgage credit in these communities. FHFA will
continue to monitor the Enterprises in its capacities as regulator and
as conservator, and if FHFA determines that the benchmark level for
this subgoal 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.
4. Low-Income Census Tracts Subgoal
The low-income census tracts subgoal is based on the percentage of
home purchase mortgages on: (1) Single-family, owner-occupied
properties to borrowers (regardless of income) in low-income census
tracts that are not minority census tracts; and (2) 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. Consistent with the proposed
rule, the final rule sets the annual low-income census tracts home
purchase subgoal benchmark level for 2022-2024 at 4 percent. FHFA
recognizes that this benchmark level is significantly lower than both
the midpoint of the confidence intervals of the market forecast and the
recent performance of the Enterprises. However, FHFA has determined
that a relatively low benchmark level for this subgoal is appropriate
in light of the fact that the subgoal includes housing goals credit for
higher income borrowers that may have ready access to mortgage credit
even when purchasing homes in low-income census tracts.
[GRAPHIC] [TIFF OMITTED] TR28DE21.003
The current market forecast in Table 6 reflects a 95 percent confidence
level for this subgoal.
Recent performance and forecasts. Table 6 shows FHFA's estimates of
Enterprise performance had this new subgoal been in place during 2018-
2020. Specifically, each of the Enterprises would have exceeded the
benchmark level each year by a meaningful amount. FHFA's 2021 market
forecast is at 9.7 percent, with projected increases in 2022 (10.0
percent), 2023 (10.2 percent), and 2024 (10.3 percent). Because this is
a new subgoal, the proposed rule did not include a forecast of the
market levels for this subgoal. Based on the newly modeled forecasts
using HMDA data and Moody's forecasts as of September 2021, the average
forecast for this subgoal for 2022-2024 is 10.2 percent.
Proposed rule and comments. Most commenters were supportive of the
proposed low-income census tracts subgoal benchmark level. Two
commenters encouraged FHFA to increase the benchmark level above the
proposed 4 percent. Two other commenters urged FHFA to gather data and
monitor potential displacement trends related to the proposed low-
income census tracts subgoal to determine if it would unintentionally
contribute to displacement of low-income families.
FHFA determination. Consistent with the proposed rule, the final
rule sets the low-income census tracts subgoal benchmark level for
2022-2024 at 4 percent. As noted above, the benchmark level is set
below historic Enterprise performance to address concerns around
gentrification and displacement of low-income families and the
potential that the Enterprises may seek to meet the goal by purchasing
loans to higher-income borrowers in lower-income areas. Thus, while the
benchmark level is lower than historic market performance, FHFA has
determined that 4 percent is an appropriate level. Setting this lower
benchmark level addresses concerns about incentivizing purchases of
loans to higher-income borrowers in low-income census tracts. However,
the 4 percent benchmark level is also intended to encourage the
Enterprises to continue providing critically needed access to mortgage
credit in low-income census tracts. In response to commenters' concerns
about displacement, FHFA will continue to monitor data trends for this
subgoal during 2022-2024 and will share additional data with the public
as appropriate. FHFA will also continue to monitor the Enterprises in
its capacities as regulator and as conservator, and if FHFA determines
that the benchmark level for this subgoal 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.
5. Low-Income Areas Home Purchase Goal
The benchmark level for the overall low-income areas housing goal
is set annually by FHFA notice based on the benchmark level for the
low-income areas housing subgoal, plus an adjustment factor to include
areas affected by disasters. FHFA will continue to set a benchmark
level for the overall low-income areas housing goal that will include
mortgages to families with incomes less than or equal to 100 percent of
AMI who are located
[[Page 73652]]
in federally declared disaster areas.\22\ The final rule defines the
low-income areas housing goal to be the sum of (i) the benchmark level
for the minority census tracts subgoal, (ii) the benchmark level for
the low-income census tracts subgoal, and (iii) a disaster areas
increment set in accordance with existing practice. Each year, FHFA
notifies the Enterprises by letter of the benchmark level for the
overall low-income areas housing goal for that year, and this practice
will continue.
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\22\ Disaster declarations are listed on the FEMA website at
<a href="https://www.fema.gov/disasters">https://www.fema.gov/disasters</a>.
