[Federal Register Volume 75, Number 38 (Friday, February 26, 2010)]
[Proposed Rules]
[Pages 9034-9072]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-3310]
[[Page 9033]]
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Part II
Federal Housing Finance Agency
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12 CFR Parts 1249 and 1282
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2010-2011 Enterprise Affordable Housing Goals; Enterprise Book-Entry
Procedures; Proposed Rule
Federal Register / Vol. 75 , No. 38 / Friday, February 26, 2010 /
Proposed Rules
[[Page 9034]]
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FEDERAL HOUSING FINANCE AGENCY
12 CFR Parts 1249 and 1282
RIN 2590-AA26
2010-2011 Enterprise Affordable Housing Goals; Enterprise Book-
Entry Procedures
AGENCY: Federal Housing Finance Agency.
ACTION: Proposed rule.
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SUMMARY: Section 1128(b) of the Housing and Economic Recovery Act of
2008 (HERA) amended the Federal Housing Enterprises Financial Safety
and Soundness Act of 1992 (Safety and Soundness Act) to provide for the
establishment, monitoring and enforcement of new affordable housing
goals effective for 2010 and 2011 for the Federal National Mortgage
Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation
(Freddie Mac) (collectively, the Enterprises). Section 1332(a) of the
Safety and Soundness Act, as amended by HERA, requires the Federal
Housing Finance Agency (FHFA) to establish three single-family owner-
occupied purchase money mortgage goals and a single-family refinancing
mortgage goal. Section 1333(a) of the Safety and Soundness Act requires
FHFA to establish a multifamily special affordable housing goal, as
well as providing for a multifamily special affordable housing subgoal.
FHFA is issuing and seeking comments on a proposed rule that would
establish new affordable housing goals for 2010 and 2011, consistent
with the Safety and Soundness Act, as amended. The proposed rule would
also revise and update the rules for counting mortgages for purposes of
the affordable housing goals to ensure clarity and consistency with the
new goals.
DATES: Written comments must be received on or before April 12, 2010.
ADDRESSES: You may submit your comments, identified by regulatory
information number (RIN) 2590-AA26, by any one of the following
methods:
U.S. Mail, United Parcel Post, Federal Express, or Other
Mail Service: The mailing address for comments is: Alfred M. Pollard,
General Counsel, Attention: Comments/RIN 2590-AA26, Federal Housing
Finance Agency, Fourth Floor, 1700 G Street, NW., Washington, DC 20552.
Hand Delivered/Courier: The hand delivery address is:
Alfred M. Pollard, General Counsel, Attention: Comments/RIN 2590-AA26,
Federal Housing Finance Agency, Fourth Floor, 1700 G Street, NW.,
Washington, DC 20552. The package should be logged at the Guard Desk,
First Floor, on business days between 9 a.m. and 5 p.m.
E-mail: Comments to Alfred M. Pollard, General Counsel,
may be sent by e-mail to [email protected]. Please include ``RIN
2590-AA26'' in the subject line of the message.
Federal eRulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments. If you submit your
comment to the Federal eRulemaking Portal, please also send it by e-
mail to FHFA at [email protected] to ensure timely receipt by the
Agency. Please include ``RIN 2590-AA26'' in the subject line of the
message.
FOR FURTHER INFORMATION CONTACT: Nelson Hernandez, Senior Associate
Director, Housing Mission and Goals, (202) 408-2993, Brian Doherty,
Manager, Housing Mission and Goals, (202) 408-2991, Paul Manchester,
Principal Economist, Housing Mission and Goals--Quantitative Analysis,
(202) 408-2946, Sharon Like, Associate General Counsel, (202) 414-8950,
Lyn Abrams, Attorney, (202) 414-8951, or Kevin Sheehan, Attorney, (202)
414-8952. These are not toll-free numbers. The mailing address for each
contact is: Office of General Counsel, Federal Housing Finance Agency,
Fourth Floor, 1700 G Street, NW., Washington, DC 20552. The telephone
number for the Telecommunications Device for the Hearing Impaired is
(800) 877-8339.
SUPPLEMENTARY INFORMATION:
I. Comments
FHFA invites comments on all aspects of the proposed rule, and will
revise the language of the proposed rule as appropriate after taking
all comments into consideration. Copies of all comments will be posted
without change, including any personal information you provide, such as
your name and address, on the FHFA Internet Web site at http://www.fhfa.gov. In addition, copies of all comments received will be
available for examination by the public on business days between the
hours of 10 a.m. and 3 p.m., at the Federal Housing Finance Agency,
Fourth Floor, 1700 G Street, NW., Washington, DC 20552. To make an
appointment to inspect comments, please call the Office of General
Counsel at (202) 414-3751.
II. Background
A. Establishment of FHFA
Effective July 30, 2008, HERA amended the Safety and Soundness Act
to create FHFA as an independent agency of the Federal Government.\1\
HERA transferred the safety and soundness supervisory and oversight
responsibilities over the Enterprises from the Office of Federal
Housing Enterprise Oversight (OFHEO) to FHFA. HERA also transferred the
charter compliance authority and responsibility to establish, monitor
and enforce the affordable housing goals for the Enterprises from the
Department of Housing and Urban Development (HUD) to FHFA. FHFA is
responsible for ensuring that the Enterprises operate in a safe and
sound manner, including maintenance of adequate capital and internal
controls, that their operations and activities foster liquid,
efficient, competitive, and resilient national housing finance markets,
and that they carry out their public policy missions through authorized
activities.\2\
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\1\ See Division A, titled the ``Federal Housing Finance
Regulatory Reform Act of 2008,'' Title I, Sec. 1101, Public Law
110-289, 122 Stat. 2654 (2008), codified at 12 U.S.C. 4501 et seq.
\2\ See 12 U.S.C. 4513.
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Section 1302 of HERA provides, in part, that all regulations,
orders and determinations issued by the Secretary of HUD (Secretary)
with respect to the Secretary's authority under the Safety and
Soundness Act, the Federal National Mortgage Association Charter Act
and the Federal Home Loan Mortgage Corporation Act (together, the
Charter Acts), shall remain in effect and be enforceable by the
Secretary or the Director of FHFA, as the case may be, until modified,
terminated, set aside or superseded by the Secretary or the Director,
any court, or operation of law. The Enterprises continue to operate
under regulations promulgated by OFHEO and HUD until FHFA issues its
own regulations.\3\ The Enterprises are government-sponsored
enterprises (GSEs) chartered by Congress for the purpose of
establishing secondary market facilities for residential mortgages.\4\
Specifically, Congress established the Enterprises to provide stability
in the secondary market for residential mortgages, respond
appropriately to the private capital market, provide ongoing assistance
to the secondary market for residential mortgages, and promote access
to mortgage credit throughout the nation.\5\
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\3\ See HERA at section 1302, 122 Stat. 2795.
\4\ See 12 U.S.C. 1716 et seq.; 12 U.S.C. 1451 et seq.
\5\ Id.
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B. Statutory and Regulatory Background
Prior to HERA, the Safety and Soundness Act provided the Secretary
of HUD with the authority to establish, monitor and enforce affordable
housing
[[Page 9035]]
goals for the Enterprises.\6\ HUD issued regulations establishing
affordable housing goals for the Enterprises, which were periodically
updated, most recently in 2004, when HUD established new housing goal
levels for 2005 through 2008.\7\ HUD's regulations provided for the
housing goal levels for 2008 to continue in effect in 2009 and each
year thereafter until replaced by new annual housing goals established
by HUD.\8\ In August 2009, FHFA issued a final rule that adopted many
of the existing housing goals provisions in a new part 1282 of title 12
of the Code of Federal Regulations. As authorized by section 1331(c) of
the Safety and Soundness Act, the final rule also revised the levels of
the existing affordable housing goals in light of current market
conditions.\9\
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\6\ See 12 U.S.C. 4561 et seq. (2008).
\7\ See 24 CFR part 81 (2008).
\8\ See 24 CFR 81.12 through 81.14 (2008).
\9\ See 74 FR 39873 (Aug. 10, 2009).
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The Safety and Soundness Act, as amended by HERA, requires the
Director of FHFA to establish new affordable housing goals effective
for 2010 and beyond. The new housing goals include four goals for
single-family, owner-occupied housing, one multifamily special
affordable housing goal, and one multifamily special affordable housing
subgoal.\10\ The single-family housing goals target purchase money
mortgages for low-income families, families that reside in low-income
areas, and very low-income families, and refinancing mortgages for low-
income families.\11\ The multifamily special affordable housing goal
targets multifamily housing affordable to low-income families, and the
multifamily special affordable housing subgoal targets multifamily
housing affordable to very low-income families.\12\
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\10\ See 12 U.S.C. 4561 and 4563(a)(2).
\11\ See 12 U.S.C. 4562.
\12\ See 12 U.S.C. 4563.
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C. Conservatorship
On September 6, 2008, the Director of FHFA appointed FHFA as
conservator of the Enterprises in accordance with the Safety and
Soundness Act, as amended by HERA, to maintain the Enterprises in a
safe and sound financial condition. The Enterprises remain under
conservatorship at this time.
III. Prospective and Market-Based Goals
Following passage of the Safety and Soundness Act, HUD established
housing goals for Fannie Mae and Freddie Mac in October 1993,\13\ and
revised and expanded those goals in 1995,\14\ 2000,\15\ and 2004.\16\
Multi-year goals were set in the 1993 housing goals rule for 1993-94
(subsequently extended to 1995), in the 1994 housing goals rule for
1996-99 (with the goal levels for 1999 continuing in effect for 2000),
in the 2000 housing goals rule for 2001-03 (with the goal levels for
2003 continuing in effect for 2004), and in the 2004 housing goals rule
for 2005-08.
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\13\ See 58 FR 53048 (Oct. 13, 1993) and 58 FR 53072 (Oct. 13,
1993).
\14\ See 60 FR 61846 (Dec. 1, 1995).
\15\ See 65 FR 65044 (Oct. 31, 2000).
\16\ See 69 FR 63580 (Nov. 2, 2004).
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In each case, the numerical goals were established up to four years
in advance. The goals were set as specific minimum goal-qualifying
percentages of all dwelling units financed by mortgages acquired by
each Enterprise in a given year, except for the special affordable
multifamily subgoal, which was set as a minimum dollar volume of this
type of business. In the 2004 final rule, HUD added three single-family
home purchase subgoals, which were similarly set as specific minimum
goal-qualifying percentages of all home purchase mortgages financed by
the Enterprises on owner-occupied properties in metropolitan
statistical areas (MSAs).
