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Proposed Rule2024-19261

2025-2027 Enterprise Housing Goals

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Published

August 29, 2024

Issuing agencies

Federal Housing Finance Agency

Abstract

The Federal Housing Finance Agency (FHFA) is issuing a proposed rule and requesting comments on the housing goals for Fannie Mae and Freddie Mac (the Enterprises) for 2025 through 2027 as required by the Federal Housing Enterprises Financial Safety and Soundness Act of 1992. The housing goals and subgoals include separate categories for single-family and multifamily mortgages on housing affordable to low- income and very low-income families, among others. The proposed rule also includes criteria for when housing plans would be required for 2025-2027, and it makes several technical changes to enhance clarity and conform the regulation to existing practice.

Full Text

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<title>Federal Register, Volume 89 Issue 168 (Thursday, August 29, 2024)</title>
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[Federal Register Volume 89, Number 168 (Thursday, August 29, 2024)]
[Proposed Rules]
[Pages 70127-70145]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-19261]

========================================================================
Proposed Rules
Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.

========================================================================

Federal Register / Vol. 89, No. 168 / Thursday, August 29, 2024 /
Proposed Rules

[[Page 70127]]

FEDERAL HOUSING FINANCE AGENCY

12 CFR Part 1282

RIN 2590-AB34

2025-2027 Enterprise Housing Goals

AGENCY: Federal Housing Finance Agency.

ACTION: Proposed rule.

-----------------------------------------------------------------------

SUMMARY: The Federal Housing Finance Agency (FHFA) is issuing a
proposed rule and requesting comments on the housing goals for Fannie
Mae and Freddie Mac (the Enterprises) for 2025 through 2027 as required
by the Federal Housing Enterprises Financial Safety and Soundness Act
of 1992. The housing goals and subgoals include separate categories for
single-family and multifamily mortgages on housing affordable to low-
income and very low-income families, among others. The proposed rule
also includes criteria for when housing plans would be required for
2025-2027, and it makes several technical changes to enhance clarity
and conform the regulation to existing practice.

DATES: FHFA will accept written comments on the proposed rule on or
before October 28, 2024.

ADDRESSES: You may submit your comments on the proposed rule,
identified by regulatory information number (RIN) 2590-AB34, by any one
of the following methods:
<bullet> Agency Website: <a href="https://www.fhfa.gov/regulation/federal-register?comments=open">https://www.fhfa.gov/regulation/federal-register?comments=open</a>.
<bullet> Federal eRulemaking Portal: <a href="https://www.regulations.gov">https://www.regulations.gov</a>.
Follow the instructions for submitting comments. If you submit your
comment to the Federal eRulemaking Portal, please also send it by email
to FHFA at <a href="/cdn-cgi/l/email-protection#095b6c6e4a6664646c677d7a496f616f68276e667f">[email&#160;protected]</a> to ensure timely receipt by FHFA.
Include the following information in the subject line of your
submission: Comments/RIN 2590-AB34.
<bullet> Hand Delivered/Courier: The hand delivery address is:
Clinton Jones, General Counsel, Attention: Comments/RIN 2590-AB34,
Federal Housing Finance Agency, 400 Seventh Street SW, Washington, DC
20219. Deliver the package at the Seventh Street entrance Guard Desk,
First Floor, on business days between 9 a.m. and 5 p.m. EST.
<bullet> U.S. Mail, United Parcel Service, Federal Express, or
Other Mail Service: The mailing address for comments is: Clinton Jones,
General Counsel, Attention: Comments/RIN 2590-AB34, Federal Housing
Finance Agency, 400 Seventh Street SW, Washington, DC 20219. Please
note that all mail sent to FHFA via U.S. Mail is routed through a
national irradiation facility, a process that may delay delivery by
approximately two weeks.

FOR FURTHER INFORMATION CONTACT: For general questions, please contact
<a href="/cdn-cgi/l/email-protection#ce83abaaa7af87a0bfbba7bca7abbd8e8886888fe0a9a1b8">[email&#160;protected]</a>. For technical questions, please contact Ted
Wartell, Associate Director, Housing & Community Investment, Division
of Housing Mission and Goals, (202) 649-3157, <a href="/cdn-cgi/l/email-protection#9ecafbfab0c9ffeceafbf2f2def8f6f8ffb0f9f1e8">[email&#160;protected]</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#df8fbebbb2beacb6b1b6f18dbeb2beb19fb9b7b9bef1b8b0a9">[email&#160;protected]</a>; or Carey Whitehead, Assistant General
Counsel, (202) 649-3630, <a href="/cdn-cgi/l/email-protection#591a382b3c20770e31302d3c313c383d193f313f38773e362f">[email&#160;protected]</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. Comments

FHFA invites comments on all aspects of the proposed rule and will
take all comments into consideration before issuing a final rule.
Comments will be posted to the electronic rulemaking docket on the FHFA
public website at <a href="https://www.fhfa.gov">https://www.fhfa.gov</a>, except as described below.
Commenters should submit only information that the commenter wishes to
make available publicly. FHFA may post only a single representative
example of identical or substantially identical comments, and in such
cases will generally identify the number of identical or substantially
identical comments represented by the posted example. FHFA may, in its
discretion, redact or refrain from posting all or any portion of any
comment that contains content that is obscene, vulgar, profane, or
threatens harm. All comments, including those that are redacted or not
posted, will be retained in their original form in FHFA's internal
rulemaking file and considered as required by all applicable laws.
Commenters that would like FHFA to consider any portion of their
comment exempt from disclosure on the basis that it contains trade
secrets, or financial, confidential or proprietary data or information,
should follow the procedures in section IV.D. of FHFA's Policy on
Communications with Outside Parties in Connection with FHFA
Rulemakings, see <a href="https://www.fhfa.gov/sites/default/files/documents/Ex-Parte-Communications-Public-Policy_3-5-19.pdf">https://www.fhfa.gov/sites/default/files/documents/Ex-Parte-Communications-Public-Policy_3-5-19.pdf</a>. FHFA cannot guarantee
that such data or information, or the identity of the commenter, will
remain confidential if disclosure is sought pursuant to an applicable
statute or regulation. See 12 CFR 1202.8, 12 CFR 1214.2, and the FHFA
FOIA Reference Guide at <a href="https://www.fhfa.gov/about/foia-reference-guide">https://www.fhfa.gov/about/foia-reference-guide</a>
for additional information.

[[Page 70128]]

II. Background

A. Statutory and Regulatory Background for Enterprise Housing Goals

The Federal Housing Enterprises Financial Safety and Soundness Act
of 1992 (Safety and Soundness Act) requires FHFA to establish several
annual housing goals for both single-family and multifamily mortgages
purchased by the Enterprises.\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\
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\1\ 12 U.S.C. 4561(a).
\2\ 12 U.S.C. 4501(7).
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Since 2010, FHFA has established annual housing goals for
Enterprise purchases of single-family and multifamily mortgages
consistent with the requirements of the Safety and Soundness Act. The
structure of the housing goals and the parameters for determining how
mortgage purchases are counted or not counted are defined in the
housing goals regulation.\3\ The most recent amendments to the housing
goals regulation were a final rule published in 2021 to establish
benchmark levels for the 2022-2024 single-family housing goals and the
2022 multifamily housing goals, and a final rule published in 2022 to
establish benchmark levels for the 2023-2024 multifamily housing
goals.\4\ This proposed rule would establish benchmark levels for the
single-family and multifamily housing goals for 2025-2027.
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\3\ 12 CFR part 1282.
\4\ See 86 FR 73641 (Dec. 28, 2021), 87 FR 78837 (Dec. 23,
2022). The 2021 final rule departed from historical FHFA practice of
establishing single-family and multifamily housing goals at three-
year intervals. As stated in the preamble to the 2021 final rule,
this choice was motivated by the unique market conditions created by
the COVID-19 pandemic.
---------------------------------------------------------------------------

Single-family housing goals. The single-family housing goals
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.\5\ For purposes
of the single-family housing goals, families that reside in low-income
areas \6\ include: (1) families in low-income census tracts, defined as
census tracts with median income less than or equal to 80 percent of
area median income (AMI); \7\ (2) families with incomes less than or
equal to 100 percent of AMI who reside in minority census tracts
(defined as census tracts with a minority population of at least 30
percent and a tract median income of less than 100 percent of AMI); \8\
and (3) families with incomes less than or equal to 100 percent of AMI
who reside in designated disaster areas.\9\ The Enterprise housing
goals regulation also includes subgoals, within the low-income areas
housing goal, that focus on single-family housing occupied by families
in low-income census tracts and moderate-income families in minority
census tracts.\10\ Performance on the single-family home purchase goals
and subgoals 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 single-family
refinance mortgages for low-income families, and performance on the
refinance goal is determined in a similar way.
---------------------------------------------------------------------------

\5\ 12 U.S.C. 4562(a)(1).
\6\ See 12 U.S.C. 4502(28); 12 CFR 1282.1 (definition of
``families in low-income areas'').
\7\ 12 CFR 1282.1 (par. (i) of definition of ``families in low-
income areas'').
\8\ 12 U.S.C. 4502(29); 12 CFR 1282.1 (par. (ii) of definition
of ``families in low-income areas'' and definition of ``minority
census tract'').
\9\ 12 U.S.C. 4502(28); 12 CFR 1282.1 (definition of
``designated disaster area'' and par. (iii) of definition of
``families in low-income areas'').
\10\ 12 CFR 1282.12(f).
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Under the Safety and Soundness Act, the single-family housing goals
are limited to mortgages on owner-occupied housing with one to four
units. The single-family goals cover first lien, conventional,
conforming mortgages, meaning mortgages that are not subordinate to
other mortgage liens, that are not insured or guaranteed by the Federal
Housing Administration or another government agency, and that have
principal balances that do not exceed the conforming loan limits for
Enterprise mortgages.
Two-part evaluation approach for single-family housing goals. The
Enterprises' performance on the single-family housing goals is
evaluated using a two-part approach that compares the goal-qualifying
share of each Enterprise's mortgage purchases to two separate measures:
a benchmark level and a market level. To meet a single-family housing
goal, the percentage of mortgage purchases by an Enterprise that
qualifies for credit under each goal must equal or exceed either the
benchmark level or the market level for that year. The benchmark level
is set prospectively by rulemaking based on various factors set forth
in the Safety and Soundness Act.\11\ The market level is determined
retrospectively for each year, based on the actual goal-qualifying
share of the overall market as measured by the Home Mortgage Disclosure
Act \12\ (HMDA) data for that year. The overall market that FHFA uses
for setting both the prospective benchmark level and the retrospective
market level consists of all single-family, owner-occupied,
conventional, conforming mortgages that would be eligible for purchase
by either Enterprise. It includes loans purchased by the Enterprises as
well as comparable loans held in a lender's portfolio. It also includes
any loans that are part of a private label security (PLS), although few
such securities have been issued for conventional conforming mortgages
since 2008. Since 2018, several new HMDA data fields have become
available. FHFA continues to monitor reporting of these new fields to
consider potential adjustments to the way FHFA measures the overall
market. Because FHFA's econometric market models use past years' data
to construct the models, a potential transition to incorporate any new
data variables will require time to obtain an adequate input data
series.
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\11\ See 12 U.S.C. 4562(e).
\12\ 12 U.S.C. 2801 et seq.
---------------------------------------------------------------------------