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6. 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. Consistent with the
proposed rule and FHFA's market model, the final rule sets the annual
low-income refinancing goal benchmark level for 2022-2024 at 26
percent. FHFA has determined that, despite the various challenges
associated with forecasting the low-income refinancing highlighted
above, a 26 percent benchmark level will serve as an appropriate target
that will channel Enterprise efforts in this segment.
[GRAPHIC] [TIFF OMITTED] TR28DE21.004
The current market forecast in Table 7 reflects a 90 percent confidence
level for this goal.
Recent performance and forecasts. As shown in Table 7, the market
for low-income refinancing has fluctuated during the period 2018 to
2020, as reflected in HMDA data. For example, the market level for low-
income refinancing was 30.7 percent in 2018 (in a strong purchase
market), 24.0 percent in 2019 (in a market that was transitioning away
from being strongly purchase), and 21.0 percent in 2020 (notable
refinance market). The performance of the Enterprises also fluctuated
during the 2018-2020 timeframe as the market turned from a
predominantly purchase money market to a refinance market. For example,
Fannie Mae exceeded the market levels for this goal in 2018 and 2020,
but not in 2019, and exceeded the benchmark level for each of the three
years. Freddie Mac exceeded the benchmark but not the market level in
2019, exceeded both the market and benchmark levels for 2019, and fell
short of both the benchmark and market levels for 2020.
Proposed rule and comments. The NPRM proposed increasing the low-
income refinancing benchmark level for 2022-2024 from 21 percent, which
had been in place since 2015, to 26 percent. FHFA noted that this
proposed benchmark level was close to the market forecast and well
within the confidence interval for each year during the period 2022-
2024. At that time, using data through July 2021, the average market
level forecast for 2022-2024 was 27.6 percent. Since the publication of
the NPRM, FHFA has updated the model using 2020 data from HMDA and
Moody's forecasts as of September 2021. The current model forecasts
that the average market level for 2022-2024 for this goal will be
lower, at 25.6 percent.
As previously noted, a majority of the commenters supported the
proposed benchmark levels for the single-family goals, including the
low-income refinancing goal. A number of these commenters stated that
the proposed higher benchmark level for the low-income refinancing
housing goal is necessary due to the crucial role the Enterprises play
in ensuring that low-income homeowners are able to refinance their
loans so they can save money on their mortgage payments. Several
commenters acknowledged the challenges associated with establishing the
benchmark level for the years 2022-2024 due to the volatility in
refinance projections and the sizable increase over the current
benchmark level. Nevertheless, none of the commenters recommended that
FHFA lower the proposed benchmark level. One commenter recommended that
FHFA increase the proposed benchmark level from 26 to 28 percent.
Fannie Mae commented that it may be challenged to meet the proposed
low-income refinance benchmark level if future refinance volume stalls
due to changes in interest rates.
FHFA determination. Consistent with the proposed rule, the final
rule sets the benchmark level for the low-income refinancing goal at 26
percent. This decision is supported by the Enterprises' year-to-date
performance for 2021. While the low-income refinancing goal is
difficult to forecast due to its sensitivity to interest rates, a 26
percent benchmark level is reasonable given the current forecast and
the two-part goal structure allowing the Enterprises to achieve the
goal by meeting either the benchmark level or the market level. For
this reason, FHFA
[[Page 73653]]
encourages the Enterprises to carefully monitor market conditions in
pursuing this goal. FHFA also notes that during periods of increased
refinance activity, the market, without additional intervention, would
typically refinance more higher balance transactions which also tend to
be made to higher income borrowers. Thus, the low-income share of
refinances, other things remaining the same, is lower in times of high
refinance activity than in times when the market is a purchase money
market. FHFA will also 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
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.
V. Multifamily Housing Goals
A. Factors Considered in Setting the Multifamily Housing Goal Benchmark
Levels
The Safety and Soundness Act requires FHFA to consider the
following six factors in setting the multifamily housing goals:
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.
FHFA considered each of these required statutory factors, as
described in detail in the proposed rule, in setting the benchmark
levels for the multifamily housing goals.\23\ The analysis below
describes trends in the overall multifamily mortgage market as they
apply to setting the final benchmark levels. Additional detailed
analyses of the trends in the overall multifamily mortgage market can
be found in the proposed rule's preamble.
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\23\ See <a href="https://www.govinfo.gov/content/pkg/FR-2021-08-25/pdf/2021-18008.pdf">https://www.govinfo.gov/content/pkg/FR-2021-08-25/pdf/2021-18008.pdf</a>.