HUD set the goals for 1993-2008 based on the six factors as
specified in the Safety and Soundness Act. The most important such
factors were past performance on the goals and, especially, for the
home purchase subgoals, HUD's estimates of the goal-qualifying shares
of home purchase mortgages in the primary mortgage market on properties
in MSAs. For the overall goals, HUD's estimates of the goal-qualifying
shares of all dwelling units financed in the primary market by the
Enterprises in each year were also important. For example, HUD
estimated that low- and moderate-income units would account for 50-55
percent of all units financed in the primary mortgage market for 2003-
04, and 51-56 percent of all units financed in 2005-08. The low- and
moderate-income goal was set at 50 percent for 2003-04, and was later
established to increase in accordance with the market range over the
2005-08 period--specifically, 52 percent for 2005, 53 percent for 2006,
55 percent for 2007, and 56 percent for 2008. A similar approach was
followed with regard to the overall underserved areas and special
affordable goals for 2005-08.
As recent market developments show, it can be difficult to forecast
the goals-qualifying shares of the primary mortgage market several
years in advance. The forecasts developed by HUD were based on the
assumption of a ``home purchase market environment,'' a market
environment in which purchase mortgages dominate over refinancing
mortgages. However, when market conditions result in higher than
average refinance activity, the actual market goals-qualifying shares
can be significantly different from the forecast because the actual
refinance share would dominate. A second reason for the divergence
between forecasted and actual shares of goals-qualifying units in the
primary mortgage market is the variation in the affordability of
housing, such as measured by the National Association of Realtors (NAR)
housing affordability index. If the price of a product or service
declines, it is more affordable to the consumer. In this respect,
housing is no different from any other product. A third reason for
divergence is the variance in the size of the multifamily mortgage
market over time. Under the previous goals counting regime, multifamily
units played a significant role in whether an Enterprise met the goals.
A fourth reason for the divergence is the change in the size of the
share of the mortgage market accounted for by Federal Housing
Administration (FHA) and Department of Veterans Affairs (VA) mortgages.
As discussed below, the market share of mortgages insured by FHA
increased dramatically in recent years, from a monthly low of 2.5
percent in October 2005 to 32 percent in December 2008.
As measured after the fact, HUD's market estimates often differed
significantly from the actual goals-qualifying shares of the primary
market. Specifically, the actual low- and moderate-income share of the
primary market in 2003 was 53 percent, which was within HUD's 2001-2003
forecasted range of 50-55 percent, but when the share increased to 58
percent for 2004, it exceeded the upper end of the range. The low- and
moderate-income share of the primary market remained high, at 57
percent for 2005, above HUD's 2005-2008 forecasted range of 51-56
percent, but then decreased to 55 percent for 2006 and 52 percent for
2007. Thus, over the 2005-2007 period, the low- and moderate-income
goals increased steadily, while the low- and moderate-income share of
the primary mortgage market decreased steadily.
While the Enterprises are in conservatorship, FHFA expects the
Enterprises to continue to fulfill their core statutory purposes,
including their support for affordable housing. The affordable housing
goals are one set of measures of that support. FHFA does not intend for
the Enterprises to undertake uneconomic or high-risk activities in
support of the goals.
[[Page 9036]]
Further, the fact that the Enterprises are in conservatorship should
not be a justification for withdrawing support from these market
segments. While in conservatorship the Enterprises have tightened their
underwriting standards to avoid poor quality mortgages that have
contributed substantially to their losses. Maintaining sound
underwriting discipline going forward is important for conserving the
Enterprises' assets and for supporting their mission in a manner in
which the achievement of housing goals directly relates to actual
market conditions. In light of these circumstances and the difficulties
in anticipating market deviations from the normal home purchase
environment in the traditional approach to goal-setting, FHFA proposes
in this rule to measure the Enterprises' single-family goal performance
relative to benchmark levels for the goals-qualifying shares of the
Enterprises' mortgage purchases, as well as relative to the actual
goals-qualifying shares of the primary mortgage market. A dual approach
prevents exclusive reliance on multi-year mortgage market forecasts.
The primary disadvantage of this approach is that information on the
goals-qualifying shares of the current single-family primary market is
not available until the release of Home Mortgage Disclosure Act (HMDA)
data in late summer of the following year, approximately nine months
after the rating period. However, FHFA believes that the market-based
approach proposed in this rule is an appropriate measure of mission
achievement under the housing goals for the Enterprises, especially
while they are operating in conservatorship, and that the overall
advantages of this approach outweigh the disadvantages.
In 2010, FHFA expects to begin to conduct a monthly survey of
single-family mortgage originations pursuant to section 1324(c) of the
Safety and Soundness Act, as amended by HERA, and make data collected
under that survey available to the public.\17\ Release of that data is
likely to provide detailed information on home mortgage lending
activity more frequently and in a timelier manner than does the public
release of the data collected under HMDA. FHFA will use the survey data
in its monitoring of Enterprise affordable housing goals performance in
2010 and subsequent years.
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\17\ 12 U.S.C. 4544(c).
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This proposed rule would establish single-family housing goals that
include (1) an assessment of Enterprise performance as compared to the
actual share of the market that meets the criteria for each goal, and
(2) a benchmark level to measure Enterprise performance. The benchmark
levels for performance are intended to provide greater certainty for
the Enterprises in establishing strategies for meeting the affordable
housing goals. An Enterprise would be found to have failed to meet a
housing goal if its annual performance falls below both the benchmark
level and the actual share of the market that meets the criteria for a
particular housing goal for that year. An Enterprise would not be found
to have failed to meet a goal if it achieves the benchmark level for
that goal, even if the actual market size for the year is higher than
the benchmark level, because for planning purposes the Enterprises need
to be able to rely on the benchmarks that FHFA has set.\18\
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\18\ See 12 U.S.C. 4561(b), acknowledging ``the need for the
enterprises to reasonably and sufficiently plan their operations and
activities in advance, including operations and activities necessary
to meet such annual goals.''
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The proposed approach to setting goals, involving both the setting
of a prospective target and an assessment of actual market opportunity,
is a departure from past practice at HUD, as well as in the
transitional housing goals established by FHFA for 2009. FHFA has
determined that this approach is appropriate in light of the
difficulties of predicting the market, especially in light of recent
market turmoil, but also in view of the difficulty in making those
projections accurately even in more stable economic environments. FHFA
views this approach as fully consistent with Congressional intent in
granting goal-setting power to the regulator, in light of the many
provisions that Congress inserted into the statute to enable the goals
to be adjusted to reflect changing market conditions or otherwise
suggesting that the goals should be set in light of market conditions.
Those provisions include: The requirement that the agency calculate the
preceding three-year average percentages of goal-eligible originations
for each goal category, and take that information into account in
setting the single-family goals; \19\ the authority to adjust goals,
when they have been set for more than one year, based on market
conditions; \20\ the discretionary authority to adjust a goal in
response to a petition, partly in response to market conditions and the
risk of ``over-investment''; \21\ and provisions for relief from
enforcement if goals are determined not to have been feasible.\22\
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\19\ 12 U.S.C. 4562(e)(2)(A).
\20\ 12 U.S.C. 4562(e)(3).
\21\ 12 U.S.C. 4564(b)(1), (2).
\22\ 12 U.S.C. 4566(b).
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IV. Changes in Structure of Housing Goals for 2010-2011
The proposed rule would modify the structure of the housing goals
established by HUD for 2005-2008, and subsequently extended and
modified for 2009 by FHFA, in a number of ways for 2010-2011. There
would be no overall goals for 2010-2011 covering all of each
Enterprise's mortgage purchases, as in the past. Rather, there would be
four separate goals for purchases of single-family mortgages and two
goals for purchases of multifamily mortgages. These changes, many of
which are required by changes made by HERA in the governing statute,
are described in more detail below.
Enterprise goal performance under each of the single-family housing
goals is measured using a fraction of qualifying mortgage purchases as
a percent of total mortgage purchases. Neither the numerator nor the
denominator includes Enterprise transactions or activities that are not
mortgage purchases as defined by FHFA or that would be specifically
excluded as ineligible under proposed Sec. 1282.16(b). The 2010-2011
single-family goals, as proposed, would establish separate goals for
home purchase mortgages and refinancing mortgages. This differs from
past treatment, which combined such purchases for the overall goals.
In addition, the proposed rule would count only conventional loans
for purposes of the housing goals. This means that certain FHA loans
that previously counted toward the goals, such as Home Equity
Conversion Mortgages (HECMs), will no longer be counted. Second liens,
which also counted toward the goals in the past, would be excluded from
counting for purposes of the housing goals in the future. The
Enterprises have purchased very few second liens in the past.
Under the 2010-2011 goals, mortgages financing rental units in
single-family properties, which were previously included in the goals,
would no longer be counted. However, FHFA will continue to monitor the
Enterprises' purchases of such mortgages with regard to rental units in
both 2-4 unit owner-occupied housing and investor-owned 1-4 unit rental
housing.
The 2010-2011 multifamily goals would be based on the numbers of
affordable dwelling units financed, rather than being specified in
minimum dollar terms. The special affordable
[[Page 9037]]
multifamily subgoal in effect prior to 2010 applied to purchases of
mortgages on housing for families with incomes below 60 percent of area
median income (AMI) and for families with incomes between 60 percent
and 80 percent of AMI living in low-income areas. The overall
multifamily goal for 2010-2011 is somewhat broader in its coverage than
the previous special affordable multifamily goal, applying to mortgages
on housing for families with incomes no greater than 80 percent of AMI,
regardless of location. However, the 2010-2011 very low-income
multifamily subgoal would be targeted to households with slightly lower
incomes. The qualifying household income for purposes of the 2010-2011
multifamily subgoal would be at or below 50 percent of AMI.
The 2010-2011 low-income home purchase and refinancing goals in the
proposed rule would target households with lower incomes than the past
low- and moderate-income goals. The past low- and moderate-income goals
included families with incomes up to 100 percent of AMI. Under the
proposed rule, the low-income home purchase and refinancing goals would
include only families with incomes no greater than 80 percent of AMI.
The 2010-2011 low-income areas home purchase goal would be somewhat
more targeted than the past underserved areas home purchase subgoal.