While the retrospective market levels measure mortgage originations
in a particular year, the performance of the Enterprises on the housing
goals includes all Enterprise purchases in that year, regardless of the
year in which the loan was originated. This includes any loans that are
originated in one year and purchased by an Enterprise in a later year.
Multifamily housing goals. The multifamily housing goals 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 and very low-income
families. The Safety and Soundness Act also requires reporting on
smaller properties, and the Enterprise housing goals regulation
includes a small multifamily low-income subgoal for properties with 5-
50 units. The multifamily housing goals include all Enterprise
multifamily mortgage purchases, regardless of the purpose of the loan.
The multifamily housing goals evaluate the performance of the
Enterprises based on the share of affordable units in properties backed
by mortgages purchased by an Enterprise. The Enterprise housing goals
regulation does not include a retrospective market level measure for
the multifamily housing goals, due in part to a lack of

[[Page 70129]]

comprehensive data about the multifamily market. As a result, FHFA
currently measures Enterprise multifamily housing goals performance
against the benchmark levels only.
The Safety and Soundness Act requires that affordability for rental
units under the multifamily housing goals be determined based on rents
that ``[do] not exceed 30 percent of the maximum income level of such
income category, with appropriate adjustments for unit size as measured
by the number of bedrooms.'' \13\ The Enterprise housing goals
regulation considers the net rent paid by the renter, i.e., the rent is
decreased by any subsidy payments that the renter may receive,
including housing assistance payments.\14\
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\13\ See 12 U.S.C. 4563(c). The 30 percent test for measuring
affordability traces back to the ``Brooke Amendment,'' which amended
the United States Housing Act of 1937 to cap public housing rents
(Pub. L. 91-152). For purposes of the multifamily housing goals, to
be affordable at the 80 percent of AMI level, the rents must not
exceed 30 percent of the renter's income which must not exceed 80
percent of AMI. See <a href="https://www.huduser.gov/portal/pdredge/pdr_edge_featd_article_092214.html">https://www.huduser.gov/portal/pdredge/pdr_edge_featd_article_092214.html</a> for a description of the Brooke
Amendment and background on the notion of affordability embedded in
the housing goals.
\14\ See 12 CFR 1282.1 (par. (i)(B) of definition of ``rent'').
\15\ See 12 CFR 1282.14(d).
\16\ See 12 U.S.C. 4566(b); 12 CFR 1282.21(a).
\17\ See 12 CFR 1282.12(e). The benchmark level for 2024 is 19
percent. The notices setting this benchmark level can be found on
FHFA's website at <a href="https://www.fhfa.gov/sites/default/files/2024-06/2024-Low-Income-Areas-Goal-Fannie-Mae.pdf">https://www.fhfa.gov/sites/default/files/2024-06/2024-Low-Income-Areas-Goal-Fannie-Mae.pdf</a> and <a href="https://www.fhfa.gov/sites/default/files/2024-06/2024-Low-Income-Areas-Goal-Freddie-Mac.pdf">https://www.fhfa.gov/sites/default/files/2024-06/2024-Low-Income-Areas-Goal-Freddie-Mac.pdf</a>.
---------------------------------------------------------------------------

B. Adjusting the Housing Goals

If, after publication of the final rule establishing the Enterprise
housing goals for 2025-2027, new information indicates that any of the
single-family or multifamily housing goals are not feasible in light of
market conditions or the safety and soundness of the Enterprises, or
for any other reason, FHFA may take any steps that are necessary and
appropriate to respond, consistent with the Safety and Soundness Act
and the Enterprise housing goals regulation.
For example, under the Safety and Soundness Act and the Enterprise
housing goals regulation, FHFA is permitted to reduce the benchmark
levels in response to an Enterprise petition for reduction for any of
the single-family or multifamily housing goals 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.\15\
The Safety and Soundness Act and the Enterprise housing goals
regulation also consider the possibility that achievement of a
particular housing goal may or may not have been feasible for an
Enterprise. 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.\16\
If FHFA determines that an Enterprise did not 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.
FHFA is proposing in Sec. 1282.22 new criteria that would apply in
assessing whether a housing plan would be required for certain single-
family housing goals during the 2025-2027 housing goals period. The
purpose of these ``Enforcement Factors,'' discussed below, is to
encourage the Enterprises to focus on meeting the market levels rather
than focusing exclusively on the housing goals benchmark levels in the
event of unexpected disruptions to the market that occur after
publication of the final rule.

C. Housing Goals Under Conservatorship

On September 6, 2008, FHFA placed each Enterprise into
conservatorship. Although the Enterprises remain in conservatorship,
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.

III. Summary of Proposed Rule

A. Benchmark Levels for the Single-Family Housing Goals and Subgoals

This proposed rule would establish the benchmark levels for the
single-family housing goals for 2025-2027 as follows:

----------------------------------------------------------------------------------------------------------------
Proposed
benchmark
Goal or subgoal Criteria level for
2025-2027
(percent)
----------------------------------------------------------------------------------------------------------------
Low-Income Home Purchase Goal................... Home purchase mortgages on single-family, owner- 25
occupied properties, to borrowers with incomes
no greater than 80 percent of area median income
(AMI).
Very Low-Income Home Purchase Goal.............. Home purchase mortgages on single-family, owner- 6
occupied properties, to borrowers with incomes
no greater than 50 percent of AMI.
Low-Income Refinance Goal....................... Refinance mortgages on single-family, owner- 26
occupied properties, to borrowers with incomes
no greater than 80 percent of AMI.
Minority Census Tracts Home Purchase Subgoal.... Home purchase mortgages on single-family, owner- 12
occupied properties to borrowers with incomes no
greater than 100 percent of AMI in minority
census tracts \1\.
Low-Income Census Tracts Home Purchase Subgoal.. (i) Home purchase mortgages on single-family, 4
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.
----------------------------------------------------------------------------------------------------------------
\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.

The low-income areas housing goal benchmark level is not included
in this proposed rule. Under the existing regulation, the benchmark
level will be the sum of the benchmark levels for the minority census
tracts subgoal and the low-income census tracts subgoal established
above, plus an additional amount that will be determined separately by
FHFA by notice that takes into account families in disaster areas with
incomes no greater than 100 percent of AMI.\17\

[[Page 70130]]

B. Proposed Benchmark Levels for the Multifamily Housing Goals and
Subgoal and Clarification on Terminology

The proposed rule would establish the benchmark levels for the
multifamily housing goals and subgoal for 2025-2027 as follows:

----------------------------------------------------------------------------------------------------------------
Proposed
benchmark
Goals and subgoal Criteria level for
2025-2027
(percent)
----------------------------------------------------------------------------------------------------------------
Low-Income Goal................................. Percentage share of all goal-eligible units in 61
multifamily properties financed by mortgages
purchased by the Enterprises in the year that
are affordable to low-income families, defined
as families with incomes less than or equal to
80 percent of AMI.
Very Low-Income Goal............................ Percentage share of all goal-eligible units in 14
multifamily properties financed by mortgages
purchased by the Enterprises in the year that
are affordable to very low-income families,
defined as families with incomes less than or
equal to 50 percent of AMI.
Small Multifamily Low-Income Subgoal............ Percentage share of all goal-eligible units in 2
all multifamily properties financed by mortgages
purchased by the Enterprises in the year that
are units in small multifamily properties
affordable to low-income families, defined as
families with incomes less than or equal to 80
percent of AMI.
----------------------------------------------------------------------------------------------------------------

This proposed rule also would revise the current regulation to
refer to the multifamily very low-income housing benchmark level as a
housing goal, instead of referring to it as a subgoal. The Safety and
Soundness Act requires FHFA to establish additional requirements for
units affordable to very low-income families when it establishes the
goal for mortgages on multifamily properties that finance dwelling
units affordable to low-income families.\18\ Revising the text of the
Enterprise housing goals regulation to refer to the multifamily very
low-income housing goal as a ``goal'' is consistent with the Safety and
Soundness Act, with the reference to the single-family very low-income
home purchase benchmark level as a goal and not a subgoal, and with
FHFA's own practice of referring to ``multifamily housing goals.''
---------------------------------------------------------------------------

\18\ 12 U.S.C. 4563(a)(2).
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C. Enforcement Factors

FHFA is proposing new criteria for the 2025-2027 housing goals
period that clarify when housing plans would be required. Section
1282.22 would establish Enforcement Factors that FHFA will apply in
determining whether to require a housing plan if an Enterprise fails to
meet certain single-family housing goals in 2025 through 2027. FHFA
expects that this proposal will provide guidance to the Enterprises
should the market for the single-family low-income home purchase, very
low-income home purchase, or low-income refinance segment turn out to
be significantly lower than what is forecasted in this rule. FHFA is
seeking public comment on all aspects of these Enforcement Factors.
FHFA is proposing this change because the mortgage market has
experienced unexpected challenges that continue to produce uncertainty.
Interest rates increased in 2022 and 2023, home prices remained
elevated, and housing supply remained constricted, resulting in low
mortgage loan volumes. Lender competition for the smaller number of
loans escalated, and the Enterprises struggled to manage their
acquisition mix to meet the benchmark levels for the low-income home
purchase and very low-income home purchase housing goals. The 2022-2024
housing goals, which were designed to be ambitious in the rule that was
finalized in 2021, were set in advance of these recent, unexpected
market changes.
There remains a great deal of uncertainty with respect to the
overall volume and composition of the mortgage market in 2025-2027.
FHFA is proposing Enforcement Factors that would be considered when
determining whether an Enterprise would be required to submit a housing
plan if it fails to meet certain single-family housing goals in 2025-
2027. FHFA expects that this will allow the Enterprises to focus on
meeting or exceeding the expected market level as opposed to the
benchmark level in the event that market levels are significantly below
the benchmark level established in the regulation. Additionally, the
Enforcement Factors should encourage the Enterprises to focus on
estimating and forecasting the market levels for the different housing
goals. Specifically, FHFA is proposing that for 2025-2027, if the
benchmark level for a single-family housing goal is higher than the
market level for the goal, an Enterprise that fails to meet the goal
will not be required to submit a housing plan if the Enterprise's
performance meets or exceeds: (i) the market level minus 1.3 percentage
points for the low-income home purchase goal; (ii) the market level
minus 0.5 percentage points for the very low-income home purchase goal;
or (iii) the market level minus 1.3 percentage points for the low-
income refinance goal. To ensure that an Enterprise does not rely
entirely on these Enforcement Factors, if an Enterprise fails to meet
one of the applicable goals in both 2025 and 2026, the Enforcement
Factor would not apply to that goal in 2027.