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Current market outlook. 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 2021 State of the
Nation's Housing Report, the share of new multifamily completions of
buildings with at least 50 units significantly increased from 30
percent in 2011 to a peak of 62 percent in 2018.\24\ That share
remained high and was at 56 percent in 2020.\25\ The units in larger
multifamily buildings tend to have higher median rents, as noted in the
JCHS 2020 State of the Nation's Housing Report.\26\ In addition,
according to that JCHS Report, 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
within the same time period.\27\
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\24\ ``The State of the Nation's Housing 2021,'' Joint Center
for Housing Studies of Harvard University, June 2021, p. 28,
available at <a href="https://www.jchs.harvard.edu/sites/default/files/reports/files/Harvard_JCHS_State_Nations_Housing_2021.pdf">https://www.jchs.harvard.edu/sites/default/files/reports/files/Harvard_JCHS_State_Nations_Housing_2021.pdf</a>.
\25\ Ibid.
\26\ ``The State of the Nation's Housing 2020,'' Joint Center
for Housing Studies of Harvard University, December 2020, p. 32,
available at <a href="https://www.jchs.harvard.edu/sites/default/files/reports/files/Harvard_JCHS_The_State_of_the_Nations_Housing_2020_Report_Revised_120720.pdf">https://www.jchs.harvard.edu/sites/default/files/reports/files/Harvard_JCHS_The_State_of_the_Nations_Housing_2020_Report_Revised_120720.pdf</a>.
\27\ Ibid.
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The JCHS report of the rental market noted the growing presence of
cost-burdened renters in certain income segments. According to the 2021
JCHS report, 19 percent of households earning $25,000-$34,999 reported
being behind on housing payments in the first quarter of 2021. In
higher income households, 16 percent of households earning $35,000-
$44,999 and 11 percent for those earning $50,000-$74,999 reported being
behind on housing payments in the first quarter of 2021.\28\ However,
many households were already cost-burdened prior to the COVID-19
pandemic. For example, close to 50 percent of renter households spent
more than 30 percent of their incomes on housing in 2019. Specifically,
almost 82 percent of renter households earning less than $25,000 and 58
percent of renter households earning $25,000-$49,999 spent more than 30
percent of their incomes on housing in 2019.\29\ This is significant
because while the Safety and Soundness Act defines affordability for
the multifamily housing goals based on rents that are affordable at the
30 percent threshold, many low-income households are paying rents that
are significantly above that level.\30\
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\28\ ``The State of the Nation's Housing 2021,'' Joint Center
for Housing Studies of Harvard University, June 2021, p. 30,
available at <a href="https://www.jchs.harvard.edu/sites/default/files/reports/files/Harvard_JCHS_State_Nations_Housing_2021.pdf">https://www.jchs.harvard.edu/sites/default/files/reports/files/Harvard_JCHS_State_Nations_Housing_2021.pdf</a>.
\29\ ``The State of the Nation's Housing 2021,'' Joint Center
for Housing Studies of Harvard University, June 2021, Figure 31,
available at <a href="https://www.jchs.harvard.edu/sites/default/files/reports/files/Harvard_JCHS_State_Nations_Housing_2021.pdf">https://www.jchs.harvard.edu/sites/default/files/reports/files/Harvard_JCHS_State_Nations_Housing_2021.pdf</a>.
\30\ See 12 U.S.C. 4563(c).
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FHFA's consideration of the multifamily mortgage market addresses
the size of the multifamily mortgage market, as well as the subset of
the multifamily mortgage market affordable to low-income and very low-
income families. In August 2021, the Mortgage Bankers Association (MBA)
estimated 2020 multifamily mortgage originations to be $360 billion, a
slight decline of 1 percent relative to the previous year.\31\ This was
an upward revision from MBA's prior estimate (from February 2021) that
2020 multifamily originations had declined by 17 percent in dollar
terms from the previous year.\32\ MBA also forecasted in August 2021
that there would be a 13 percent increase in total multifamily mortgage
originations to $409 billion in 2021 and a more modest increase of 3
percent to $421 billion in 2022.
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\31\ See <a href="https://www.mba.org/2021-press-releases/august/mba-forecast-commercial/multifamily-lending-on-track-to-increase-31-percent-to-578-billion-in-2021">https://www.mba.org/2021-press-releases/august/mba-forecast-commercial/multifamily-lending-on-track-to-increase-31-percent-to-578-billion-in-2021</a>.