For example, the new low-income areas housing goal includes families in
census tracts with incomes up to 80 percent of AMI, while the
underserved areas home purchase subgoal included families in census
tracts with incomes up to 90 percent of AMI. The narrower scope of the
low-income areas housing goal may be seen by comparing performance on
the underserved areas home purchase subgoal in 2008 (approximately 30
percent for both Enterprises) with what their performance would have
been on the low-income areas home purchase goal in 2008 (approximately
15 percent for both Enterprises).
V. Analysis of Single-Family Housing Goals
Section 1332(e)(2) of the Safety and Soundness Act, as amended by
HERA, requires FHFA to consider the following seven factors in setting
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 under this section in previous years;
(4) The ability of the Enterprise 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.\23\
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\23\ 12 U.S.C. 4562(e)(2).
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FHFA's consideration of the size of the market for each housing
goal includes consideration of the percentage of goals-qualifying
mortgages under each housing goal, as calculated based on HMDA data for
the three most recent years for which data is available.\24\
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\24\ See 12 U.S.C. 4562(e)(2)(A).
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A. Analysis of Factors for Single-Family Housing Goals
FHFA's analysis of each of the factors is set forth below.
1. National Housing Needs
With the collapse of subprime and Alt-A lending, tighter credit
conditions, and stricter underwriting standards, single-family mortgage
originations fell 38 percent in 2008. The Enterprises' share of single-
family mortgage-backed securities (MBS) issuance rose to over 73
percent in that year, however, and the credit risk characteristics of
their purchases began to improve. Falling house prices caused equity in
homes to decline sharply. The resetting of interest rates on poorly
underwritten adjustable rate mortgages (ARMs) originated in recent
years, deteriorating household balance sheets, rising unemployment,
continued credit tightening, and the deepening recession contributed to
increases in mortgage delinquency and home foreclosure rates as well as
sharply lower housing starts and sales.
The decline in home prices that began in 2007 accelerated sharply
in 2008. Continued tightening in lender credit policies, large
inventories of unsold homes, significant volumes of homes in
foreclosure, rising unemployment, and increasing pessimism among
potential homebuyers combined to drive home prices down further.
Despite improving housing affordability, the U.S. homeownership
rate declined since peaking at 69 percent in 2004. In the third quarter
of 2009, the homeownership rate was 67.6 percent, down from the 67.9
percent in the third quarter of 2008.\25\ The homeownership rate for
married couples with children declined from 78.8 percent in the third
quarter of 2008 to 77.9 percent in the third quarter of 2009.\26\ The
homeownership rate for Black households declined markedly from 48.2
percent in the third quarter of 2008 to 46.8 percent in the third
quarter of 2009.\27\ Between 2000 and 2005, the homeowner vacancy
rate--the proportion of the homeowner inventory that is vacant for
sale--averaged about 1.7 percent. However, that rate increased 70 basis
points in 2006 alone, to 2.7 percent in the fourth quarter, and has
inched up generally every year since, reaching 2.9 percent in the first
and fourth quarters of 2008. That was the highest rate since the Census
Bureau began collecting that statistic in 1956. The persistently high
rate reflects both the high level of foreclosures and declining home
sales.
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\25\ U.S. Housing Market Conditions, 3rd Quarter 2009.
Department of Housing and Urban Development at 87.
\26\ U.S. Housing Market Conditions, 3rd Quarter 2009.
Department of Housing and Urban Development at 89.
\27\ U.S. Housing Market Conditions, 3rd Quarter 2009.
Department of Housing and Urban Development at 88.
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A recent NAR study of homebuyers and sellers between July 2008 and
June 2009 shows the number of first-time homebuyers rose to 47 percent
of all homebuyers, from 41 percent in the prior year's study. The
median age for first-time homebuyers was 30 years and the median income
was $61,600. The typical first-time homebuyer purchased a home costing
$156,000, down from $165,000 in the prior year's study. The study found
that 55 percent of entry level buyers financed their purchase with an
FHA loan, and another 8 percent used the VA loan program.\28\
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\28\ ``NAR Survey Shows First-Time Home Buyers Set Record in
Past Year.'' Press Release. National Association of Realtors. Nov.
13, 2009.
\29\ ``HMDA Data Show Huge Decline in 2008 Mortgage Activity--
Except at Government Insured Programs.'' Inside Mortgage Finance.
Oct. 2, 2009 at 8.
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According to FHFA's Monthly Interest Rate Survey (MIRS), the
average loan-to-value ratio (LTV ratio) of single-family, conventional,
purchase money mortgages, which increased rapidly from 73.6 percent in
2003 to 79.3 percent in 2007, fell to 76.7 percent in 2008. The
proportion of such loans with LTV ratios greater than 90 percent
dropped sharply from 2007's level of 29 percent--the highest level
recorded--to 18 percent in 2008.
HMDA data for 2008 indicated that applications from Black borrowers
fell by 48 percent, and applications from Hispanic borrowers fell by 55
percent.\29\
[[Page 9038]]
Originations rose somewhat in the first two quarters of 2009 over the
last two quarters of 2008, but the $410 billion in mortgage
originations in the third quarter of 2009 showed a decline of more than
25 percent over the second quarter's $550 billion.\30\
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\30\ ``Mortgage Origination Volume Dropped Sharply in 3Q09, But
2009 May End on a Rising Trend.'' Inside Mortgage Finance. Oct. 30,
2009 at 3-4.
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One of the key catalysts of the current economic crisis was falling
housing prices after the substantial increase that began in 2000. From
January 2000 through the May 2006 peak, the S&P/Case-Shiller housing
price index rose by approximately 105 percent, only to fall by more
than 30 percent since then. The less volatile FHFA housing price index,
which reflects the book of business of the Enterprises, peaked later
and has since declined about 11 percent.
Changes in mortgage underwriting, particularly for affordable
products, had a direct impact on the national housing market. During
the boom, as house price appreciation reduced affordability, low
documentation Alt-A loans, interest-only loans and ARMs proliferated.
Subprime market share tripled to more than 20 percent of the market.
Lenders accepted more loans with higher LTV ratios and lower borrower
credit scores. The Joint Center for Housing Studies report, ``State of
the Nation's Housing 2009,'' describes the effect of loosened mortgage
underwriting standards on the housing market. In 2005, a household with
median owner income of about $57,000 and spending 28 percent of income
on mortgage principal and interest could qualify for a 30-year, fixed-
rate loan of $225,000. If the same borrower took out an ARM loan at a
discounted interest rate, the maximum loan amount increased to
$265,000. By adding an interest-only feature to that ARM and qualifying
the household based on the initial interest-only payments, the
potential loan size grew to $356,000. Allowing the borrower to spend 38
percent of income on mortgage costs meant that the mortgage loan could
total approximately $482,000. Interagency regulatory guidance on
nontraditional and subprime loans issued in 2006 and 2007, including
guidance to the Enterprises by OFHEO, contributed to limiting the
numbers of such loans as underwriting standards were subsequently
strengthened.\31\
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\31\ See Office of Federal Housing Enterprise Oversight, ``OFHEO
Director James B. Lockhart Commends Enterprises on Implementation of
Subprime Mortgage Lending Guidance,'' News Release (Sept. 10, 2007),
available at http://www.fhfa.gov/webfiles/1608/LockhartcommendsENTERPRISEsreSubprime91007.pdf. See also Office of
the Comptroller of the Currency, Federal Reserve Board, Federal
Deposit Insurance Corporation, Office of Thrift Supervision,
National Credit Union Administration, Statement on Subprime Mortgage
Lending, 72 FR 37569-37575 (July 10, 2007); and Office of the
Comptroller of the Currency, Federal Reserve Board, Federal Deposit
Insurance Corporation, Office of Thrift Supervision, National Credit
Union Administration, Interagency Guidance on Nontraditional
Mortgage Product Risks, 71 FR 58609-58618 (Oct. 4, 2006).
---------------------------------------------------------------------------
A result of the crisis is that the mortgage market has returned to
more traditional and prudent lending standards. Mortgage underwriting
standards in the near term can be expected to continue to be more
conservative than earlier in the decade.
The decline in housing prices has made housing more affordable. A
composite index of housing affordability for the third quarter of 2009
showed that families earning the median income had 159.2 percent of the
income needed to purchase a median-priced existing single-family home,
a figure 24 percent higher than the 128.6 percent reported for the
third quarter of 2008, although down from the 169.2 percent
affordability level of the prior quarter.\32\ Housing price declines
have brought standard affordability ratios closer to or even above
historical levels. In one national survey of 122 metropolitan areas,
the number of areas where the home price is less than three times the
median household income has declined to the same level as in 2003.\33\
While the unemployment rate may decline in 2010 and 2011, or at a
minimum the rate of unemployment may level off, there are concerns as
to whether jobs will return in areas where excess single-family housing
units are located.\34\
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\32\ U.S. Housing Market Conditions, 3rd Quarter 2009.
Department of Housing and Urban Development at 17.
\33\ ``State of the Nation's Housing 2009.'' Joint Center for
Housing Studies of Harvard University at 9.
\34\ Emile J. Brinkmann, Mortgage Bankers Association. Senate
Banking, Housing and Urban Affairs Committee. Oct. 20, 2009 at 3.
---------------------------------------------------------------------------
From April 2008 through December 2008, eligible first-time
homebuyers received a $7,500 tax credit. From January 2009 through the
end of November 2009, the tax credit was revised to include an $8,000
non-refundable tax credit. On November 5, 2009, the Congress enacted
H.R. 3548, the Unemployment Compensation Extension Act, which extended
and expanded the $8,000 non-refundable homebuyer tax credit. Under the
legislation, qualifying first-time homebuyers receive the $8,000 tax
credit if they sign a contract by April 30, 2010, and close by June 30,
2010. To encourage ``move up'' homebuyers, the legislation allows
homebuyers who purchase a new primary residence to qualify for a $6,500
tax credit, provided they owned their current home for at least five
consecutive years in the previous eight years.\35\
---------------------------------------------------------------------------
\35\ ``House Clears Extension of Jobless Benefits, Homebuyer's
Tax Credit.'' Congressional Quarterly Today Online News. Nov. 5,
2009.
---------------------------------------------------------------------------
2. Economic, Housing and Demographic Conditions
The current turmoil in the housing and mortgage markets has created
less than favorable conditions for expansions in credit to borrowers on
the margins of homeownership. The adverse market conditions include:
(1) Tightened credit underwriting practices; (2) sharply increased
standards of private mortgage insurance (MI) companies; (3) increased
role of FHA in the marketplace; (4) collapse of the private label
mortgage-backed securities (PLS) market; and (5) increasing
unemployment. These developments contribute to a decrease in the
overall number of single-family loans likely to qualify for affordable
housing goals credit.