D. Proposed Technical Changes

The proposed rule would make minor technical changes intended to
better conform the regulation to statutory text and existing FHFA
practices and procedures, as further discussed below. FHFA welcomes
comments on these technical changes and any other technical changes or
corrections that are necessary. FHFA may include additional technical
changes or corrections in the final rule based on comments received.
The proposed rule would amend the definition of ``designated
disaster area'' to reflect that major disasters are designated
(declared) by the President under the Robert T. Stafford Disaster
Relief and Emergency Assistance Act (42 U.S.C. 5121 et seq.).
The proposed rule also would make technical changes to consistently
reference goals and subgoals. For example, in the current regulation,
Sec. 1282.11(a)(1) refers to the various housing goals, including one
single-family subgoal, one multifamily special affordable housing goal,
and two multifamily special affordable housing subgoals. The proposed
rule would modify that paragraph to reference the two single-family,
owner-occupied, purchase money mortgage housing subgoals. The proposed
rule also would modify that paragraph to remove the words ``special
affordable'' in each

[[Page 70131]]

reference to a multifamily housing goal or subgoal.
In addition, the proposed rule would make other, non-substantive
changes to the enforcement provisions located at Sec. Sec. 1282.20 and
1282.21 of the current Enterprise housing goals regulation. Section
1282.20 currently addresses both preliminary and final determinations
of housing goals compliance and would be divided into two distinct
sections: Sec. 1282.20 would address preliminary determinations of
housing goals compliance; and Sec. 1282.21 would address final
determinations of housing goals compliance. As proposed, these sections
would include revised wording that conforms to FHFA's established
practices.
Current Sec. 1282.21 addresses housing plans and would accordingly
be redesignated as Sec. 1282.22 and amended to include the proposed
Enforcement Factors provisions described above in paragraph (b). The
provisions in current Sec. 1282.21(b) through (e) would be relocated
to proposed Sec. 1282.22(c) through (f). Paragraph (f) would include
technical changes to clarify that if a proposed amended housing plan is
not acceptable to the Director, the Director may afford the Enterprise
15 days to submit additional amendments to its proposed plan for
approval or disapproval, rather than requiring a ``new'' proposed plan.
Finally, the proposed rule would include a new provision at Sec.
1282.22(g) that incorporates the housing plan enforcement provisions
contained in the Safety and Soundness Act. This would provide that if
the Director requires an Enterprise to submit a housing plan and the
Enterprise refuses to submit such a plan, submits an unacceptable plan,
or fails to comply with the plan, the Director may issue a cease and
desist order in accordance with 12 U.S.C. 4581, impose civil money
penalties in accordance with 12 U.S.C. 4585, or take any other action
that the Director determines to be appropriate. While FHFA has
authority to enforce the housing plans under the statutory authority in
the Safety and Soundness Act whether or not these specific references
are incorporated into the Enterprise housing goals regulation,
incorporating the enforcement provisions would provide a more complete
description of FHFA's enforcement authority. This would support the
goal of transparency and make it easier for anyone unfamiliar with the
Safety and Soundness Act to understand the potential consequences if an
Enterprise fails to submit an acceptable housing plan or fails to
comply with the plan as required.

IV. Single-Family Housing Goals and Subgoals

A. Factors Considered in Setting the Proposed 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.\19\
---------------------------------------------------------------------------

\19\ See 12 U.S.C. 4562(e)(2)(B).
---------------------------------------------------------------------------

FHFA has considered each of these seven statutory factors in
setting the proposed benchmark levels for each of the single-family
housing goals and subgoals.
In setting the proposed benchmark levels for the single-family
housing goals, FHFA typically relies on statistical market models
developed by FHFA to evaluate many of these statutory factors,
including national housing needs, the size of the market, and expected
market developments. These market models generate a point forecast for
each goal as well as a confidence interval for the point forecast. FHFA
then considers other statutory factors, including the need to maintain
the sound financial condition of the Enterprises, in proposing a
specific benchmark level.
Market forecast models. The purpose of FHFA's market forecast
models is to forecast the market share of the goal-qualifying mortgage
originations for the 2025-2027 period. The models are intended to
generate reliable forecasts rather than to test various economic
hypotheses about the housing market or to explain the relationship
between variables. Therefore, following standard practice among
forecasters and economists at other federal agencies, FHFA estimates a
reduced-form equation for each of the housing goals and fits an
Autoregressive Integrated Moving Average (or ARIMA) model to each goal
share. The models look at the statistical relationship between (a) the
historical market share for each single-family housing goal or subgoal,
as calculated from monthly HMDA data, and (b) the historical values for
various factors that may influence the market shares, such as interest
rates, inflation, home prices, home sales, the unemployment rate, and
other factors. The models then project the future value of the
affordable market share using forecast values of the model inputs.
Separate models are developed for each of the single-family housing
goals and subgoals.
FHFA has employed similar models in past Enterprise housing goals
rulemaking cycles to generate market forecasts. The models are
developed using monthly series generated from HMDA and other data
sources, and the resulting monthly forecasts are then averaged into an
annual forecast for each of the three years in the goal period. The
models rely on 19 years of HMDA data, from 2004 to 2022, the latest
year for which public HMDA data was available at the time of model
construction. FHFA will update the models with HMDA data for 2023 when
developing the final rule. Additional discussion of the market forecast
models can be found in a research paper, available at <a href="https://www.fhfa.gov/research/papers/2025-2027-enterprise-single-family-housing-goals">https://www.fhfa.gov/research/papers/2025-2027-enterprise-single-family-housing-goals</a>.\20\
---------------------------------------------------------------------------

\20\ Details on FHFA's single-family market models will be
available in the technical report ``The Size of the Affordable
Mortgage Market: 2022-2024 Enterprise Single-Family Housing Goals.''
Available at <a href="https://www.fhfa.gov/research/papers/2025-2027-enterprise-single-family-housing-goals">https://www.fhfa.gov/research/papers/2025-2027-enterprise-single-family-housing-goals</a>.
---------------------------------------------------------------------------

Current market outlook. There are many factors that impact the
affordable housing market, and changes to any of them could
significantly impact the ability of the Enterprises to meet the goals.
In developing the market models, FHFA used Moody's forecasts as the
source for macroeconomic variables where available.\21\ 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.\22\ Variables that impact the

[[Page 70132]]

models and the determinations of benchmark levels, including interest
rates, home prices, and the supply of affordable housing, are discussed
below.
---------------------------------------------------------------------------

\21\ Ibid.
\22\ 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.
---------------------------------------------------------------------------

Interest rates are important determinants of the trajectory of
financial markets, including the mortgage market. As Moody's notes in
its February 2024 forecasts, the Federal Reserve has signaled that it
may be at the end of its current tightening cycle. At its January 2024
meeting, the Federal Open Market Committee (FOMC) further signaled that
it would consider rate cuts once inflation is moving sustainably
towards the Federal Reserve's 2.0 percent inflation target. Moody's
baseline scenario in February 2024 assumed that this will occur in mid-
2024 and expected a 25 basis point cut in May, June, July, and December
2024. After that, Moody's baseline scenario expects that further rate
cuts will be spread out over a longer period so that the Federal Funds
rate for 2025, 2026, and 2027 will be 4.0 percent, 3.2 percent, and 2.9
percent, respectively. Thus, Moody's assumes that the FOMC will adjust
monetary policy slowly as inflation eases slowly. The Consumer Price
Index (CPI), which stood at 4.1 percent for 2023, is projected to be
2.7 percent in 2024, and is projected to decline to 2.2 percent by
2027. The unemployment rate is expected to gradually rise to 4.0
percent by the end of 2024, before peaking just above that in mid-2025.
It is forecast to be 4.1 percent for 2025, before declining to 4.0
percent for 2026 and 2027.\23\
---------------------------------------------------------------------------

\23\ Moody's Analytics, ``Economic Data and Forecasts,''
February 2024.
---------------------------------------------------------------------------

Home prices increased rapidly in 2021 and 2022 as indicated by
FHFA's purchase-only House Price Index (HPI), due to a combination of
high demand for housing resulting from demographic trends and limited
supply of homes for sale.\24\ The rapid rise in mortgage rates through
2022 and their stabilization at new elevated levels in 2023 slowed down
the pace of house price growth. However, in 2023, the HPI remained
high, with median existing home prices rising in 171 of 177 metro areas
in the second quarter of 2023, and prices in the typical metro area
increasing 9.0 percent during the quarter.\25\ For future years,
Moody's baseline scenario calls for a much more modest increase, with
an annual rate of increase of 0.7 percent in 2024, followed by a
slightly negative rate of growth of 1.0 percent in 2025, then modest
increases (0.3 and 1.8 percent annual rates of increases in 2026 and
2027, respectively).\26\
---------------------------------------------------------------------------

\24\ FHFA, ``FHFA House Price Index Report--Monthly Report,''
July 2024, available at <a href="https://www.fhfa.gov/sites/default/files/2024-07/FHFA-HPI-Monthly-07302024.pdf">https://www.fhfa.gov/sites/default/files/2024-07/FHFA-HPI-Monthly-07302024.pdf</a>.
\25\ Daniel McCue, ``Home Prices and Interest Rates Still
Rising, Shutting out More Potential Homebuyers'' Joint Center for
Housing Studies of Harvard University, September 28, 2023, available
at <a href="https://jchs.harvard.edu/blog/home-prices-and-interest-rates-still-rising-shutting-out-more-potential-homebuyers">https://jchs.harvard.edu/blog/home-prices-and-interest-rates-still-rising-shutting-out-more-potential-homebuyers</a>.
\26\ Moody's Analytics, ``Economic Data and Forecasts,''
February 2024.
---------------------------------------------------------------------------

The rise in the effective Federal Funds rate from 0.08 percent in
January 2022 to 5.33 percent in July 2023 contributed to rapid
increases in mortgage rates: for instance, the average 30-year fixed
rate mortgage rate increased from 3.1 percent to 6.6 percent over the
same period.27 28 Loan origination volume in mortgage
markets declined as the demand for refinances decreased in the second
half of 2022 and in 2023, along with significant declines in home
purchase loan volume. For example, sales in August 2023 were down 15
percent from the previous year and more than 30 percent below peak
levels in 2021.\29\ Even though mortgage interest rates are forecast to
decline modestly, many households are locked into low interest rates
and are less likely to refinance. Hence, Moody's baseline scenario
forecasts a slight decline in the refinance share between 2023 and
2024, before increasing gradually thereafter, reflecting the
expectation that the average 30-year fixed rate mortgage rate will
continue to be in the 5.9-6.1 percent range over 2025-2027.\30\
---------------------------------------------------------------------------