\32\ See <a href="https://www.mba.org/2021-press-releases/february/mba-forecast-commercial/multifamily-lending-to-increase-11-percent-to-486-billion-in-2021">https://www.mba.org/2021-press-releases/february/mba-forecast-commercial/multifamily-lending-to-increase-11-percent-to-486-billion-in-2021</a>.
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Based on nationwide CoStar data that FHFA obtains, on a year-over-
year basis, after rent growth slowed to 0.3 percent in 2020, it
accelerated in 2021, growing by 10.6 percent as of the end of the third
quarter compared to the end of the third quarter one year earlier.\33\
Significant rent increases were apparent in all subsegments of the
rental market based on building ratings defined by CoStar (i.e., ``1,
2, 3, 4, & 5 Star'' property designations).\34\ Rent increases were
most significant for 4 & 5 Star properties, at 13.6 percent, while
rents increased for 3 Star and 1 & 2 Star properties by 10.8 percent
and 4.3 percent, respectively, according to CoStar data. After rising
earlier in the COVID-19 pandemic, at 4.5 percent, vacancy rates are at
historic lows as of the third quarter of 2021, according to CoStar
data. Vacancies at 4 & 5 Star properties have declined from the COVID-
19 pandemic high of 10.6
[[Page 73654]]
percent to 6.2 percent in the third quarter of 2021. Vacancies in 3
Star properties also reached a historic low of 4.0 percent, as did
vacancies at 1 & 2 Star properties, which are the tightest, at 3.8
percent.
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\33\ FHFA tabulations of CoStar data.
\34\ CoStar building ratings definitions are available at
<a href="https://www.costar.com/docs/default-source/brs-lib/costar_buildingratingsystem-definition.pdf">https://www.costar.com/docs/default-source/brs-lib/costar_buildingratingsystem-definition.pdf</a>.
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Multifamily volume caps. As conservator for the Enterprises, FHFA
has set a yearly cap under the Conservatorship Scorecard that limits
the total amount by dollar volume unpaid principal balance of
multifamily loans 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. In October 2021, FHFA announced the new multifamily
loan purchase cap for the 2022 calendar year of $78 billion for each
Enterprise, a combined total of $156 billion.\35\
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\35\ FHFA Announces 2022 Multifamily Loan Purchase Caps for
Fannie Mae and Freddie Mac, October 13, 2021: <a href="https://www.fhfa.gov/Media/PublicAffairs/Pages/FHFA-Announces-2022-Multifamily-Loan-Purchase-Caps-for-Fannie-Mae-and-Freddie-Mac.aspx">https://www.fhfa.gov/Media/PublicAffairs/Pages/FHFA-Announces-2022-Multifamily-Loan-Purchase-Caps-for-Fannie-Mae-and-Freddie-Mac.aspx</a>.
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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 2022
Conservatorship Scorecard requires that at least 50 percent of each
Enterprises' multifamily loan purchases be mission-driven, affordable
housing. In addition, 25 percent of their business must be affordable
to households at 60 percent of AMI or below. Loans may qualify as
mission-driven under the Conservatorship Scorecard even if the loans do
not meet the criteria for counting units as affordable for purposes of
the Enterprise housing goals. Details about the multifamily cap and the
mission-driven requirements can be found in Appendix A of the 2022
Conservatorship Scorecard.\36\
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\36\ See <a href="https://www.fhfa.gov/Media/PublicAffairs/PublicAffairsDocuments/2022-Appendix-A-10132021.pdf">https://www.fhfa.gov/Media/PublicAffairs/PublicAffairsDocuments/2022-Appendix-A-10132021.pdf</a>.
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B. Final Multifamily Housing Goal Benchmark Levels for 2022
This final rule establishes multifamily housing goal benchmark
levels for 2022 only. FHFA considered comments recommending the
establishment of benchmark levels for fewer than three years, and the
differential impact of the COVID-19 pandemic on the various multifamily
origination market segments, and FHFA has concluded that establishing
multifamily housing goal benchmark levels for 2022 only is the prudent
course of action at this time. Several commenters recommended annual
multifamily goal benchmark levels, and one commenter encouraged two-
year benchmark levels for both single-family and multifamily goals. By
setting the multifamily goal benchmark levels for 2022 only, FHFA will
be able to take more recent economic data and conditions into account
when setting benchmark levels for the following year. FHFA plans to
publish an NPRM in the Federal Register in 2022 with proposed benchmark
levels for each of the multifamily housing goals. The NPRM will also
request additional information about the Enterprises' role in the small
multifamily market, along with any other issues that FHFA finds
appropriate to address in the rulemaking.