Tightened credit underwriting practices. In general, more
conservative underwriting standards in the mortgage market will likely
result in fewer goals-qualifying loans and a lower percentage of goal-
qualifying loans in the market. Underwriting standards in the mortgage
market generally, and at Fannie Mae and Freddie Mac, tightened
considerably in 2008 and 2009 in response to declining market
conditions and early payment defaults, among other factors, and such
standards can be expected to remain in place in the near future. In May
2008, responding to changes in private MI underwriting, Fannie Mae
revised its down payment policy to lower the maximum allowable LTV
ratio for loans underwritten by Desktop Underwriter (DU) and for
manually underwritten loans. The implementation of Fannie Mae's updated
DU Version 8.0, effective in December 2009, generally reduces the
allowable ``back-end'' borrower debt-to-income ratio--the portion of a
borrower's income that goes toward paying debts--to 45 percent. In
addition, it eliminates DU recommendations for Expanded Approval II and
Expanded Approval III loans, loans which historically counted heavily
toward the housing goals.\36\ If the DU 8.0 revisions had been in
effect
[[Page 9039]]
for all of 2009, substantially fewer goals-qualifying loans would have
been underwritten. The changes to DU will likely have a similar effect
in 2010 and 2011. Freddie Mac has similarly tightened its underwriting
standards.
---------------------------------------------------------------------------
\36\ Desktop Originator/Desktop Underwriter Release Notes. DU
Version 8.0. DODU 0909. Fannie Mae. Sept. 22, 2009. DU 8.0 will
allow a back-end ratio of up to 50 percent for case files with
strong compensating factors.
---------------------------------------------------------------------------
Sharply increased standards of private mortgage insurers. Much like
tighter credit underwriting standards generally, higher underwriting
standards of private MI providers have resulted in fewer goal-
qualifying loans and a lower percentage of goal-qualifying loans in the
market. As a result of stress in the mortgage markets, beginning in
late 2007, MI providers implemented major changes in the types of risk
they were able to insure. MI providers that had experienced substantial
ratings downgrades acted to minimize losses by imposing stricter
underwriting standards on loans with high LTVs. In October 2009,
Standard and Poor's put five MI providers on credit watch for potential
downgrades, citing economic developments that were having a negative
effect on the MI providers' book of business.\37\ For the first nine
months of 2009, private MI activity was down more than 60 percent from
the previous year. MGIC, the largest mortgage insurer, reported a
$517.8 million net loss for the third quarter of 2009, an amount equal
to more than half of the MI industry's loss for the period.\38\ In
addition, MI providers have implemented measures in ``declining
markets'' that have sharply limited the insurability of certain higher-
LTV mortgage loans.
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\37\ ``FHA Ends 2009 Fiscal Year With a Bang, Topping $100
Billion in Quarterly Originations for the First Time.'' Inside
Mortgage Finance. Oct. 30, 2009 at 8.
\38\ ``Private MIs Continue to Take a Beating as FHA Rockets to
New Record Market Share.'' Inside Mortgage Finance. Nov. 13, 2009 at
3-4.
---------------------------------------------------------------------------
As a result of these conditions, the availability of MI for high-
LTV or low credit score loans is much reduced relative to what it was a
few years ago. These developments limit the ability of MI providers to
write new business and reduce the overall mortgage lending volume,
particularly for higher-LTV mortgages, which historically have tended
to be more likely to count for purposes of the housing goals.
Increased role of FHA in the marketplace. Another factor that has
had substantial marketplace impact is the increase in the share of
mortgages insured by FHA and mortgages guaranteed by the VA. These
loans generally are pooled into mortgage-backed securities guaranteed
by the Government National Mortgage Association (GNMA). Purchases of
mortgages insured by FHA and mortgages guaranteed by the VA ordinarily
do not receive goals credit. In general, the impact of the FHA market
on the percentage of loans in the conventional market that qualify for
a particular goal depends on: (1) The goal-qualifying size of the
overall market; (2) the share of the market accounted for by FHA
mortgages; and (3) the extent to which FHA mortgages have goals
qualifying characteristics.
The market share of mortgages insured by FHA and mortgages
guaranteed by the VA has risen dramatically. In the third quarter of
2009, FHA endorsed a record $104.2 billion in mortgages, which brought
the agency's total production to $360.7 billion for the government's
fiscal year, or nearly a billion dollars a day.\39\ A key reason for
this growth is that Fannie Mae and Freddie Mac generally cannot buy
loans with original LTV ratios greater than 80 percent without some
form of credit enhancement. With the stresses on private mortgage
insurers, borrowers without substantial down payments are increasingly
dependent on government insurance programs. Nearly 80 percent of FHA's
purchase-loan borrowers in 2009 were first-time homebuyers, and in the
second quarter of 2009, nearly half of all first-time buyers in the
housing market used FHA-insured loans.\40\ To ensure long-term
actuarial soundness, FHA announced several policy changes on January
20, 2010 that could have the effect of limiting its role in the
mortgage market, including: (1) Reducing the maximum permissible seller
concession from the current 6 percent to 3 percent, which is in line
with marketplace norms; (2) requiring a minimum credit score of 580 for
new borrowers seeking to qualify for the 3.5 percent downpayment
program; and (3) increasing the up-front mortgage insurance premium by
50 basis points, to 2.25 percent. In addition, FHA asked for a change
in the law to allow it the ability to increase the maximum annual
mortgage insurance premium.\41\
---------------------------------------------------------------------------
\39\ ``FHA Ends 2009 Fiscal Year With a Bang, Topping $100
Billion in Quarterly Originations for the First Time.'' Inside
Mortgage Finance. Oct. 30, 2009 at 8.
\40\ ``HUD Secretary, FHA Commissioner Report on FHA's
Finances.'' HUD Press Release No. 09-214. Nov. 12, 2009.
\41\ ``FHA Announces Policy Changes to Address Risk and
Strengthen Finances.'' HUD Press Release No. 10-001. Jan. 20, 2010.
---------------------------------------------------------------------------
Collapse of private label securities market. In the middle part of
the decade--the period covered by the prior HUD rule on affordable
housing goals--Fannie Mae and Freddie Mac were major purchasers of the
AAA-rated tranches of PLS that contained substantial amounts of
subprime mortgages. While the size and nature of the Enterprises'
subprime holdings differed, these purchases had an impact on the
achievement of the housing goals for each Enterprise, particularly for
the home purchase subgoals. Such loans were not a large factor in the
mortgage marketplace in 2008 or 2009. OFHEO provided guidance to the
Enterprises in 2007 incorporating interagency policy guidance from the
Federal Deposit Insurance Corporation, the Office of the Comptroller of
the Currency, the Federal Reserve Board and the National Credit Union
Administration. The guidance restricted the purchase of such securities
by the Enterprises when certain terms of mortgages backing those
securities are harmful to the borrower.\42\
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\42\ On August 10, 2007, OFHEO issued letters directing the
Enterprises to apply the principles and practices of the interagency
Statement on Subprime Mortgage Lending to their purchases of
subprime loans in the regular flow of business, including bulk
purchases. OFHEO directed that, not later than September 13, 2007,
nontraditional and subprime loans purchased by Fannie Mae and
Freddie Mac as part of PLS transactions comply with the Interagency
Guidance on Nontraditional Mortgage Product Risks and the Statement
on Subprime Mortgage Lending. This application to PLS conformed to
the underwriting provisions of the guidance. Further, OFHEO directed
that the Enterprises adopt such business practices and take such
quality control steps as necessary to ensure the orderly and
effective implementation of the guidance with respect to the
purchase of PLS. OFHEO News Release (Sept. 10, 2007).
---------------------------------------------------------------------------
Increasing unemployment. Unemployment and underemployment have an
effect on mortgage default rates, and on the number of borrowers
seeking and obtaining a purchase money mortgage or a refinance.
According to the Bureau of Labor Statistics of the U.S. Department of
Labor, the unemployment rate rose from 9.8 percent to 10.1 percent in
October 2009, as nonfarm payroll employment continued to decline.
Construction employment decreased by 62,000 jobs in October.\43\ The
unemployment rate declined to 10.0 percent in November 2009,\44\ and it
remained at that level in December 2009.\45\ The average duration of
unemployment has also increased significantly over the last year.
---------------------------------------------------------------------------
\43\ ``The Employment Situation--October 2009.'' Economic News
Release USDL-09-1331. Bureau of Labor Statistics. U.S. Department of
Labor. Nov. 6, 2009.
\44\ ``The Employment Situation--November 2009.'' Economic News
Release USDL-09-1479. Bureau of Labor Statistics. U.S. Department of
Labor. Dec. 4, 2009.
\45\ ``The Employment Situation--December 2009.'' Economic News
Release USDL-09-1583. Bureau of Labor Statistics. U.S. Department of
Labor. Jan. 18, 2010.
---------------------------------------------------------------------------
NeighborWorks, a national network of community-based organizations
actively involved in foreclosure mitigation
[[Page 9040]]
counseling, has estimated that the two leading causes of mortgage
default rates were a reduction in income (28 percent of defaults) and
loss of income (17 percent of defaults).\46\ The high rates of
unemployment and underemployment are likely to continue to have a
significant impact on the size of the mortgage market going forward.
---------------------------------------------------------------------------
\46\ NeighborWorks, National Foreclosure Mitigation Counseling
Program Update, Jan. 23, 2009.
---------------------------------------------------------------------------
Refinancings. In 2009, Fannie Mae and Freddie Mac refinanced 4
million mortgage loans through November. Refinancing volumes are
strongly influenced by mortgage interest rates and LTV ratios on
existing mortgages.
Under the umbrella of the Administration's Making Home Affordable
program, the Home Affordable Refinance Program (HARP) is an effort by
the Enterprises to enhance the opportunity for owners to refinance.
Under this program, homeowners whose mortgages are owned or guaranteed
by Fannie Mae or Freddie Mae who are current on their mortgages have
the opportunity to reduce their monthly mortgage payments to take
advantage of low monthly mortgage interest rates, which Freddie Mac's
January 21, 2010 weekly report indicated had fallen to 4.99 percent for
a 30-year, fixed-rate mortgage. For homeowners with a current LTV ratio
between 80 and 125 percent, the Enterprises will refinance mortgages
without requiring additional mortgage insurance.