\27\ ``Effective Federal Funds Rate--FEDERAL RESERVE BANK of NEW
YORK,'' Federal Reserve Bank of New York, available at <a href="https://www.newyorkfed.org/markets/reference-rates/effr">https://www.newyorkfed.org/markets/reference-rates/effr</a>.
\28\ ``Mortgage Rates,'' Freddie Mac, available at <a href="https://www.freddiemac.com/pmms">https://www.freddiemac.com/pmms</a>.
\29\ Daniel McCue, ``Home Prices and Interest Rates Still
Rising, Shutting out More Potential Homebuyers,'' Joint Center for
Housing Studies of Harvard University, September 28, 2023, available
at <a href="https://jchs.harvard.edu/blog/home-prices-and-interest-rates-still-rising-shutting-out-more-potential-homebuyers">https://jchs.harvard.edu/blog/home-prices-and-interest-rates-still-rising-shutting-out-more-potential-homebuyers</a>.
\30\ Moody's Analytics, ``Economic Data and Forecasts,''
February 2024.
---------------------------------------------------------------------------

Taken together, the elevated mortgage interest rates and high home
price levels likely will continue to impact the ability of low- and
very low-income households to purchase homes. The median home price to
median household income ratio, which is often used to measure
affordability, rose to 5.6 in 2022, the highest point since the early
1970s. Since the beginning of the pandemic, the rise of home prices has
been rapid in all parts of the country and especially so in metro
areas. For example, in 2022, among the 100 largest metro areas in the
county, 48 metro areas had home price to income ratios exceeding 5,
compared to 2019 where only 15 markets had ratios above 5.\31\
Additionally, this rise in home prices has been more rapid than the
rise in median household incomes. Further indication of worsening
affordability in the housing market can be seen in the second quarter
of 2023, where monthly payments on median priced homes hit new record
highs in 159 of the 177 markets that the National Association of
Realtors (NAR) tracks for typical 30-year fixed rate mortgages obtained
by first-time homebuyers.\32\ As a result, between 2019 and 2021, the
number of cost-burdened homeowners increased by 2.3 million
households.\33\ Housing affordability in 2023, as measured by Moody's
forecast of NAR's Housing Affordability Index (HAI), was at its lowest
level since 1989. This is projected to improve incrementally in 2025-
2027.34 35
---------------------------------------------------------------------------

\31\ Alexander Hermann and Peyton Whitney, ``Home Price-To-
Income Ratio Reaches Record High,'' Joint Center for Housing Studies
of Harvard, January 22, 2024, available at <a href="https://www.jchs.harvard.edu/blog/home-price-income-ratio-reaches-record-high-0">https://www.jchs.harvard.edu/blog/home-price-income-ratio-reaches-record-high-0</a>.
\32\ Daniel McCue, ``Home Prices and Interest Rates Still
Rising, Shutting out More Potential Homebuyers,'' Joint Center for
Housing Studies of Harvard University,'' September 28, 2023,
available at <a href="https://jchs.harvard.edu/blog/home-prices-and-interest-rates-still-rising-shutting-out-more-potential-homebuyers">https://jchs.harvard.edu/blog/home-prices-and-interest-rates-still-rising-shutting-out-more-potential-homebuyers</a>.
\33\ ``The State of the Nation's Housing 2023,'' Joint Center
for Housing Studies of Harvard University, 2023, p.6, available at
<a href="https://www.jchs.harvard.edu/sites/default/files/reports/files/Harvard_JCHS_The_State_of_the_Nations_Housing_2023.pdf">https://www.jchs.harvard.edu/sites/default/files/reports/files/Harvard_JCHS_The_State_of_the_Nations_Housing_2023.pdf</a>.
\34\ Moody's Analytics, ``Economic Data and Forecasts,''
February 2024.
\35\ 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.
---------------------------------------------------------------------------

The supply of affordable housing has not kept pace with the growth
of demand.\36\ This has led to a shortage of homes, which became more
acute during the pandemic. According to a report by the Urban
Institute, listings have fallen 44.7 percent since 2019, with the
supply of homes under $200,000 (representing lower priced homes that
are likely to be more affordable to low- and very low-income

[[Page 70133]]

families) falling 74.5 percent.\37\ The inventory of homes as a share
of home sales, or months' supply of existing homes, remains lower than
pre-pandemic levels, at 2.9 in February 2024 compared to 3.1 in
February 2020.\38\ Single-family housing starts, or the measure of new
one-to-four-unit residential construction, dropped 10.8 percent from
2021 to 2022, and continued to decline in 2023.\39\ For example, the
Mortgage Bankers Association (MBA) estimates housing starts to have
decreased about 8.8 percent from 1.55 million in 2022 to 1.42 million
in 2023. MBA forecasts housing starts to decline about 1.5 percent in
2024, before rising about 2.8 percent in 2025.\40\
---------------------------------------------------------------------------

\36\ Moody's Analytics, ``Economic Data and Forecasts,''
February 2024.
\37\ ``Housing Finance: At a Glance Monthly Chartbook February
2024,'' Urban Institute Housing Finance Policy Center, February 27,
2024, p.23, available at <a href="https://www.urban.org/research/publication/housing-finance-glance-monthly-chartbook-february-2024">https://www.urban.org/research/publication/housing-finance-glance-monthly-chartbook-february-2024</a>.
\38\ ``Existing Home Sales: Months Supply,'' National
Association of Realtors, FRED, Federal Reserve Bank of St. Louis,
available at <a href="https://fred.stlouisfed.org/series/HOSSUPUSM673N">https://fred.stlouisfed.org/series/HOSSUPUSM673N</a>.
\39\ ``Exploring 2023's Housing Trends and Challenges [verbar]
Housing Matters,'' Urban Institute, January 31, 2024, available at
<a href="https://housingmatters.urban.org/research-summary/exploring-2023s-housing-trends-and-challenges">https://housingmatters.urban.org/research-summary/exploring-2023s-housing-trends-and-challenges</a>.
\40\ ``Housing Finance: At a Glance Monthly Chartbook, February
2024,'' [verbar] Urban Institute Housing Finance Policy Center,
Urban Institute,'' Urban Institute, February 27, 2024, p. 21,
available at <a href="https://www.urban.org/research/publication/housing-finance-glance-monthly-chartbook-february-2024">https://www.urban.org/research/publication/housing-finance-glance-monthly-chartbook-february-2024</a>.
---------------------------------------------------------------------------

The combination of high home prices and elevated mortgage rates
along with continued limited housing supply has also contributed to a
sharp decline in purchase loan origination volumes, as new homes are
less affordable and existing homeowners are less likely to give up
their low interest rate mortgage. For example, in 2022 lenders reported
a 51 percent decrease in closed-end site-built single-family mortgage
originations from 2021 volumes.\41\ Home prices grew by 43 percent
between 2019 and 2022, while incomes grew by just 7 percent over the
same time.\42\ Moody's baseline scenario for February 2024 has single-
family purchase mortgage originations similarly down in 2023, when
originations totaled $1.341 trillion, compared to 2021, when
originations totaled $1.864 trillion.\43\
---------------------------------------------------------------------------

\41\ ``Data Point: 2022 Mortgage Market Activity and Trends,''
Consumer Financial Protection Bureau, 2023, p.8, available at
<a href="https://files.consumerfinance.gov/f/documents/cfpb_data-point-mortgage-market-activity-trends_report_2023-09.pdf">https://files.consumerfinance.gov/f/documents/cfpb_data-point-mortgage-market-activity-trends_report_2023-09.pdf</a>.
\42\ Alexander Hermann and Peyton Whitney, ``Home Price-To-
Income Ratio Reaches Record High,'' Joint Center for Housing Studies
of Harvard University,'' January 22, 2024, available at<a href="https://www.jchs.harvard.edu/blog/home-price-income-ratio-reaches-record-high-0">https://www.jchs.harvard.edu/blog/home-price-income-ratio-reaches-record-high-0</a>.
\43\ Moody's Analytics, ``Economic Data and Forecasts,''
February 2024.
---------------------------------------------------------------------------

Furthermore, Moody's notes that, ``Life events such as divorces,
deaths, and the birth of children along with moderating interest rates
will prompt more homeowners to list their homes in 2024 than in 2023,
but the rise in existing home sales is expected to be limited.'' \44\
NAR predicts that 2024 will see only a 13.5 percent increase from 2023
in existing home sales.\45\ This economic outlook is largely consistent
with the outlook provided by other forecasters.
---------------------------------------------------------------------------

\44\ Edward Friedman, ``U.S. Macroeconomic Outlook Baseline and
Alternative Scenarios,'' Moody's Analytics, 2024.
\45\ Lauren Cozzi, ``NAR Forecasts 4.71 Million Existing-Home
Sales, Improved Outlook for Home Buyers in 2024,'' National
Association of Realtors, December 13, 2023, available at <a href="https://www.nar.realtor/newsroom/nar-forecasts-4-71-million-existing-home-sales-improved-outlook-for-home-buyers-in-2024">https://www.nar.realtor/newsroom/nar-forecasts-4-71-million-existing-home-sales-improved-outlook-for-home-buyers-in-2024</a>.
---------------------------------------------------------------------------

FHFA continues to monitor how these changes in the housing market,
as well as other market conditions, may impact various segments of the
market, including those targeted by the housing goals.
Post-model adjustments. While FHFA's models can address and
forecast many of the factors referenced in the statute, including
increasing interest rates and rising property values, some factors are
not captured in the models. FHFA, therefore, considers additional
factors when selecting the benchmark level within the model-generated
confidence interval for each of the single-family housing goals.
Demographic trends. Specific demographic changes, such as the
housing demand patterns of millennials or the growth of minority
households, are not included explicitly in the market forecast models.
Millennials have continued to make up the largest share of home
purchase mortgage applications for the past eight years.\46\ This
generation's share of mortgage purchase applications appears to have
peaked at 54 percent in 2022 before declining to 53 percent in 2023
with the entry of Generation Z into the homebuying market.\47\
Furthermore, the number of minority households is projected to grow by
22 percent, or 9.3 million, from 2018 to 2028.\48\
---------------------------------------------------------------------------

\46\ Archana Pradhan, ``Millennials Continued to Lead the
Homebuyer Pack in 2023,'' February 2024, CoreLogic Blog accessed on
April 7, 2024 at <a href="https://www.corelogic.com/intelligence/millennials-continued-lead-homebuyer-pack-2023/">https://www.corelogic.com/intelligence/millennials-continued-lead-homebuyer-pack-2023/</a>.
\47\ Ibid.
\48\ Daniel McCue, ``Number of U.S. Households Projected to
Increase by 12.2 Million in the Next Decade,'' Joint Center for
Housing Studies of Harvard University, December 20, 2018, available
at <a href="https://www.jchs.harvard.edu/blog/number-of-u-s-households-projected-to-increase-by-12-2-million-in-the-next-decade">https://www.jchs.harvard.edu/blog/number-of-u-s-households-projected-to-increase-by-12-2-million-in-the-next-decade</a>.
---------------------------------------------------------------------------

Enterprises' share of the mortgage market. The Enterprises' overall
share of the mortgage market is subject to fluctuation as well. In the
years preceding the 2008 financial crisis, the Enterprises' share of
the market dropped to about 44 percent. As shown in Graph 1, that share
rose to about 65 percent in 2012, but declined to about 55 percent in
2015. The Enterprises' share remained relatively stable until 2019,
then jumped to 67 percent in 2020 as the Enterprises continued to
acquire mortgages even as others in the market stepped back. Since
then, this share has declined as the shares of government-guaranteed
and government-insured loans, and well as other market participants,
have grown.