This final rule sets the multifamily housing goals at benchmark
levels intended to encourage the Enterprises to provide liquidity and
to support various multifamily finance market segments in a safe and
sound manner. The Enterprises have served as a stabilizing force in the
multifamily market, particularly throughout the COVID-19 pandemic.
Since 2008, the Enterprises' portfolios of loans on multifamily
affordable housing properties have experienced low levels of
delinquency and default, similar to the performance of the Enterprises'
portfolios of loans on market rate properties. In light of this
performance, the Enterprises should be able to sustain or increase
their volume of purchases of loans on affordable multifamily housing
properties without adversely impacting the Enterprises' safety and
soundness or negatively affecting the performance of their total loan
portfolios.
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. The final rule sets the multifamily low-income housing
goal benchmark level for both Enterprises for 2022 at 415,000 units,
consistent with the benchmark level that was proposed for 2022-2024.
FHFA has determined that this benchmark level is reasonable and
achievable for each Enterprise based on the multifamily volume cap for
2022, the comments received, and FHFA's consideration of the statutory
factors discussed above.
[GRAPHIC] [TIFF OMITTED] TR28DE21.005
Recent performance. As shown in Table 8, both Enterprises have
exceeded the applicable multifamily low-income goal benchmark levels by
a significant amount each year since 2016. In most years, each
Enterprise has also come close to or exceeded the new benchmark level
of 415,000 units that will apply in 2022. Freddie Mac historically has
[[Page 73655]]
outperformed Fannie Mae on the multifamily low-income goal in terms of
volume of low-income multifamily units.
Proposed rule and comments. A number of commenters, including
Freddie Mac, supported the proposal to increase the multifamily low-
income benchmark level, describing it as ambitious but attainable for
the Enterprises. Overall, commenters supported FHFA making affordable
rental housing a priority by setting higher multifamily housing goal
benchmark levels. While one commenter advocated for higher multifamily
goal benchmark levels than proposed, two commenters stated that the
proposed benchmark levels were too high. Fannie Mae commented that the
proposed multifamily low-income benchmark level would only be
attainable if the Conservatorship Scorecard multifamily volume cap is
maintained at or increased from $78 billion in 2022 and future years.
FHFA determination. Based on FHFA's consideration of the statutory
factors for the multifamily housing goals, as well as the general
support from some commenters for the proposed increase in the
multifamily low-income housing goal benchmark level, FHFA has
determined that benchmark level for this goal for both Enterprises for
2022 should be set at 415,000 units, consistent with the proposed rule.
While this benchmark level is a significant increase from the benchmark
level of 315,000 units for 2021, the increase reflects FHFA's
commitment to ensuring that the Enterprises provide substantial support
for affordable multifamily housing.
2. Multifamily Very Low-Income Housing Subgoal
The multifamily very low-income housing subgoal is based on the
total number of rental units in multifamily properties financed by
mortgages purchased by the Enterprises that are affordable to very low-
income families, defined as families with incomes no greater than 50
percent of AMI. The final rule sets the multifamily very low-income
housing subgoal benchmark level for both Enterprises for 2022 at 88,000
units, consistent with the benchmark level that was proposed for 2022-
2024. FHFA has determined that this benchmark level is reasonable and
achievable for each Enterprise based on the multifamily volume cap for
2022, the comments received, and FHFA's consideration of the statutory
factors discussed above.
[GRAPHIC] [TIFF OMITTED] TR28DE21.006
Recent performance. As shown in Table 9, both Enterprises have
exceeded the applicable multifamily very low-income subgoal benchmark
levels by a significant amount almost every year from 2016-2020. In
most years, one or both Enterprises have also come close to or exceeded
the new benchmark level that will apply in 2022.
Proposed rule and comments. A number of commenters generally
supported the proposed increased benchmark level for the multifamily
very low-income housing subgoal, with some commenters describing it as
reasonable and meaningful. Freddie Mac praised the proposed benchmark
level as requiring Enterprises to maintain a strong and meaningful
commitment to supporting affordable housing. While one commenter viewed
the proposed benchmark level as too low, two commenters stated that the
proposed benchmark level was too high. Fannie Mae expressed concern
that the proposed benchmark level would be achievable only if the
current Conservatorship Scorecard multifamily cap is maintained at or
increased from $78 billion in 2022.