Demographic conditions. In establishing the 2010 goals, FHFA
analyzed current demographic trends for their possible effect on
housing demand. Analysis of current trends reveals that by 2008,
household formation rates were already on the decline. In addition, the
recession and unemployment have reduced immigration, which in the past
has been a driver of housing demand. It is still too early to assess
the impact of the current economic downturn on housing demand,
particularly given regional variations in impact and mitigating
factors, such as increased affordability of housing ownership. In the
long-term, housing demand is likely to increase as a result of
population growth, immigration, and future household formation by the
generation born between 1981 and 2000.\47\ However, the impact of long-
term demographic conditions on short-term goals performance would be
minimal.
---------------------------------------------------------------------------
\47\ ``State of the Nation's Housing 2009.'' Joint Center for
Housing Studies of Harvard University.
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3. The Performance and Effort of the Enterprises Toward Achieving the
Housing Goals in Previous Years
Section 1332(a) of the Safety and Soundness Act, as amended by
section 1128 of HERA, requires FHFA to establish three single-family
home purchase mortgage goals for the Enterprises: A goal for low-income
families; a goal for families that reside in low-income areas; and a
goal for very low-income families. Revised section 1332(a) also
requires FHFA to establish a goal for single-family refinancing
mortgages for low-income families. The following section reviews what
performance would have been on these four single-family goals if they
had been in effect over the 2001-08 period.
Low-Income Families Housing Goal. The affordable housing goals in
the Safety and Soundness Act, as amended, apply to the Enterprises'
acquisitions of ``conventional, conforming, single-family, purchase
money mortgages financing owner-occupied housing'' for the targeted
groups. Accordingly, they are similar in structure to the home purchase
subgoals established by HUD for Fannie Mae and Freddie Mac for 2005-08,
and subsequently extended and modified for 2009 by FHFA. One difference
is that the subgoals established by HUD applied only to mortgages on
properties in metropolitan areas, while the new goals apply to
mortgages on properties in all locations.
The low-income families housing goal applies to mortgages made to
``low-income families,'' defined as families with incomes no greater
than 80 percent of AMI.\48\ Past performance on this goal, if it had
been in effect in previous years, is shown in Table 1. As indicated,
Fannie Mae's performance would have risen markedly between 2001 and
2003, and then, with the exception of 2006, would have fallen steadily
between 2003 and 2008. Its performance last year, at 23.2 percent,
would have been the lowest of the period. Freddie Mac's performance
generally would have risen between 2001 and 2005, and then declined
between 2005 and 2008. Its performance last year would have been 24.5
percent, also the lowest of the period.
---------------------------------------------------------------------------
\48\ 12 U.S.C. 4502(14).
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[[Page 9041]]
[GRAPHIC] [TIFF OMITTED] TP26FE10.000
Very Low-Income Families Housing Goal. The Safety and Soundness
Act, as revised by HERA, defines a ``very low-income'' owner-occupied
property as one occupied by a family with income no greater than 50
percent of AMI.\49\ Past performance on this goal, if it had been in
effect in previous years, is shown in Table 2. As indicated, Fannie
Mae's performance would have risen from 6.8 percent in 2001 to 9.0
percent in 2003 and 2004, and then, with the exception of 2006,
generally decreased, to 5.6 percent in 2008, the lowest in the period.
Freddie Mac's performance on this goal would have changed little over
the 2001-08 period, remaining in the range of 6.2 percent to 7.0
percent.
---------------------------------------------------------------------------
\49\ 12 U.S.C. 4502(24).
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[[Page 9042]]
[GRAPHIC] [TIFF OMITTED] TP26FE10.001
Low-Income Areas Housing Goal. The low-income areas housing goal
targets the Enterprises' purchases of mortgages in specified geographic
areas, in a manner similar to the previous underserved areas goal. The
Safety and Soundness Act, as revised by HERA, now defines a ``low-
income area'' as a census tract or block numbering area in which the
median income does not exceed 80 percent of AMI, including families
with incomes not greater than 100 percent of AMI who reside in minority
census tracts and in designated disaster areas.\50\ It defines a
``minority census tract'' as a census tract that has a minority
population of at least 30 percent and a median family income of less
than 100 percent of AMI.\51\
---------------------------------------------------------------------------
\50\ 12 U.S.C. 4502(28).
\51\ 12 U.S.C. 4502(29).
---------------------------------------------------------------------------
According to the 2000 census, of the 66,144 unique census tracts,
there were 18,613 low-income tracts. There were 25,254 tracts with a
minority population of at least 30 percent, of which 5,711 had a tract
income greater than 80 percent of AMI but less than or equal to 100
percent of AMI. Accordingly, based on the 2000 census, there were
24,324 tracts that would be targeted by this goal, excluding tracts in
designated disaster areas, but only families with incomes no greater
than AMI would be included in the 5,711 high-minority, moderate-income
tracts.
Past performance on the low-income areas housing goal, if it had
been in effect in previous years, excluding designated disaster areas,
is shown in Table 3. As indicated, Fannie Mae's
[[Page 9043]]
performance would have varied over time. It would have reached its
highest level, 19.3 percent, in 2002, and its lowest level, 15.1
percent, in 2008. Freddie Mac's performance would have peaked at 19.3
percent in 2002, then fallen sharply to 13.3 percent in 2003, and would
have been 15.2 percent in 2008.
[GRAPHIC] [TIFF OMITTED] TP26FE10.002
[[Page 9044]]
Refinancing Housing Goal. Under the Safety and Soundness Act, as
revised by HERA, the refinancing housing goal is targeted to low-income
families, i.e., families with incomes no greater than 80 percent of
AMI. It applies to mortgages that are ``given to pay off or prepay an
existing loan secured by the same property.'' Thus, the goal would not
apply to home equity loans.
Past performance on this goal, if it had been in effect in previous
years, is shown in Table 4. As indicated, Fannie Mae's performance
would have peaked in 2004, following the 2001-03 refinance boom, and
declined thereafter, to a low of 23.1 percent last year. Freddie Mac's
performance would have peaked in 2005, and then also declined, to 23.9
percent in 2008.
[GRAPHIC] [TIFF OMITTED] TP26FE10.003
BILLING CODE C
Interpreting Past Goal Performance Data. Past performance is not
necessarily a good indicator of future goal performance, due to changes
in mortgage interest rates, home prices, credit availability, and other
factors. This subsection briefly discusses the role of the purchase of
PLS in achieving past performance, and the possible effects of changes
in underwriting guidelines recently adopted by the Enterprises. Also,
FHFA has partial-year data which allow calculation of each Enterprise's
performance in the first three quarters of 2009 relative to the
proposed 2010-2011 goals. Such data are proprietary, but preliminary
full-
[[Page 9045]]
year data will be included in the final rule for the 2010-2011 goals.
The Enterprises purchased PLS in recent years primarily due to
anticipated profitability, to maintain market share, and because some
PLS, especially those containing subprime mortgages, helped achieve the
housing goals. The performance data in Tables 1-4 include the effects
of these PLS purchases. Elsewhere in the proposed rule is a discussion
regarding counting mortgages included in PLS toward the affordable
housing goals in 2010-2011.
In response to the housing crisis and their financial difficulties,
including the performance of PLS, the Enterprises have adopted more
conservative underwriting guidelines. As previously discussed, those
changes will affect goal performance.
4. The Ability of the Enterprises To Lead the Industry in Making
Mortgage Credit Available
As background for the statutory requirement to consider the
Enterprises' ``ability * * * to lead the industry in making mortgage
credit available,'' a Senate committee report on legislation leading to
the enactment of the Safety and Soundness Act in 1992 expressed concern
that Enterprise purchases had not kept pace with market originations of
mortgages to low- and moderate-income borrowers.\52\ FHFA shares that
concern and has defined the proposed Enterprise housing goals in part
against that history. FHFA believes that, in fact, the Enterprises have
played a leading role in sustaining the mortgage market during the
recent crisis.
---------------------------------------------------------------------------
\52\ S. Rep. No. 102-282, at 10-11 (1992).
---------------------------------------------------------------------------
Leading the industry in making mortgage credit available includes
making mortgage credit available to primary market borrowers at
differing income levels. It also includes the ability of the
Enterprises to respond to pressing mortgage needs in the current
market, such as the threat of a loss of a home by the borrower, for
example, by implementing the loan modification and refinance programs
under the Administration's Making Home Affordable Program, and by
supporting State and local housing finance agencies. The Enterprises'
ability to respond is reflected through the introduction of safe and
sound innovative products, technology and process improvements.
In the current market environment, the Enterprises, along with FHA
and VA, now lead the market. From 1997-2003, the Enterprises' share of
mortgage originations grew to almost 55 percent. From 2004-2006, the
private mortgage market predominated, and the Enterprises' market share
dropped to below 35 percent. After the private mortgage market began to
deteriorate in 2007, the Enterprises' share of the single-family
mortgage market grew to about 75 percent, with FHA and VA accounting
for the bulk of the balance.\53\
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\53\ Address by Edward DeMarco, Acting Director of the Federal
Housing Finance Agency, New England Mortgage Bankers 22nd Annual
Conference, Oct. 1, 2009 at 5.
---------------------------------------------------------------------------
At the same time, the Enterprises have been severely stressed by
the financial crisis. As described below, they have suffered losses
that have depleted their capital and resulted in their being sustained
only by multi-billion-dollar infusions of capital from the U.S.
Treasury under the Senior Preferred Stock Purchase Agreements. In this
environment, in which FHFA as conservator is also exercising a
statutory mandate to conserve and preserve the Enterprises' assets, it
is especially important that the Enterprises not take on undue
additional credit risk by purchasing mortgages in any defined segment
in quantities beyond what market originations reasonably provide.
FHFA has taken into account all of the foregoing considerations in
assessing the Enterprises' ability to lead the industry.
5. Other Mortgage Data
The primary source of reliable mortgage data for establishing the
affordable housing goals is the HMDA data reported by originators.
Enterprise mortgage purchase data are compared to HMDA data to evaluate
the Enterprises' performance with respect to leading or lagging the
housing market under specific goals.