[[Page 70134]]

[GRAPHIC] [TIFF OMITTED] TP29AU24.009

As shown in Graph 1, the Enterprises' share of the conforming
mortgage market returned to pre-pandemic levels in 2022 and rose
slightly in 2023. Over the same period, the total Government share of
the mortgage market (including the Federal Housing Administration,
Department of Veterans Affairs, and Rural Housing Service) and the
Other share (such as retained bank portfolios) expanded.
Past performance of the Enterprises. Table 1 provides the annual
performance of both Enterprises on the single-family housing goals
between 2010 and 2023. FHFA has made preliminary determinations of the
Enterprises' 2023 housing goals performance and will make final
determinations later in 2024.

[[Page 70135]]

[GRAPHIC] [TIFF OMITTED] TP29AU24.010

B. Proposed Benchmark Levels for the Single-Family Housing Goals for
2025-2027

FHFA is proposing to establish the following benchmark levels for
the single-family housing goals and subgoals for 2025-2027.
1. Low-Income Home Purchase Goal
The low-income home purchase goal is based on the percentage share
of all single-family, owner-occupied home purchase mortgages purchased
by an Enterprise that are made to low-income families, defined as
families with incomes less than or equal to 80 percent of AMI.

[[Page 70136]]

[GRAPHIC] [TIFF OMITTED] TP29AU24.011

Between 2020 and 2023, the low-income purchase market level, as
measured by HMDA data, declined from 27.6 percent to 26.3 percent.
FHFA's current model forecasts that the annual market average over
2025-2027 will be 26.6 percent. As noted previously and in the
accompanying market model paper, this forecast is based on the 2022
HMDA data and Moody's forecasts as of February 2024. As of July 2024,
the interest rate cuts in the Moody's forecast have not materialized.
FHFA will update this and the other forecast models before the release
of the final housing goals rule.
FHFA's 2022-2024 housing goals final rule established a benchmark
of 28 percent for the low-income home purchase goal to serve as a
``stretch goal'' to encourage the Enterprises to continue their efforts
to promote safe and sustainable lending to low-income families.
However, during that period, larger than expected increases in mortgage
rates and home prices, and the continued shortfall in affordable
housing supply, have disproportionately impacted lower-income
borrowers' mortgage eligibility and lowered the number of low-income
loans in the market to well below the Agency's initial expectations.
Those factors, which are outside the Enterprises' control, continue in
the market today along with great uncertainty about when conditions
will change. Further, by statute, in setting new goals FHFA considers
the Enterprises' past efforts to meet the housing goals as well as the
impact of those efforts on the Enterprises' financial condition. During
2023, FHFA observed that many competing actions taken by the
Enterprises designed to help them meet the stretch benchmark (which
exceeded the level of low-income loans being produced in the market)
did not benefit low-income borrowers, risked constraining liquidity in
the overall market, and potentially impacted the Enterprises' financial
condition.
Considering current and foreseeable market conditions, FHFA is
proposing a benchmark level for the low-income home purchase goal of 25
percent. This proposed benchmark level is below the benchmark level for
2022-2024, but above the 24 percent benchmark level that was in place
from 2015 through 2021. FHFA expects this proposed benchmark level to
encourage the Enterprises to continue to find ways to support low-
income borrowers without compromising safe and sound lending standards
during a period of affordability challenges and increased uncertainty
around market conditions.
2. Very Low-Income Home Purchase Goal
The very low-income home purchase goal is based on the percentage
share 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.
[GRAPHIC] [TIFF OMITTED] TP29AU24.012

[[Page 70137]]

Between 2020 and 2023, the very low-income purchase market level,
as measured using HMDA data, declined from 7.0 percent to 6.5 percent.
FHFA's current model forecasts that the market for this goal will
remain around 6.6-6.7 percent for 2025-2027. This forecast is based on
the 2022 HMDA data and Moody's forecasts as of February 2024 and will
be updated before the release of the final housing goals rule.
Like the low-income home purchase goal, FHFA's 2022-2024 housing
goals final rule established a ``stretch'' benchmark of 7 percent for
the very low-income home purchase goal, also designed to encourage the
Enterprises to continue to promote safe and sustainable lending to very
low-income families. However, the same adverse market conditions
described in the previous section have also disproportionately impacted
very low-income borrowers' mortgage eligibility, reducing the number of
very low-income loans in the market to well below FHFA's earlier
expectations. During 2023, the Enterprises deployed the same actions
described above in their efforts to reach the very low-income
benchmark, and those actions also failed to benefit very low-income
borrowers, risked constraining liquidity in the overall market, and
potentially impacted the Enterprises' financial condition. Those market
conditions continue today along with great uncertainty about when
conditions will change. Therefore, FHFA is proposing a benchmark level
for the very low-income home purchase goal of 6 percent. FHFA expects
this proposed benchmark will encourage the Enterprises to continue to
find ways to support low-income borrowers without compromising safe and
sound lending standards during a period of affordability challenges and
increased uncertainty around market conditions.
3. Minority Census Tracts Home Purchase Subgoal
The minority census tracts subgoal is based on the percentage share
of home purchase mortgages on single-family, owner-occupied properties
to borrowers with incomes no greater than 100 percent of AMI in
minority census tracts. The Safety and Soundness Act defines minority
census tracts as those with a minority population of 30 percent or more
and median census tract income of less than 100 percent of AMI. The
proposed rule would raise the annual benchmark level for this subgoal
for 2025-2027 to 12 percent from its previous level of 10 percent.
[GRAPHIC] [TIFF OMITTED] TP29AU24.013

FHFA's 2022-2024 housing goals final rule established the minority
census tracts home purchase subgoal as a new subgoal within the broader
low-income areas goal to encourage the Enterprises to fulfill their
statutory duty to facilitate the financing of affordable housing for
all low- and moderate-income families, including families of color. The
final rule forecast for the new subgoal averaged 8.9 percent over the
2022-2024 period, and the final rule set the annual minority census
tracts subgoal benchmark for each of those years at 10 percent to
ensure Enterprises focus on the needs of communities of color. The
preamble also emphasized that FHFA would carefully monitor the
performance of Fannie Mae and Freddie Mac on this new subgoal.
Table 4 shows the implied market levels and Enterprise performance
in 2020 and 2021 (before FHFA established the subgoal) as well as
market levels and Enterprise performance since the subgoal was
established. Both Enterprises exceeded the benchmark and market levels
for this subgoal in 2022, the year this subgoal was introduced. Based
on preliminary data, both Enterprises exceeded the benchmark level for
this subgoal in 2023. The table also shows a pronounced increase in the
market levels and both Enterprises' performance on this subgoal
beginning in 2022. FHFA notes that 2022 was the first year of new
census tract boundaries based on the 2020 Census, which could have
contributed to the change. The Agency is continuing to analyze the
issue and plans to publish more information in the final rule.
FHFA's current model forecasts the market for this subgoal will
remain around 12.3-12.4 percent for 2025-2027. This forecast is based
on the 2022 HMDA data and Moody's forecasts as of February 2024, and
will be updated before the release of the final housing goals rule.
FHFA is proposing to increase the benchmark for this subgoal from 10
percent to 12 percent, which is slightly lower than the midpoint of the
market forecast. FHFA believes that this level emphasizes the
importance of providing access to mortgage credit for borrowers who
reside or seek to reside in minority census tracts.
4. Low-Income Census Tracts Home Purchase Subgoal
The low-income census tracts home purchase subgoal is based on the
percentage share of home purchase

[[Page 70138]]

mortgages that are either: (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. The proposed rule would set the annual
benchmark level for this subgoal for 2025-2027 at 4 percent.
---------------------------------------------------------------------------

\49\ See 86 FR 47408 (Aug. 25, 2021).
[GRAPHIC] [TIFF OMITTED] TP29AU24.014

Table 5 shows the implied market levels and Enterprise performance
in 2020 and 2021, along with market levels and Enterprise performance
since the subgoal has been established. As shown above, both
Enterprises exceeded the benchmark level for this subgoal in 2022, the
first year of this subgoal. Based on preliminary data, both Enterprises
also exceeded the benchmark level in 2023.
Prior to 2022, the subgoal structure included both low-income
census tracts and minority census tracts in a single subgoal. As FHFA
noted in the preamble to the 2022-2024 housing goals proposed rule, the
performance of the Enterprises on that subgoal was heavily influenced
by Enterprise purchases of loans for higher income families (over 100
percent of AMI) rather than for families at or below 100 percent of
AMI. FHFA adopted the current subgoal structure, with separate subgoals
for low-income census tracts and minority census tracts, to ``refocus
Enterprise efforts towards minority census tracts and families at or
below 100 percent of AMI.'' \49\ In 2022, FHFA set the benchmark level
for the new low-income census tract home purchase subgoal at 4 percent
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.
FHFA's current model forecasts that the market for this subgoal
will remain around 9.9-10 percent for 2025-2027. This forecast is based
on the 2022 HMDA data and Moody's forecasts as of February 2024, and
will be updated before the release of the final housing goals rule.
FHFA is proposing a benchmark level for this subgoal of 4 percent,
which is lower than recent and forecast performance, to be cognizant of
concerns about gentrification and the displacement of low-income
families in these areas.
FHFA believes that this 4 percent benchmark level addresses
concerns about the potential that the Enterprises may seek to meet the
goal by purchasing loans to higher-income borrowers in lower-income
areas. In addition, this 4 percent benchmark level is intended to
encourage the Enterprises to continue to provide access to mortgage
credit in low-income census tracts.
5. Low-Income Refinance Goal
The low-income refinance goal is based on the percentage share 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. The proposed rule
would set the annual benchmark level for this goal for 2025-2027 at 26
percent.