FHFA determination. Based on FHFA's consideration of the statutory
factors for the multifamily housing goals, as well as the general
support from some commenters for the proposed increased benchmark level
for the multifamily very low-income housing subgoal, FHFA has
determined that the benchmark level for this subgoal for both
Enterprises for 2022 should be set at the same level as in the proposed
rule, i.e., 88,000 units. This benchmark level is a significant
increase over the benchmark level in place since 2015. However, both
Enterprises have overperformed the benchmark level by a wide margin
since 2016. FHFA considers the increased benchmark level to be
attainable for the Enterprises in 2022, and the increase reflects
FHFA's commitment to ensuring that the Enterprises provide substantial
support for affordable multifamily housing.
3. Small Multifamily Low-Income Housing Subgoal
A small multifamily property is defined for purposes of the housing
goals 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. The
final rule sets the small multifamily low-income housing subgoal
benchmark level for 2022 at different levels for each Enterprise. The
benchmark level for Freddie Mac will be 23,000 units for 2022, while
the benchmark level for Fannie Mae will be 17,000 units for 2022. FHFA
has determined that these benchmark levels are reasonable and
achievable for each Enterprise based on the multifamily volume cap for
2022, the comments received, and FHFA's consideration of the statutory
factors discussed above.
[[Page 73656]]
[GRAPHIC] [TIFF OMITTED] TR28DE21.007
Recent performance. As shown in Table 10, both Enterprises achieved
the small multifamily low-income subgoal for the years 2016-2020.
Freddie Mac has performed substantially above the benchmark level for
this subgoal, significantly outpacing Fannie Mae's performance on the
subgoal. For example, Freddie Mac's average performance on the subgoal
over the past three years was 34,114 units, while Fannie Mae averaged
17,173 units during the same period. The Enterprises have different
multifamily business models that complement one another and ensure
continued liquidity in the multifamily market. Given these differences,
each Enterprise must set its own credit risk tolerance for multifamily
products. This produces variation in the number of affordable small
units each Enterprise can support without crowding out private capital
sources. Therefore, FHFA has decided to set different thresholds for
each Enterprise for the affordable small multifamily subgoal that
respond to these factors. These benchmarks should continue to encourage
the Enterprises' participation in this market and ensure the
Enterprises have the expertise necessary to serve this market should
private sources of financing become unable or unwilling to lend on
small multifamily properties.
Proposed rule and comments. Most commenters were generally
supportive of the proposed increased benchmark level for the small
multifamily subgoal. Freddie Mac expressed support for the proposed
benchmark level, which it described as ambitious and requiring the
Enterprises to maintain a strong and meaningful commitment to
supporting affordable multifamily housing. However, Fannie Mae
expressed concerns about its ability to achieve the proposed benchmark
level. Fannie Mae also stated that substantial changes in the
Enterprise's business mix, deal flow, and underwriting standards might
be necessary in order to accommodate the proposed increase in the
benchmark level.
FHFA determination. FHFA recognizes that the Enterprises have
different approaches to serving this segment of the multifamily market
and ensuring the safety and soundness of the Enterprises continues to
be a fundamental priority for FHFA. Monitoring trends in the small
multifamily market is challenging, and FHFA's non-public Enterprise
reporting data suggests that loan performance for small multifamily
properties were hit particularly hard in 2020 as a result of the COVID-
19 pandemic. However, small multifamily properties are a key source of
affordable rental housing, and maintaining consistent access to
secondary market liquidity for such housing is critical.
At 23,000 units, the proposed small multifamily subgoal benchmark
level for 2022 was a substantial increase from the 10,000-unit
benchmark level that has been in place since 2017. In a departure from
the proposed rule, the final rule establishes separate benchmark levels
for the small multifamily low-income housing subgoal for each
Enterprise. Although both Enterprises surpassed the small multifamily
subgoal benchmark levels during this timeframe (from 2017-2020),
Freddie Mac far exceeded the benchmark level. As a result, Freddie Mac
is positioned to meet, if not exceed, the proposed small multifamily
subgoal benchmark level for 2022. In light of historical performance on
this subgoal, in addition to supportive comments on this proposed
increase in the benchmark level, FHFA has determined that the proposed
benchmark level of 23,000 units for 2022 is reasonable and meaningful
for Freddie Mac. Accordingly, the final rule sets the final benchmark
level for the small multifamily low-income housing subgoal at 23,000
units for Freddie Mac in 2022.