FHFA also uses other reliable data sources including the American
Housing Survey (AHS), Census demographics, commercial sources such as
Moody's,\54\ and other industry and trade research sources, e.g.,
Mortgage Bankers Association (MBA),\55\ Inside Mortgage Finance
Publications,\56\ NAR,\57\ National Association of Home Builders
(NAHB),\58\ and the Commercial Mortgage Securities Association.\59\ The
FHFA MIRS,\60\ previously administered by the Federal Housing Finance
Board, a predecessor agency to FHFA, is used to complement forecast
models for home purchase loan originations by making intra-annual
adjustments prior to the public release of HMDA mortgage data. In the
development of economic forecasts, FHFA uses data and information from
Wells Fargo, PNC, Fannie Mae, Freddie Mac, The Wall Street Journal
Survey and Forcast.org. In addition, FHFA uses market and economic data
from the Bureau of Labor Statistics, the Federal Reserve Board, the
Department of Commerce Bureau of Economic Analysis, and FedStats.\61\
---------------------------------------------------------------------------
\54\ http://www.moodys.com/.
\55\ http://www.mbaa.org/.
\56\ http://www.imfpubs.com/.
\57\ http://www.realtor.org/.
\58\ http://www.nahb.org/.
\59\ http://www.cmsaglobal.org/CMSA_Resources/Research/Market_Statistics/Market_Statistics/.
\60\ http://www.fhfa.gov/Default.aspx?Page=250.
\61\ http://www.fedstats.gov/other.html.
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6. Market Size
In general, the single-family mortgage market environment of 2009
is expected to extend to 2010, with modest improvements in 2011. Much
of FHFA's estimates of the mortgage market rely on the Federal Reserve
continuing to support low interest rates.\62\ Other quantifiable
factors influencing FHFA's outlook for the mortgage market include
general growth in the economy, employment and inflation. Other factors
that are less easily quantified include the effect of the extension and
expansion of the homebuyer tax credit on the mortgage market. Activity
in the subprime market is expected to be minimal through 2011.
---------------------------------------------------------------------------
\62\ ``The [Federal Open Market] Committee will maintain the
target range for the Federal funds rate at 0 to \1/4\ percent and
continues to anticipate that economic conditions, including low
rates of resource utilization, subdued inflation trends, and stable
inflation expectations, are likely to warrant exceptionally low
levels of the Federal funds rate for an extended period.'' Board of
Governors of the Federal Reserve System, Press Release, Nov. 4,
2009.
---------------------------------------------------------------------------
The composition of the mortgage market will be influenced by FHA's
market share, which rose significantly in 2008-2009 and continues to be
high, and by the rate of refinancing. Given that underwriting standards
are expected to be tight in 2010 and 2011, FHA will most likely
continue to have a much larger presence in the mortgage market. In
addition, rising interest rates or a combination of depressed housing
prices and high LTV ratios could push down the number of homeowners
refinancing their mortgages, lowering the refinance rate.
The outlook for the housing and mortgage markets over the 2010-2011
period remains guarded. Both of these markets will be heavily
influenced by general economic factors as well as internal market
forces. In developing its Economic and Mortgage Outlook (see Table 5,
below) FHFA uses an average of forecasted values for key economic
indicators drawn from several industry
[[Page 9046]]
sources.\63\ On average, industry forecasters project the economy to
rebound in 2010 and 2011, with real Gross Domestic Product (GDP)
growing at a rate of 2.6 and 2.8 percent, respectively. Industry
assessments on housing markets are generally reserved. If unemployment
remains high, at approximately 10 percent, it would have a negative
impact on the housing market. There are also concerns over the impact
of the overall economy on housing markets. According to the MBA,
``[h]ousing markets are beginning to slowly recover from the worst
recession in decades, but are vulnerable to additional macroeconomic
shocks.'' \64\ Industry forecasters expect that inflation will remain
low, and the minutes of the November 2009 meeting of the Federal Open
Market Committee (FOMC) indicate that the FOMC expects core inflation
to slow somewhat further over the next two years and inflation to be
subdued for some time. The FOMC has also concluded that ``economic
conditions were likely to warrant exceptionally low [Federal funds
rates] for an extended period.'' \65\ Mortgage interest rates are
currently dependent on Federal policies and somewhat independent of the
Federal funds rate, but for the period between 2010 and 2011, FHFA is
not assuming a substantial increase in mortgage interest rates.
---------------------------------------------------------------------------
\63\ These forecasts include those by the Mortgage Bankers
Association, Fannie Mae, Freddie Mac, the National Association of
Realtors, Wells Fargo, Wall Street Journal Forecast Survey, PNC
Financial and forecast.org.
\64\ Mortgage Bankers Association, Mortgage Finance Commentary,
Nov. 10, 2009.
\65\ See Federal Open Market Committee of the Federal Reserve
System, Minutes of the Federal Open Market Committee, Nov. 3-4,
2009. Accessed at http://www.federalreserve.gov/monetarypolicy/fomcminutes20091104.htm.
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[[Page 9047]]
[GRAPHIC] [TIFF OMITTED] TP26FE10.004
Mortgages insured by FHA are likely to continue to represent a
significant share of the mortgage market in 2010 and 2011. These loans
generally are pooled into mortgage-backed securities guaranteed by
GNMA. Purchases of
[[Page 9048]]
mortgages insured by FHA and VA ordinarily do not receive affordable
housing goals credit.
As shown in Figure 1, the market share of all mortgages insured by
FHA increased dramatically, from a low of 2.5 percent in 2005 to a high
of 32 percent in December 2008. A key reason for this growth is that
Fannie Mae and Freddie Mac generally cannot buy loans with original LTV
ratios greater than 80 percent without some form of credit enhancement.
With the stresses on private mortgage insurers, borrowers without
substantial down payments are increasingly dependent on government
insurance programs. Since FHA's market share increase appears to
coincide with the demise of the subprime market, it would be easy to
conclude that for high-risk borrowers, FHA loans are replacing loans
from subprime lenders. However, FHA's internal data indicate that the
average riskiness of the loans they insure has actually decreased,
i.e., credit risk scores increased, since late 2007.\66\
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\66\ See FHA Outlook, a monthly statistical summary of
application insurance endorsement, delinquency and claim information
on FHA single family programs. Available at http://www.hud.gov/offices/hsg/comp/rpts/ooe/olmenu.cfm.
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[[Page 9049]]
[GRAPHIC] [TIFF OMITTED] TP26FE10.005
With the increase in the FHA loan limit in 2008, FHA is able to
endorse larger mortgages. These mortgages would otherwise have been
originated as conventional mortgages. In 2008, nearly 80 percent of
FHA's
[[Page 9050]]
endorsements of refinancing mortgages came from mortgages that were
previously conventional mortgages, and this share increased throughout
the year.\67\ FHA's market share for home purchase mortgages increased
from 3.8 percent in January 2007 to 32 percent in December 2008. The
share of FHA endorsed refinancing loans increased from 4 percent in
2007 to 15 percent of the conforming market in 2008. As expected, these
additional mortgages reduced the share of FHA mortgages that were for
low- and very low-income borrowers. While the share of FHA loans for
lower-income borrowers decreased, the share of lower-income borrower
loans increased in the conventional conforming market between 2007 and
2008 (see Table 6).
---------------------------------------------------------------------------
\67\ Id. 2008 was the first year FHA reported refinance
endorsements by whether they were a refinance of a conventional
mortgage or an FHA mortgage.
[GRAPHIC] [TIFF OMITTED] TP26FE10.006
BILLING CODE C
The experience for the low-income areas goal is different. While
FHA endorsed more loans on properties located in low-income areas, it
endorsed an even larger number of loans in higher-income areas. As a
result, the low-income areas share of FHA's mortgages decreased.
However, unlike the borrower-income based goals, the low-income area
share of the conventional market also decreased. While the volume of
conventional conforming mortgages in 2008 was 50 percent of that in
2007, the volume of conventional conforming mortgages from low-income
areas in 2008 was only 40 percent of the level in 2007. The low-income
area share of the conventional conforming market fell by 240 basis
points between 2007 and 2008. As shown in Table 5, FHA market share is
expected to be 30 percent in 2009, 2010 and 2011.
The impact from the first-time homebuyer tax credit is unclear.
Additional first-time homebuyers taking advantage of the $8,000 tax
credit will likely have a positive impact on the housing goals. The
additional repeat homebuyers who qualify for the $6,500 tax credit
(there is a five-year occupancy requirement) will likely have a
negative impact on the housing goals. For the proposed rule, FHFA has
assumed that the homebuyer tax credit will have no significant impact
on the share of conventional loans to low- and moderate-income
borrowers or on the share of conventional loans that support housing
purchases in lower-income areas.
FHFA's estimates of the market performance for the three single-
family owner-occupied property purchase money mortgage housing goals
and the refinancing mortgage housing goal are provided in Table 6. FHFA
estimates that the low-income and very low-income borrower mortgage
shares of the home purchase mortgage market will be 24 percent to 30
percent and 6 percent to 9 percent, respectively, in 2010 and 2011. The
share of goal-qualifying mortgages in low-income areas in the home
purchase mortgage market is estimated to be 11 percent to 15 percent in
2010 and 2011. With a projected refinance rate of 46 percent in 2010
(down from 67 percent in 2009), FHFA estimates that 19 percent to 30
percent of refinance mortgages will be made to low-income borrowers.
The refinance rate is expected to fall to 37 percent in 2011, resulting
in an estimate that the low-income borrower mortgage share of the
refinance mortgage market will be 19 percent to 33 percent in that
year. To arrive at these estimates, FHFA used econometric methods to
extend the trends of the market performance for each goal, based on a
monthly time series database provided by the Federal Financial
Institutions Examination Council (FFIEC) and the Federal Reserve Board.
A detailed description of FHFA's analysis of the mortgage market
for 2010 and 2011 market model methodology, is contained in a document
entitled ``Market Estimates for the 2010 and 2011 Enterprise Single-
Family Housing Goals,'' which is available at http://www.fhfa.gov.
[[Page 9051]]
Sustainable Mortgages
An alternative to defining the market for determining whether a
mortgage is eligible to count toward the housing goals would be to
focus on the sustainability of the mortgage. Under this approach, the
housing goals would be defined in such a way that only mortgages that
support sustainable home ownership would count toward the goals. This
would require a standard to differentiate between mortgages that are
sustainable and mortgages that are likely not to be sustainable.