[[Page 70139]]

[GRAPHIC] [TIFF OMITTED] TP29AU24.015

Measured as a percent, annual performance in the overall market and
by the Enterprises on low-income refinance mortgages tends to be
inversely proportional to the volume of low-income refinance loans the
market produces and the Enterprises purchase during a given year. For
example, during the refinance boom of 2020, low-income refinance volume
in the overall market soared to over 1.3 million loans, but the volume
of all refinances in the market reached over 6.3 million.\50\ Measured
as a percent, the low-income refinance percentage share of the market
was 21 percent. Compare that performance to 2023, when due to higher
interest rates low-income refinance volume in the overall market
contracted to roughly 160 thousand loans and refinance volume overall
fell to about 397 thousand.\51\ Measured as a percent, the low-income
refinance percentage share of the market was 40.3 percent. The
Enterprises' performance on the low-income refinance goal has followed
the same pattern. Refinance share for both Enterprises has increased
significantly during this period, even as the volume of their purchases
of low-income refinance mortgages has fallen.
---------------------------------------------------------------------------

\50\ FHFA's tabulation of HMDA data.
\51\ Ibid.
---------------------------------------------------------------------------

FHFA is proposing to maintain the current benchmark level of 26
percent for this goal for 2025-2027. FHFA is proposing this benchmark
level in recognition of the fact that FHFA's model cannot forecast low-
income refinance levels in the market for 2025-2027 with great
confidence, due to the high degree of unpredictability of future
interest rates and the strong sensitivity of refinance originations to
interest rates. Additionally, many current mortgage holders are
``locked-in'' and are unlikely to refinance without a substantial
reduction in mortgage rates. FHFA is not aware of any long-term data
series that captures this impact that can be used in the forecast
model. FHFA also recognizes that if interest rates were to decline
significantly, the proposed benchmark level of 26 percent could be
difficult for the Enterprises to achieve based on market conditions.
FHFA will continue to monitor the performance of the Enterprises and
will take appropriate steps, after adoption of the final housing goals
rule, to adjust the benchmark level if necessary.

V. Multifamily Housing Goals and Subgoal

A. Factors Considered in Setting the Proposed 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.\52\
---------------------------------------------------------------------------

\52\ 12 U.S.C. 4563(a)(4).
---------------------------------------------------------------------------

Unlike the single-family housing goals, performance on the
multifamily housing goals is measured solely against benchmark levels
set by FHFA in the regulation, without any retrospective market
measure. The absence of a retrospective market measure for the
multifamily housing goals results, in part, from the lack of
comprehensive data about the multifamily mortgage market. Unlike the
single-family mortgage market, where HMDA provides a reasonably
comprehensive dataset about single-family mortgage originations each
year, the multifamily mortgage market (and the affordable multifamily
mortgage market segment) has no comparable single, unified source with
coverage extending across many years. As a result, it is difficult to
correlate different datasets that rely on different reporting metrics.
The lack of comprehensive data for the multifamily mortgage market
is even more acute with respect to the segments of the market that are
targeted to low-income families, defined as families with incomes at or
below 80 percent of AMI, and very low-income families, defined as
families with incomes at or below 50 percent of AMI.
Another difference between the single-family and multifamily
housing goals is that while there are separate single-family housing
goals for home purchase and refinance mortgages, the multifamily
housing goals include all Enterprise multifamily mortgage purchases,
regardless of the purpose of the loan.
In consideration of public comments and to improve the
responsiveness of the multifamily housing goals to market conditions,
FHFA changed its process starting in 2023 for setting the multifamily
benchmark levels from a numeric benchmark for units to a percentage of
affordable units in multifamily properties financed by mortgages
purchased by the Enterprise each year. This ensures that the
multifamily housing goals remain

[[Page 70140]]

meaningful in different market conditions and enables the Enterprises
to respond to those conditions while continuing to serve affordable
segments.\53\
---------------------------------------------------------------------------

\53\ 12 CFR 1282.13.
---------------------------------------------------------------------------

FHFA has considered each of the six statutory factors in setting
the proposed benchmark levels for each of the multifamily housing
goals. Five of the factors relate to the multifamily mortgage market
and the Enterprise role in that market. Those factors generally have
similar impacts on each of the multifamily housing goals and are
discussed below. The past performance of the Enterprises is discussed
separately for each of the multifamily housing goals.
Multifamily mortgage market. FHFA's consideration of the
multifamily mortgage market credit needs addresses the size and
competitiveness of the overall multifamily mortgage market as well as
the subset that is affordable to low-income and very low-income
families. In January 2024, MBA forecasted that multifamily mortgage
originations would increase from the $271 billion estimated in 2023 to
$339 billion in 2024, then to $404 billion in 2025.\54\ However, MBA
noted that while this baseline scenario is an improvement from 2023
levels, the outlook remains uncertain and it believes borrowing and
lending in 2024 will be below the levels in 2017.\55\
---------------------------------------------------------------------------

\54\ ``CREF Forecast: Commercial/Multifamily Borrowing and
Lending Expected to Increase 29 Percent to $576 Billion in 2024,''
Mortgage Bankers Association, January 23, 2024, available at <a href="https://www.mba.org/news-and-research/newsroom/news/2024/01/23/cref-forecast-commercial-multifamily-borrowing-and-lending-expected-to-increase-29-percent-to-576-billion-in-2024">https://www.mba.org/news-and-research/newsroom/news/2024/01/23/cref-forecast-commercial-multifamily-borrowing-and-lending-expected-to-increase-29-percent-to-576-billion-in-2024</a>.
\55\ Ibid.
---------------------------------------------------------------------------

According to the National Multifamily Housing Council's tabulation
of American Community Survey microdata, in 2022, about 47 percent of
renter households (21 million households) lived in multifamily
properties with the remaining renter households living in one-to-four-
unit single-family structures.56 57
---------------------------------------------------------------------------

\56\ Single-family properties are defined as structures with one
to four units. Multifamily properties are defined as structures with
five or more units.
\57\ ``Review of Household Characteristics, (n.d.),'' National
Multifamily Housing Council, available at <a href="https://www.nmhc.org/research-insight/quick-facts-figures/quick-facts-resident-demographics/household-characteristics">https://www.nmhc.org/research-insight/quick-facts-figures/quick-facts-resident-demographics/household-characteristics</a>.
---------------------------------------------------------------------------

Affordability in the multifamily mortgage market. In the State of
the Nation's Housing Report 2023, Harvard University's Joint Center for
Housing Studies (JCHS) found that year-over-year rent growth in the
professionally managed segment of the apartment market moderated
significantly after rising 15.3 percent year-over-year in the first
quarter of 2022, a 25-year high. By the end of the first quarter of
2023, rent growth had slowed to 4.5 percent annually.\58\ However,
rents still rose ``23.9 percent between the first quarter of 2020 and
the first quarter of 2023.'' \59\ In comparison, the average annual
rent increase in the pre-pandemic years of 2015-2019 was only 3.6
percent.\60\ These trends point to the continued stress on renters,
with the share of cost-burdened renters continuing to remain elevated.
---------------------------------------------------------------------------

\58\ ``The State of the Nation's Housing 2023,'' Joint Center
for Housing Studies of Harvard University, 2023, p.1, available at
<a href="https://www.jchs.harvard.edu/sites/default/files/reports/files/Harvard_JCHS_The_State_of_the_Nations_Housing_2023.pdf">https://www.jchs.harvard.edu/sites/default/files/reports/files/Harvard_JCHS_The_State_of_the_Nations_Housing_2023.pdf</a>.
\59\ ``The State of the Nation's Housing 2023,'' Joint Center
for Housing Studies of Harvard University, 2023, p.13, available at
<a href="https://www.jchs.harvard.edu/sites/default/files/reports/files/Harvard_JCHS_The_State_of_the_Nations_Housing_2023.pdf">https://www.jchs.harvard.edu/sites/default/files/reports/files/Harvard_JCHS_The_State_of_the_Nations_Housing_2023.pdf</a>.
\60\ Ibid.
---------------------------------------------------------------------------

For purposes of the Enterprise housing goals, the Safety and
Soundness Act requires FHFA to determine affordability based on whether
rent levels are affordable. The Safety and Soundness Act defines a rent
level as affordable if a family's rent and utility expenses do not
exceed 30 percent of the maximum income level for each income category,
with appropriate adjustments for unit size as measured by the number of
bedrooms.\61\ The JCHS report found that the share of cost-burdened
renters, particularly among low-income and very low-income households,
continues to grow.\62\ A household is considered cost-burdened if it
spends more than 30 percent of its income on housing, or severely cost-
burdened if it spends more than 50 percent of its income on housing.
The JCHS report shows that the share of cost-burdened renters across
all income segments rose from 43.6 percent in 2019 to 49.0 percent in
2021.\63\ The share of cost-burdened renters earning between $45,000
and $74,999 increased the most, rising 3.5 percentage points from 30.8
percent in 2019 to 34.3 percent in 2021.\64\
---------------------------------------------------------------------------

\61\ 12 U.S.C. 4563(c).
\62\ ``The State of the Nation's Housing 2023,'' Joint Center
for Housing Studies of Harvard University, 2023, Table A-1,
available at <a href="https://www.jchs.harvard.edu/sites/default/files/reports/files/Harvard_JCHS_The_State_of_the_Nations_Housing_2023.pdf">https://www.jchs.harvard.edu/sites/default/files/reports/files/Harvard_JCHS_The_State_of_the_Nations_Housing_2023.pdf</a>.
\63\ Ibid.
\64\ Ibid.
---------------------------------------------------------------------------

The JCHS report also notes the significant rise in new rental
supply from 2021 to 2023. In 2022 alone, 342,000 multifamily units were
added.\65\ However, this growth has started to slow as overall housing
starts in the multifamily sector decreased 37.9 percent in January 2024
compared to the volume in January 2023, according to the U.S.
Department of Housing and Urban Development (HUD) and the U.S. Census
Bureau.\66\ While the addition of units may limit rent growth, the JCHS
report found that new units are primarily targeted towards the upper
end of the market, with rents unaffordable to low-income
households.\67\ The JCHS report states that the share of newly
completed units with asking rents of $2,050 or more doubled from 19
percent in 2015 to 38 percent in 2022, while the share of new units
that rent for less than $1,050 declined from 22 percent in 2015 to only
5 percent in 2022.\68\
---------------------------------------------------------------------------

\65\ Ibid. p. 34.
\66\ ``Housing Market Indicators Monthly Update,'' U.S.
Department of Housing and Urban Development, February 2024, p. 1,
available at <a href="https://www.huduser.gov/portal/sites/default/files/pdf/Housing-Market-Indicators-Report-February-2024.pdf">https://www.huduser.gov/portal/sites/default/files/pdf/Housing-Market-Indicators-Report-February-2024.pdf</a>.
\67\ ``The State of the Nation's Housing 2023,'' Joint Center
for Housing Studies of Harvard University, 2023, p. 34, available at
<a href="https://www.jchs.harvard.edu/sites/default/files/reports/files/Harvard_JCHS_The_State_of_the_Nations_Housing_2023.pdf">https://www.jchs.harvard.edu/sites/default/files/reports/files/Harvard_JCHS_The_State_of_the_Nations_Housing_2023.pdf</a>.
\68\ Ibid. p. 34-35.
---------------------------------------------------------------------------

Role of the Enterprises. In proposing the multifamily housing goal
benchmark levels for 2025 through 2027, FHFA has considered the ability
of the Enterprises to lead the market in making multifamily mortgage
credit available. The Enterprises' share of the overall multifamily
mortgage origination market increased in the years immediately
following the 2008 financial crisis but has declined more recently in
response to growing private sector participation. The Enterprises'
share of the multifamily mortgage origination market was over 70
percent in 2008 and 2009,

