The Housing and Economic Recovery Act of 2008 (HERA) gave the FHFA authority for establishing housing goals for the GSEs. Previously, the Department of Housing and Urban Development (HUD) set the GSEs' housing goals.
For 2010 and 2011, FHFA is proposing levels for three single-family home-purchase goals: low-income families, very-low-income families and families in low-income/high-minority/disaster areas. The proposed rule also contains goals for single-family refinance mortgages for low-income families. These are the goal categories established in HERA. The home-purchase and refinance goals are all expressed as minimum goal-qualifying shares of each type of mortgage purchased by the GSEs.
Pursuant to HERA, the FHFA is also proposing separate goals for GSE purchases of multifamily mortgages. Specifically, the FHFA is proposing multifamily goals for low-income families and for very low-income families, both expressed in terms of minimum numbers of units financed. In accordance with HERA, the GSEs will also be reporting their funding of low-income units in small (i.e., five- to 50-unit) multifamily properties, the FHFA says.
There are no overall goals for all mortgages (single-family and multifamily combined) purchased by the GSEs, as there were before HERA.
In the past, the GSEs' housing goals were set prospectively by rule, whereby HUD established in regulation the target housing-goal levels for future years. The approach set forth in the FHFA's proposed rule utilizes prospective, or "benchmark," goals and adds a market-based alternative measure for each single-family goal. This market-based assessment measures the GSEs' single-family goals performance relative to the actual goals-qualifying shares of the primary-mortgage market.
Thus, Fannie Mae or Freddie Mac can satisfy a particular goal if it exceeds the benchmark goal level in the rule or if the goal category's share of the its business for the year is at least as great as the category's share of the overall market, the FHFA explains.
As before, the applicable mortgage market considered for the housing goals is the market for conforming, conventional mortgages.
The rule also proposes to prohibit housing goals credit for mortgages in private-label securities. The FHFA says it does not intend for the GSEs to undertake uneconomic or high-risk activities in support of the goals, nor does it intend for the GSEs' state of conservatorship to be a justification for withdrawing support from these market segments.
Additionally, the FHFA says it intends to issue two related proposed rules – the FHLBanks' Affordable Housing Goals rule and the Enterprises' Duty to Serve rule – in the near future.
SOURCE: Federal Housing Finance Agency