FHFA notes that the proposed small multifamily low-income benchmark
level of 23,000 units for 2022 would have been a significant increase
over Fannie Mae's historical performance under this subgoal, as well as
a significant increase over the benchmark level of 10,000 units that
has been in place since 2017. However, FHFA has determined that an
increase in the benchmark level for Fannie Mae is reasonable and
meaningful for Fannie Mae, and FHFA is setting the benchmark level for
2022 at 17,000 units for Fannie Mae. This benchmark level should
continue to encourage Fannie Mae to provide necessary liquidity to this
market segment while operating in a safe and sound manner.
VI. Section-by-Section Analysis of Other Changes
The final rule revises other provisions of the Enterprise housing
goals regulation, as discussed below. These 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.
A. Definition of ``Designated Disaster Area''--Sec. 1282.1
Consistent with the proposed rule, the final rule revises the
definition of ``designated disaster area'' in Sec. 1282.1 to refer to
major disasters ``where housing assistance payments were authorized by
FEMA.''
Comments on Proposed Rule. FHFA received one comment on this
proposed revision. Fannie Mae supported the proposed revision based on
its understanding that the intent of the proposal is to focus disaster-
related housing goal credit on discrete and localized events rather
than broad-based
[[Page 73657]]
conditions like the COVID-19 pandemic response.
FHFA determination. 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 of counting
only those census tracts where housing assistance payments were
authorized by FEMA.
For those reasons, the final rule amends Sec. 1282.1 to clarify
the regulation with respect to FHFA's existing practice by revising 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.''
B. Newly Available Data--Removal of Sec. 1282.15(i)
Consistent with the proposed rule, the final rule removes 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.
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.\37\ 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.
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\37\ 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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Comments on Proposed Rule and FHFA determination. FHFA did not
receive any comments on this change, and the final rule adopts the
change as proposed.
C. Loan Modifications--Removal of Sec. 1282.16(c)(10)
Consistent with the proposed rule, the final rule removes Sec.
1282.16(c)(10) as it is no longer necessary in light of the expiration
of the Home Affordable Modification Program (HAMP) modification
program.
Section 1282.16(c)(10) of the current Enterprise housing goals
regulation provides that the permanent modification of a mortgage under
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.
Comments on Proposed Rule. FHFA received one comment on this
proposed revision. Fannie Mae acknowledged the need to remove the
reference to the HAMP modification program but suggested that FHFA
modify the regulation to take into account that the Enterprises have
had and will continue to have additional loan modification programs.
Fannie Mae recommended that FHFA add the phrase ``in accordance with a
loan modification program implemented by the Enterprise'' to the
existing regulation.
FHFA determination. The final rule adopts the change as proposed.
The final rule does not adopt Fannie Mae's recommendation to provide
housing goals credit for other Enterprise loan modification programs.
While FHFA supports the robust loss mitigation programs that the
Enterprises have developed, treating all loan modifications as
refinances for purposes of the housing goals would result in a
misalignment between the Enterprise performance as measured and the
benchmark level forecasts and market levels calculated by FHFA.
VII. Paperwork Reduction Act
This final rule does 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 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 this final
rule under the Regulatory Flexibility Act. FHFA certifies that the 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.
IX. Congressional Review Act
In accordance with the Congressional Review Act (5 U.S.C. 801 et
seq.), FHFA has determined that this final rule is a major rule and has
verified this determination with OMB.
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 amends 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
[[Page 73658]]
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. For the year 2022, the
benchmark level for each 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 2022.
(c) Multifamily very low-income housing subgoal. For the year 2022,
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 2022.
(d) Small multifamily low-income housing subgoal. For the year
2022, the benchmark level for each Enterprise's purchases of mortgages
on small multifamily properties affordable to low-income families shall
be, for Freddie Mac, at least 23,000 dwelling units affordable to low-
income families in small multifamily properties financed by mortgages
purchased by that Enterprise in 2022, and for Fannie Mae, at least
17,000 such dwelling units.
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. 2021-28168 Filed 12-27-21; 8:45 am]
BILLING CODE 8070-01-P
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