[[Page 70141]]

compared to 36 percent in 2015.69 70 The total share was 40
percent or higher from 2016 to 2020. However, in 2021and 2022, when
multifamily origination volume was relatively robust, the combined
Enterprise share was estimated to be below 30 percent before increasing
to 38 percent in 2023.\71\ If interest rates drop in 2024 and 2025,
multifamily origination volume are likely to rise in those years.\72\
---------------------------------------------------------------------------

\69\ ``The GSE's Shrinking Role in the Multifamily Market,''
Urban Institute, April 2015, p. 4, available at <a href="https://www.urban.org/sites/default/files/publication/48986/2000174-The-GSEs-Shrinking-Role-in-the-Multifamily-Market.pdf">https://www.urban.org/sites/default/files/publication/48986/2000174-The-GSEs-Shrinking-Role-in-the-Multifamily-Market.pdf</a>.
\70\ ``Multifamily Business Information Presentation,'' Fannie
Mae, May 2024, p. 3, available at <a href="https://multifamily.fanniemae.com/media/9131/display">https://multifamily.fanniemae.com/media/9131/display</a>.
\71\ Ibid.
\72\ ``CREF Forecast: Commercial/Multifamily Borrowing and
Lending Expected to Increase 29 Percent to $576 Billion in 2024.''
Mortgage Bankers Association, January 23, 2024, available at <a href="https://www.mba.org/news-and-research/newsroom/news/2024/01/23/cref-forecast-commercial-multifamily-borrowing-and-lending-expected-to-increase-29-percent-to-576-billion-in-2024">https://www.mba.org/news-and-research/newsroom/news/2024/01/23/cref-forecast-commercial-multifamily-borrowing-and-lending-expected-to-increase-29-percent-to-576-billion-in-2024</a>.
---------------------------------------------------------------------------

FHFA recognizes that the multifamily housing goals are just one
measure of how the Enterprises contribute to and participate in the
multifamily market. Other Enterprise multifamily activities include
their Duty to Serve Underserved Markets Plans, Equitable Housing
Finance Plans, Low-Income Housing Tax Credit (LITHC) equity financing,
and the mission-driven elements of FHFA's Conservatorship Scorecard.
Together with the housing goals, these programmatic activities provide
support to renter households, including low-income families spending
more than 30 percent of their income on housing. FHFA will continue to
monitor these initiatives and priorities to ensure appropriate focus by
the Enterprises, including compliance with the Enterprises' charter
acts and safety and soundness considerations.
FHFA expects the Enterprises to continue to demonstrate leadership
in supporting affordable housing in the multifamily market by providing
liquidity for housing for tenants at different income levels in various
geographies and market segments. This support should continue
throughout the economic cycle, even as the overall size of the
multifamily mortgage market fluctuates.
Availability of public subsidies. Multifamily housing assistance is
primarily available in two forms--demand-side subsidies that either
directly assist low-income tenants (e.g., Section 8 vouchers) or
provide project-based rental assistance (e.g., Section 8 contracts),
and supply-side subsidies that support the creation and preservation of
affordable housing (e.g., public housing and LIHTCs). The availability
of public subsidies impacts the overall affordable multifamily housing
market, and significant changes to historic programs could impact the
ability of the Enterprises to meet the housing goals. The Enterprises
also provide liquidity to facilitate the preservation of public
subsidies through their purchase of mortgages that finance the
preservation of existing affordable housing units (especially for
restructurings of older properties that reach the end of their initial
15-year LIHTC compliance periods) and for refinancing properties with
expiring Section 8 Housing Assistance Payment contracts.
The need for public subsidies persists as the number of cost-
burdened renters remains high, at over 21.6 million renter households
in 2021.\73\ The Center on Budget and Policy Priorities estimates that
only one in four eligible households currently receive Federal housing
assistance.\74\
---------------------------------------------------------------------------

\73\ ``The State of the Nation's Housing 2023,'' Joint Center
for Housing Studies of Harvard University, 2023, p. 36, available at
<a href="https://www.jchs.harvard.edu/sites/default/files/reports/files/Harvard_JCHS_The_State_of_the_Nations_Housing_2023.pdf">https://www.jchs.harvard.edu/sites/default/files/reports/files/Harvard_JCHS_The_State_of_the_Nations_Housing_2023.pdf</a>.
\74\ Sonya Acosta, ``Final 2023 Funding Bill Should Support,
Expand Housing Vouchers. Center on Budget and Policy Priorities'',
December 2022, available at <a href="https://www.cbpp.org/blog/final-2023-funding-bill-should-support-expand-housing-vouchers">https://www.cbpp.org/blog/final-2023-funding-bill-should-support-expand-housing-vouchers</a>.
---------------------------------------------------------------------------

In 2024 and beyond, there should continue to be opportunities in
the multifamily mortgage market to provide permanent financing for
properties with LIHTCs and to preserve existing affordable units, as
described above.
Maintaining the sound financial condition of the Enterprises. In
proposing multifamily housing goals benchmark levels for 2025-2027,
FHFA must balance the role of the Enterprises in providing liquidity
and supporting various multifamily mortgage market segments with the
need to maintain the Enterprises' sound and solvent financial
condition. The Enterprises have served as a stabilizing force in the
multifamily mortgage market across economic cycles, and their loans on
affordable multifamily properties have experienced low levels of
delinquency and default that are similar to those of market rate
properties.
FHFA continues to monitor the activities of the Enterprises in this
market. As discussed above and consistent with the authorities
described in the Enterprise housing goals regulation, FHFA may take any
steps it determines necessary and appropriate after adoption of the
final housing goals rule to address the multifamily housing goals
benchmark levels to ensure the Enterprises' continued safety and
soundness.

B. Proposed Multifamily Housing Goals Benchmark Levels

Based on FHFA's consideration of the statutory factors described
above and the past performance of the Enterprises under the multifamily
housing goals, the proposed rule would establish benchmark levels for
the multifamily housing goals, as further discussed below. Before
finalizing the benchmark levels for the multifamily housing goals in
the final rule, FHFA will review any additional data that becomes
available about the performance of the Enterprises with regard to
multifamily housing goals and any developments in the multifamily
mortgage market, as well as any comments on the proposed multifamily
housing goals benchmark levels.
1. Multifamily Low-Income Housing Goal
The multifamily low-income housing goal is the percentage share of
all goal-eligible units in multifamily properties financed by mortgages
purchased by the Enterprises that are affordable to low-income families
in any given year. Low-income families are defined as those with
incomes less than or equal to 80 percent of AMI.

[[Page 70142]]

[GRAPHIC] [TIFF OMITTED] TP29AU24.016

Table 7 shows the annualshare of goal-qualifying low-income
multifamily units in properties backing mortgages acquired by each
Enterprise from 2020 through 2023.\75\ In addition, the historical
performance share average for the pre-pandemic years of 2017-2019 would
have been 65.1 percent for Fannie Mae and 67.3 percent for Freddie
Mac.\76\ Starting in 2023, the benchmark metric for this goal changed
from the number of low-income units to the share of low-income units.
Based on preliminary data, both Enterprises exceeded the benchmark
level of 61 percent for this goal in 2023.
---------------------------------------------------------------------------

\75\ 12 CFR 1282.16 (Special Counting Requirements).
\76\ See 87 FR 50800 (Aug. 18, 2022).
---------------------------------------------------------------------------

Higher interest rates are continuing to contribute to the
increasing costs of acquiring low-income multifamily units, and
expected declines in affordable originations and increases in rents are
likely to cause fewer units to qualify as affordable for low-income
families.\77\ These challenges are expected to persist in 2025-2027, as
rent increases and insufficient supply of affordable housing are likely
to result in more low-income families paying greater than 30 percent of
their incomes for rent.\78\ In light of these factors, FHFA proposes to
maintain the current benchmark level for this goal at 61 percent for
both Enterprises for 2025-2027. The proposed benchmark takes into
account the elevated interest rate environment and the additional
challenges the Enterprises currently face in the competitive market,
without diminishing the Enterprises' focus on affordability.
---------------------------------------------------------------------------

\77\ See 12 U.S.C. 4563(c).
\78\ See ``The State of the Nation's Housing 2024,'' Joint
Center for Housing Studies of Harvard University, June 2024,
available at <a href="https://www.jchs.harvard.edu/state-nations-housing-2024">https://www.jchs.harvard.edu/state-nations-housing-2024</a>.
---------------------------------------------------------------------------

2. Multifamily Very Low-Income Housing Goal
The multifamily very low-income housing goal is the percentage
share of all goal-eligible units in multifamily properties financed by
mortgages purchased by the Enterprises that are affordable to very low-
income families in any given year. Very low-income families are defined
as those with incomes less than or equal to 50 percent of AMI.
[GRAPHIC] [TIFF OMITTED] TP29AU24.017

Table 8 shows the number and share of goal-qualifying very low-
income multifamily units as a percentage of the total goal-eligible
units in properties backing mortgages acquired by each Enterprise. In
addition, the historical performance share average for the pre-pandemic
years of 2017-2019 would have been 13.1 percent for Fannie Mae and 15.6
percent for Freddie Mac.\79\ Starting in 2023, the benchmark metric for
this goal changed from the number of very low-income units to the share
of very low-income units. Based on preliminary data, both Enterprises
exceeded the benchmark level of 12 percent for this goal in 2023.
---------------------------------------------------------------------------

\79\ See 87 FR 50801 (Aug. 18, 2022).
---------------------------------------------------------------------------

Considering the multifamily mortgage market conditions described
above, FHFA is proposing to set the benchmark level for this goal at 14
percent for 2025-2027, an increase from the benchmark level of 12
percent for 2023-2024. FHFA proposes to set this benchmark at a higher
level to ensure that the Enterprises continue to adequately serve very
low-income families while accounting for the challenges associated with
elevated interest rates, lower volume of loan transactions, and the
lack of affordable units in the multifamily market, as well as
continued uncertain economic conditions.
FHFA believes that this proposed increase is appropriate and
achievable for the Enterprises considering the past performance of the
Enterprises on this housing goal.

[[Page 70143]]

3. Small Multifamily Low-Income Housing Subgoal
The current Enterprise housing goals regulation defines a small
multifamily property as having 5 to 50 units. The small multifamily
low-income housing subgoal is based on the share of units in small
multifamily properties affordable to low-income families as a
percentage of all goal-eligible units in all multifamily properties
financed by mortgages purchased by the Enterprises in a given year.
Low-income families are defined as those with incomes less than or
equal to 80 percent of AMI.
[GRAPHIC] [TIFF OMITTED] TP29AU24.018

Table 9 shows Enterprise performance on this subgoal, including the
previous numeric benchmark levels applicable through 2022 and the
percentage-based metric that began in 2023. FHFA recognizes that the
Enterprises have different business approaches to the small multifamily
market segment, and that each Enterprise sets its own credit risk
tolerance for these products. As a result, each Enterprise has
performed very differently on this subgoal. Since 2020, Freddie Mac has
acquired more units than Fannie Mae, both in terms of percentage share
of total units and volume of small low-income units. Based on
preliminary data, both Enterprises exceeded the benchmark level of 2.5
percent for this subgoal in 2023.
While FHFA has observed increased private sector financing for
small multifamily properties in recent years, elevated interest rates
have resulted in fewer multifamily transactions and therefore less
activity among secondary mortgage market participants more broadly.
Taking these factors into account, FHFA proposes to set the benchmark
level for this subgoal at 2 percent for 2025-2027, which would be lower
than the benchmark level of 2.5 percent applicable for 2023-2024. FHFA
believes that this proposed benchmark level will ensure that the
Enterprises support this market when needed without crowding out other
sources of financing for small multifamily properties.