One approach would be to use historical data on the cumulative
default rates (CDRs) of mortgages acquired by the Enterprises and make
a determination, based on statistical models that predict CDR, whether
mortgages with specific characteristics promote sustainable
homeownership. The higher the predicted CDR of a mortgage with specific
characteristics, the higher the probability the mortgage will default
sometime within its life. FHFA would determine that mortgages with
expected CDRs above some point did not promote sustainable
homeownership. It might also be possible to establish a statistical
correlation between a mortgage's expected CDR and the spread between
the yield on the loan and some benchmark interest rate. If so, it might
be possible to use that spread as a basis for determining whether
mortgages promoted sustainable homeownership.
Both Enterprises use statistical models to calculate expected CDR
as part of their business decision strategy. FHFA could rely on
Enterprise statistical models or develop its own models to estimate
CDRs for the purpose of determining whether mortgages acquired by the
Enterprises had estimated CDRs above a specified threshold. FHFA would
also have to develop estimates of the share of single-family mortgages
originated each year that had estimated CDRs above and below that
threshold. To develop its own statistical models, FHFA could use loan-
level mortgage data obtained from the Enterprises and leased from
private vendors. Data obtained through the mortgage market survey
required by section 1324(c) of the Safety and Soundness Act, as amended
by HERA, might also be useful.
FHFA invites comments on this alternative to estimating the market
and counting single-family mortgages toward the housing goals.
7. Financial Condition of the Enterprises
In the first two full years of the current housing crisis--from
July 2007 through the first half of 2009--combined losses at the
Enterprises totaled $165 billion. In the first half of 2009, the
Enterprises reported combined losses of $47 billion. The financial
performance of both Enterprises is dominated by credit-related expenses
and losses that stem principally from purchases of PLS and purchases
and guarantees of mortgages originated in 2006 and 2007. Since the
establishment of the conservatorship for the Enterprises in September
2008, the combined losses of the two Enterprises depleted their capital
and required them to draw from the U.S. Treasury under the Senior
Preferred Stock Purchase Agreements.
FHFA's duties as conservator require the conservation and
preservation of the assets of the two Enterprises. Given the importance
of the Enterprises to the housing market, any goal-setting must be
closely linked to putting the Enterprises in sound and solvent
condition. Over the long term, such actions will assist homeowners and
neighborhoods while saving the Enterprises money. In 2009, FHFA
attempted to align the Enterprises' affordable housing goals with safe
and sound practices and market reality, and the housing goals
requirements for 2010 and 2011 must be similarly aligned.
B. Single-Family Housing Goal Levels
Based on the factors described above, proposed Sec. 1282.12 would
establish the benchmark levels for the single-family housing goals for
2010 and 2011 as follows:
Housing goals for low-income families. The benchmark level of the
annual goal for each Enterprise's purchases of purchase money mortgages
on owner-occupied single-family housing for low-income families would
be 27 percent of the total number of such mortgages purchased by that
Enterprise.
Housing goals for families in low-income areas. The benchmark level
of the annual goal for each Enterprise's purchases of purchase money
mortgages on owner-occupied single-family housing for families in low-
income areas would be 13 percent of the total number of such mortgages
purchased by that Enterprise.
Housing goals for very low-income families. The benchmark level of
the annual goal for each Enterprise's purchases of purchase money
mortgages on owner-occupied single-family housing for very low-income
families would be 8 percent of the total number of such mortgages
purchased by that Enterprise.
Housing goals for refinancing mortgages. The benchmark level of the
annual goal for each Enterprise's purchases of refinancing mortgages on
owner-occupied single-family housing for low-income families would be
25 percent of the total number of such mortgages purchased by that
Enterprise.
VI. Analysis of Multifamily Housing Goals
Section 1333(a)(4) of the Safety and Soundness Act, as amended by
HERA, requires FHFA to consider the following six factors in setting
multifamily special affordable housing goals:
(1) National multifamily mortgage credit needs and the ability of
the Enterprise to provide additional liquidity and stability for the
multifamily mortgage market;
(2) The performance and effort of the Enterprise 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 Enterprise 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;
(6) The need to maintain the sound financial condition of the
Enterprise.\68\
---------------------------------------------------------------------------
\68\ 12 U.S.C. 4563(a)(4).
---------------------------------------------------------------------------
A. Analysis of Factors for Multifamily Housing Goals
FHFA's analysis of each of the factors is set forth below.
1. National Multifamily Mortgage Credit Needs
Due to the credit crisis, traditional sources of multifamily
credit, primarily commercial mortgage-backed securities (CMBS), life
insurance companies, commercial banks, and thrifts, have significantly
reduced lending or stopped lending completely. This has left Freddie
Mac and Fannie Mae as the principal sources of financing for most
multifamily mortgages. FHA, another active source of multifamily
credit, has capacity constraints that limit its ability to
significantly expand lending through its insured programs.
With multifamily property prices having fallen by almost 34 percent
from the third quarter of 2008 to the third quarter of 2009,\69\ many
properties that
[[Page 9052]]
would have been eligible for refinance through Enterprise programs lack
enough equity to meet Enterprise loan underwriting standards. Declining
multifamily property prices will adversely affect owners who financed
with interest-only loans over the past decade. As these loans become
due, properties with non-amortizing loans will not have accumulated
sufficient additional equity over the term of the loan to counter the
effects of declining property values.
---------------------------------------------------------------------------
\69\ Moody's/Real CPPI Report, Jan. 2010.
---------------------------------------------------------------------------
While obtaining multifamily credit is difficult for most owners,
demand for new multifamily housing credit has also waned. According to
the U.S. Census Bureau, multifamily housing starts plummeted by 47
percent from September 2008 to December 2009.\70\ Sales of multifamily
properties are far below normal levels in part because property owners
are waiting for property values to stabilize. Many other multifamily
property owners, unable to refinance, have been granted extensions by
lenders, or in the case of loans securitized through CMBS, by the
servicer. On the positive side, the maturations of multifamily loans
acquired by the Enterprises and backing CMBS issuances are unlikely to
begin to increase significantly until after 2010.
---------------------------------------------------------------------------
\70\ ``New Residential Construction in December 2009.'' U.S.
Census Bureau, Joint Release, U.S. Department of Housing and Urban
Development, Jan. 20, 2009.
---------------------------------------------------------------------------
While the Enterprises have primarily purchased the highest-rated
CMBS tranches, they may be indirectly affected by increasing CMBS
delinquency rates. According to a March 2009 report by Deutsche Bank,
delinquencies on CMBS issuances began to accelerate in late 2008, and
should peak at 6 to 7 percent in late 2010.\71\ According to December
2009 data released by the MBA,\72\ delinquencies on CMBS issuances rose
slightly from 3.89 percent to 4.06 percent in the third quarter of
2009. The CMBS delinquency rate in the third quarter of 2008 was 0.63
percent. As properties collateralizing CMBS issuances become
delinquent, foreclosures and workouts will increase, further depressing
prices of all commercial properties, including multifamily properties.
This will make refinancing maturing multifamily loans more challenging
for the Enterprises.
---------------------------------------------------------------------------
\71\ Commercial Real Estate Outlook Q1 2009, Deutsche Bank, Mar.
2009.
\72\ MBA Commercial/Multifamily Mortgage Delinquency Report,
Dec. 7, 2009.
---------------------------------------------------------------------------
While multifamily delinquencies remain relatively low for both
Fannie Mae\73\ and Freddie Mac,\74\ 0.062 percent and 0.014 percent
respectively, there is growing concern among multifamily property
owners and investors about properties that are overleveraged or
generating negative cashflows. Depending on the magnitude of distressed
properties requiring restructuring, both Fannie Mae's and Freddie Mac's
multifamily activity could exceed FHFA forecasts.
---------------------------------------------------------------------------
\73\ Fannie Mae: Monthly Summary, November 2009, Table 9.
\74\ Freddie Mac: Monthly Volume Summary: November 2009, Table
6.
---------------------------------------------------------------------------
2. Past Performance
HUD established dollar-based multifamily subgoals for the
Enterprises for the years 1996 through 2008. HERA extended the 2008
subgoals through 2009, subject to review by FHFA, and in its August 10,
2009 final rule on the housing goals, FHFA increased these 2009
subgoals modestly, from $5.49 billion to $6.56 billion for Fannie Mae,
and from $3.92 billion to $4.60 billion for Freddie Mac.
HERA changed the structure of the multifamily housing goal for 2010
and beyond. The multifamily housing goal for 2009 is set in terms of
units for very low-income families and low-income families in low-
income areas. The scope of the goal is broader for 2010-2011, covering
units affordable to all low-income families (those with incomes no
greater than 80 percent of AMI) regardless of property location.
Section 1333(a)(2) of the Safety and Soundness Act, as revised by
HERA, requires the Director to establish ``additional requirements for
the purchase by each enterprise of mortgages on multifamily housing
that finance dwelling units affordable to very low-income families,''
with ``very low-income'' families defined as those with incomes no
greater than 50 percent of AMI.\75\ To implement this provision, FHFA
is proposing to establish a multifamily housing subgoal for very low-
income families. FHFA invites comment on this proposed requirement.
---------------------------------------------------------------------------
\75\ 12 U.S.C. 4563(a)(2).
---------------------------------------------------------------------------
Section 1333(a)(3) of the Safety and Soundness Act, as revised by
HERA, provides that the Director shall require each Enterprise to
report on its purchases of mortgages on multifamily housing ``of a
smaller or limited size that is affordable to low-income families.''
The provision defines small multifamily projects as those containing 5
to 50 units or as those with mortgages of up to $5,000,000. The
Director may adjust the definition to include projects containing
different numbers of units or with mortgages of different amounts. The
provision further states that the Director may establish additional
requirements related to such units by regulation.\76\
---------------------------------------------------------------------------
\76\ 12 U.S.C. 4563(a)(3).
---------------------------------------------------------------------------
FHFA proposes to define such small multifamily properties as those
containing 5 to 50 units, which is consistent with industry standards.
FHFA already requires reporting by the Enterprises for purchases of
mortgages secured by such properties. FHFA invites comments on whether
additional requirements for small multifamily properties should be
considered.
Multifamily special affordable housing goal. Both Enterprises
played major roles in funding multifamily units for low-income families
between 2001 and 2008, as shown in Table 7. Fannie Mae financed an
average of 417,000 such units over this period, peaking at 538,000
units in 2003, while Freddie Mac financed an average of 364,000 units,
peaking at 492,000 units in 2007. However, as discussed elsewhere in
the proposed rule, the Enterprises followed different approaches to the
multifamily market, with Freddie Mac relying to a significant extent on
the purchase of CMBS, while Fannie Mae depended to a greater extent on
the direct purchase of multifamily loans originated by its Delegated
Underwriting and Servicing (DUS) lenders.