VI. Paperwork Reduction Act

The proposed rule would 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 proposed rule to OMB for
review.

VII. 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 the
proposed rule under the Regulatory Flexibility Act. FHFA certifies that
the proposed rule, if adopted as a final 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.

VIII. Providing Accountability Through Transparency Act of 2023

The Providing Accountability Through Transparency Act of 2023 (5
U.S.C. 553(b)(4)) requires that a notice of proposed rulemaking include
the internet address of a summary of not more than 100 words in length
of a proposed rule, in plain language, that shall be posted on the
internet website under section 206(d) of the E-Government Act of 2002
(44 U.S.C. 3501 note) (commonly known as <a href="http://Regulations.gov">Regulations.gov</a>). FHFA's
proposed rule and the required summary can be found at <a href="https://www.regulations.gov">https://www.regulations.gov</a>.

List of Subjects in 12 CFR Part 1282

Mortgages, Reporting and recordkeeping requirements.

For the reasons stated in the preamble, under the authority of 12
U.S.C. 4511, 4513, and 4526, FHFA proposes to amend part 1282 of title
12 of the Code of Federal Regulations as follows:

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 President as adversely affected by a
declared major disaster administered by FEMA under the Robert T.
Stafford Disaster Relief and Emergency Assistance Act (42 U.S.C. 5121
et seq.), 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 major
disaster declaration of the county, or such earlier date as determined
by FHFA, and continuing through December 31 of the third full calendar
year following the major disaster declaration. This time period may be
adjusted for a particular disaster

[[Page 70144]]

area by notice from FHFA to the Enterprises.
* * * * *
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3. Amend Sec. 1282.11 by revising paragraph (a)(1) to read as follows:

Sec. 1282.11 General.

(a) * * *
(1) Three single-family owner-occupied purchase money mortgage
housing goals, two single-family owner-occupied purchase money mortgage
housing subgoals, a single-family refinancing mortgage housing goal,
two multifamily housing goals, and a multifamily housing subgoal;
* * * * *
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4. Amend Sec. 1282.12 by revising paragraphs (c)(2), (d)(2),
(f)(2)(ii), (g)(2), and (h)(2) to read as follows:

Sec. 1282.12 Single-family housing goals and subgoals.

* * * * *
(c) * * *
(2) The benchmark level, which for 2025, 2026, and 2027 shall be 25
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 2025, 2026, and 2027 shall be 6
percent of the total number of purchase money mortgages purchased by
that Enterprise in each year that finance owner-occupied single-family
properties.
* * * * *
(f) * * *
(2) * * *
(ii) The benchmark level, which for 2025, 2026, and 2027 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) * * *
(2) The benchmark level, which for 2025, 2026, and 2027 shall be 12
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 2025, 2026, and 2027 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.
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5. Revise Sec. 1282.13 to read as follows:

Sec. 1282.13 Multifamily housing goals and subgoal.

(a) Multifamily housing goals and subgoal. An Enterprise shall be
in compliance with a multifamily housing goal or subgoal if its
performance under the housing goal or subgoal meets or exceeds the
benchmark level for the goal or subgoal, respectively.
(b) Multifamily low-income housing goal. The percentage share of
dwelling units in multifamily residential housing financed by mortgages
purchased by each Enterprise that consists of dwelling units affordable
to low-income families shall meet or exceed 61 percent of the total
number of dwelling units in multifamily residential housing financed by
mortgages purchased by the Enterprise in each year for 2025, 2026, and
2027.
(c) Multifamily very low-income housing goal. The percentage share
of dwelling units in multifamily residential housing financed by
mortgages purchased by each Enterprise that consists of dwelling units
affordable to very low-income families shall meet or exceed 14 percent
of the total number of dwelling units in multifamily residential
housing financed by mortgages purchased by the Enterprise in each year
for 2025, 2026, and 2027.
(d) Small multifamily low-income housing subgoal. The percentage
share of dwelling units in small multifamily properties financed by
mortgages purchased by each Enterprise that consists of dwelling units
affordable to low-income families shall meet or exceed 2 percent of the
total number of dwelling units in all multifamily residential housing
financed by mortgages purchased by the Enterprise in each year for
2025, 2026, and 2027.
0
6. Amend Sec. 1282.15 as follows:
0
a. In paragraph (b)(2) remove the first instance of ``subgoal'' and add
in its place ``subgoals'';
0
b. Revise the heading and the first sentence of paragraph (c);
0
c. In paragraphs (d)(1), (3), and (4) and (e)(3), remove the phrase
``housing goal and subgoals'' wherever it appears and add in its place
the phrase ``housing goals and subgoal'';
0
d. Revise the heading to paragraph (e); and
0
e. In paragraph (e)(2) remove the phrase ``housing goal or subgoals''
and add in its place the phrase ``housing goals or subgoal''.
The revisions read as follows:

Sec. 1282.15 General counting requirements.

* * * * *
(c) Calculating the numerator and denominator for multifamily
housing goals and subgoal. Performance under the multifamily housing
goals and subgoal shall be measured using a fraction that is converted
into a percentage. * * *
* * * * *
(e) Missing data or information for multifamily housing goals and
subgoal.* * *
* * * * *
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7. Revise Sec. 1282.20 to read as follows:

Sec. 1282.20 Preliminary determination of compliance with housing
goals; notice of preliminary determination.

(a) Preliminary determination. On an annual basis, the Director
will evaluate each Enterprise's performance under each single-family
housing goal and subgoal and each multifamily housing goal and subgoal.
The Director will make a preliminary determination of whether an
Enterprise has failed, or there is a substantial probability that an
Enterprise will fail, to meet each housing goal or subgoal established
by this subpart.
(b) Notice of preliminary determination. The Director will provide
written notice to each Enterprise of the preliminary determination of
performance under each housing goal and subgoal established by this
subpart, the reasons for such determination, and the information on
which the Director based the determination.
(c) Response by Enterprise. Any notification to an Enterprise of a
preliminary determination under this section will provide the
Enterprise with an opportunity to respond in writing in accordance with
the procedures at 12 U.S.C. 4566(b). Relevant information in a timely
written response from an Enterprise will be included in the information
the Director considers when making a final determination of housing
goals compliance under Sec. 1282.21.
0
8. Redesignate Sec. 1282.21 as Sec. 1282.22, and revise and republish
newly redesignated Sec. 1282.22 to read as follows:

Sec. 1282.22 Housing plans.

(a) General. If the Director determines that an Enterprise has
failed, or that there is a substantial probability that an Enterprise
will fail, to meet any housing goal or subgoal, and that the
achievement of the housing goal or subgoal was or is feasible, the
Director may require the Enterprise to submit a housing plan for
approval by the Director.
(b) Enforcement factors for 2025-2027. (1) Except as provided in
paragraph (b)(3) of this section, the Director will not require an
Enterprise to submit a housing plan based on the Enterprise's failure
to meet the single-family low-income families housing

[[Page 70145]]

goal, the single-family very low-income families housing goal, or the
single-family refinancing housing goal for the years 2025, 2026, or
2027, if:
(i) The share of the market as defined in Sec. 1282.12(b) for the
applicable goal is lower than the benchmark level for the goal; and
(ii) The Enterprise's performance meets or exceeds the share of the
market minus the enforcement factor for the applicable goal as defined
in paragraph (b)(2) of this section.
(2) The following enforcement factors apply for the years 2025,
2026, and 2027:
(i) For the single-family low-income families housing goal, 1.3
percentage points;
(ii) For the single-family very low-income families housing goal,
0.5 percentage points; and
(iii) For the single-family refinancing housing goal, 1.3
percentage points.
(3) The enforcement factor in this paragraph (b) will not apply to
a goal in 2027 if the Enterprise failed to meet that goal for each of
the previous two years.
(c) Nature of plan. If the Director requires a housing plan, the
housing plan must:
(1) Be feasible;
(2) Be sufficiently specific to enable the Director to monitor
compliance periodically;
(3) Describe the specific actions that the Enterprise will take in
a time period determined by the Director to improve the Enterprise's
performance under the housing goal; and
(4) Address any additional matters relevant to the plan as
required, in writing, by the Director.
(d) Deadline for submission. The Enterprise shall submit the
housing plan to the Director within 45 days after issuance of a notice
requiring the Enterprise to submit a housing plan. The Director may
extend the deadline for submission of a plan, in writing and for a time
certain, to the extent the Director determines an extension is
necessary.
(e) Review of housing plans. The Director shall review and approve
or disapprove housing plans in accordance with 12 U.S.C. 4566(c)(4) and
(c)(5).
(f) Resubmission. If the Director disapproves an initial housing
plan submitted by an Enterprise, the Enterprise shall submit an amended
plan for approval or disapproval not later than 15 days after the
Director's disapproval of the initial plan; the Director may extend the
deadline if the Director determines an extension is in the public
interest. If an amended plan is not acceptable to the Director, the
Director may afford the Enterprise 15 days to submit additional
amendments to its plan for approval or disapproval.
(g) Enforcement of housing plans. If the Director requires an
Enterprise to submit a housing plan and the Enterprise refuses to
submit such a plan, submits an unacceptable plan, or fails to comply
with the plan, the Director may issue a cease and desist order in
accordance with 12 U.S.C. 4581, impose civil money penalties in
accordance with 12 U.S.C. 4585, or take any other action that the
Director determines to be appropriate.
0
9. Add new Sec. 1282.21 to read as follows:

Sec. 1282.21 Final determination of compliance with housing goals;
notice of final determination.

(a) Final determination. On an annual basis, the Director will make
a final determination of each Enterprise's performance under each
single-family housing goal and subgoal and each multifamily housing
goal and subgoal. The final determination will address whether an
Enterprise has failed, or there is a substantial probability that an
Enterprise will fail, to meet any single housing goal or subgoal and
whether the achievement of that housing goal or subgoal was or is
feasible.
(b) Notice of final determination. The Director will provide each
Enterprise with written notification of the final determination. If the
Enterprise fails to meet any housing goal or subgoal, the notification
will specify whether the Enterprise is required to submit a housing
plan for approval under Sec. 1282.22.

Sandra L. Thompson,
Director, Federal Housing Finance Agency.
[FR Doc. 2024-19261 Filed 8-28-24; 8:45 am]
BILLING CODE 8070-01-P

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