As indicated in Table 7, Fannie Mae's financing of low-income
multifamily units fell by 16 percent, from 532,000 units in 2007 to
448,000 in 2008 units. Financing fell more sharply at Freddie Mac, by
44 percent, from 492,000 units in 2007 to 276,000 units in 2008. This
difference reflects the drop in CMBS purchases by Freddie Mac. As a
result, Freddie Mac's financing of such units was 62 percent of Fannie
Mae's financing, the lowest ratio of the 2001-08 period.
BILLING CODE P
[[Page 9053]]
[GRAPHIC] [TIFF OMITTED] TP26FE10.007
Very low-income multifamily subgoal. HERA revised the definition of
``very low-income'' families as it pertains to the Enterprises' housing
goals. Under the housing goals established by HUD for 1993-2008, ``very
low-income'' referred to borrowers with incomes no greater than 60
percent of AMI, or for rental units, to units affordable to families
with incomes in this range, with adjustments for family size. This
definition was changed by HERA to refer to borrowers with incomes no
greater than 50 percent of AMI, or for rental units, to units
affordable to families with incomes in this range, with adjustments for
family size.\77\ The new definition of ``very low-income'' families is
consistent with that used in some other housing programs.
---------------------------------------------------------------------------
\77\ 12 U.S.C. 4502(24).
---------------------------------------------------------------------------
Enterprise financing of rental units for very low-income families
over the 2001-08 period is reported in Table 8. On average, Fannie Mae
funded 94,000 such units each year, and Freddie Mae funded 86,000 such
units. The same general pattern prevailed over time as that shown in
Table 7, with a modest drop in funding by Fannie Mae and a substantial
drop (55 percent) by Freddie Mac. As a result, the number of such units
financed by Freddie Mac in 2008 was 49 percent of the number financed
by Fannie Mae, the lowest ratio of this period.
[[Page 9054]]
[GRAPHIC] [TIFF OMITTED] TP26FE10.008
Financing of low-income units in small multifamily properties. As
discussed above, HERA recognizes the important role played by small
multifamily housing as a source of affordable rental housing. According
to the 2007 AHS, multifamily properties containing 5-49 units (a
slightly different definition than the 5-50 unit definition in HERA)
constituted 77 percent of all multifamily units and 74 percent of
multifamily units constructed in the previous 4 years. Table 9 reports
additional information on small multifamily properties affordable to
low-income families.
Both Enterprises increased their financing of low-income
multifamily units between 2001 and 2003, from 24,000 units to 155,000
units for Fannie Mae, and from 44,000 units to 138,000 units for
Freddie Mac. This increase was motivated at least in part by the
favorable counting treatment that HUD allowed for financing goal-
qualifying units in small multifamily properties over the 2001-03
period. Under this counting treatment, each goal-qualifying unit
counted twice in the numerator and once in the denominator in
calculating goal performance.
As indicated in Table 9, both Enterprises decreased their roles in
the small multifamily market after the expiration of the favorable HUD
counting treatment--for Fannie Mae, an average of 49,000 units for
2004-07, and for Freddie Mac, an average of 24,000 such units. Fannie
Mae financed 44,000 low-income small multifamily units in 2008,
approximately equal to the average for 2004-07, while Freddie Mac
financed only 2,078 such units in 2008, a decrease of 91 percent from
its 2004-07 average. FHFA is concerned about Freddie Mac's virtual exit
from this business and seeks comment on whether small multifamily low-
income housing subgoals should be established for future years.
[[Page 9055]]
[GRAPHIC] [TIFF OMITTED] TP26FE10.009
BILLING CODE C
3. Market Size
The multifamily mortgage market is likely to remain relatively
unchanged in 2010 as compared to 2009, and the dollar amount of
multifamily loans financed in 2010 will likely be similar to that of
2009, approximately $40-45 billion. Poor property fundamentals,
especially declines in property value, will affect the type of
properties and owners that can access multifamily credit. If the
multifamily market begins to recover in 2011, multifamily originations
may increase. Projections of such activity, however, are uncertain.
Accordingly, for purposes of this rulemaking, the multifamily goals for
both 2010 and 2011 are based on the overall multifamily market for 2009
and Enterprise multifamily performance in the years 2004-2008, taking
into account the average percent of very low-income and low-income
purchases by the Enterprises in those years. As in prior years, the
multifamily goals are set separately for each Enterprise. Unlike prior
years, the multifamily goals are measured in units rather than dollar
volume.
The proportion of multifamily affordable units available for
financing in 2010 and 2011 will likely be below historical levels due
to weakness in the multifamily housing market. Steep declines in
multifamily property prices since mid-2007 have caused a significant
loss of equity for owners, many of whom can no longer qualify for
Enterprise financing without placing substantial cash into the
property. The loss of equity for most owners has meant that only
financially strong properties and borrowers will qualify for Enterprise
financing. These properties often have a much lower proportion of
affordable units.
Another factor that will likely constrain Enterprise multifamily
loan production in 2010 and 2011 will be the relatively small dollar
amount of loans maturing in the Enterprise portfolios in 2010 and 2011.
The MBA expects only $26 billion in total maturing multifamily
mortgages in 2010. However, the volume of maturing loans is expected to
increase from 2011 onward.\78\
---------------------------------------------------------------------------
\78\ Multifamily Housing News: MBA Says Large Amounts of
Multifamily Loans Will Mature in 2011 and After, Feb. 11, 2009.
---------------------------------------------------------------------------
For well over a decade, Freddie Mac relied upon purchases of CMBS
and structured deals involving large portfolios of affordable
multifamily loans to meet applicable affordable housing goals.
Beginning in 2006 and 2007, CMBS made up a significant portion of
Fannie Mae's affordable multifamily purchases. These sources of
affordable units are now either
[[Page 9056]]
unavailable or do not meet Enterprise standards. Therefore, based on
the factors discussed above, multifamily affordable purchases in the
very low-income category are likely to be near historical lows in 2009
overall. The effect, though, will be more pronounced at Freddie Mac.
The percentage of very low-income multifamily purchases in 2010 for
Freddie Mac will be below its average for 2004 to 2008. Fannie Mae is
expected to have a very low-income purchase volume near its average for
the past several years.
4. Ability of the Enterprise To Lead the Market in Making Multifamily
Mortgage Credit Available
As described above in the context of the single-family goals,
Congress in enacting the Safety and Soundness Act was concerned that
the Enterprises were lagging behind market originations of mortgages
for the benefit of low- and moderate-income households. FHFA has been
cognizant of that concern in setting goals for the Enterprises.
With the current credit crisis negatively affecting the commercial
real estate market, the Enterprises have become market leaders by
default. The disciplined underwriting and credit standards they bring
to the industry have contributed to relatively low delinquency rates.
Compared to the industry, the Enterprises have relatively conservative
multifamily underwriting parameters. With the fundamentals of
multifamily real estate very weak (e.g., high vacancy rates, stagnant
rents and falling property values), the Enterprises have enhanced their
credit standards to reduce risk exposure, which has meant that owners
of the strongest performing properties are more likely to obtain credit
from lenders selling to the Enterprises. As noted previously, Fannie
Mae and Freddie Mac comprise a large portion of the multifamily market.
As a result, in 2009 they not only led the multifamily market, they
effectively were the market.
5. Availability of Public Subsidies
Public subsidies for multifamily housing have been affected by the
mortgage credit crisis. Low-income housing tax credits (LIHTCs), an
important source of equity for new low-income housing, have fallen in
value. However, on October 19, 2009, FHFA announced, in conjunction
with the Treasury Department and HUD, an initiative to support State
and local housing finance agencies (HFAs) through a new bond purchase
program that will support new lending by HFAs, and a temporary credit
and liquidity program that will improve the access of HFAs to liquidity
for outstanding HFA bonds. Fannie Mae and Freddie Mac each played
critical roles in this program, which helped support low mortgage rates
and expand resources for low- and middle-income borrowers who want to
purchase or rent homes that are affordable over the long term. On
January 13, 2010, the Treasury Department, FHFA and HUD announced the
completion of all transactions under the initiative, which involved
more than 90 HFAs.
The Enterprises actively purchase mortgages on properties with HUD
Housing Assistance Plan (HAP) contracts. Newly constructed or
rehabilitated properties usually receive forward commitments from the
Enterprises with part of the new equity coming from LIHTCs. The
remaining Section 8 properties are refinancings where the property
owners sign long-term use agreements with HUD and receive a HAP
contract in return. The Enterprises can also assist State and local
HFAs by credit enhancing HFA bonds, and by offering permanent financing
for properties rehabilitated through the Neighborhood Stabilization
Program and other HUD grants.
6. Financial Condition of Enterprises
As previously discussed, in the first two full years of the current
housing crisis--from July 2007 through the first half of 2009--combined
losses at the Enterprises totaled $165 billion. In the first half of
2009, the Enterprises reported combined losses of $47 billion. The
financial performance of both Enterprises is dominated by credit-
related expenses and losses stemming principally from purchases of PLS
and purchases and guarantees of mortgages originated in 2006 and 2007.
Since the establishment of the conservatorship for the Enterprises in
September 2008, the combined losses of the two Enterprises depleted
their capital and required them to draw from the U.S. Treasury under
the Senior Preferred Stock Purchase Agreements.
FHFA's duties as conservator require the conservation and
preservation of the assets of the two Enterprises. Given the importance
of the Enterprises to the housing market, any goal setting must be
closely linked to putting the Enterprises in sound and solvent
condition. Over the long term, such actions will assist homeowners and
neighborhoods while saving the Enterprises money. In 2009, FHFA
attempted to align the Enterprises' affordable housing goals with safe
and sound practices and market reality, and the housing goals
requirements for 2010 and 2011 must be similarly aligned.
B. Multifamily Housing Goal Levels
As a result of the changes in HERA, the proposed rule would
establish the multifamily affordable housing goals for each Enterprise
separately from the single-family housing goals beginning in 2010.
Qualifying multifamily units previously had been included with single-
family affordable purchases in the overall goals. Additional
requirements for multifamily housing were imposed under a multifamily
special affordable subgoal. The multifamily affordable goals for each
Enterprise in 2010 and 2011 would be established in terms of low-income
and very low-income units financed annually.
Estimates of Enterprise multifamily purchase volume in 2009 were
used by FHFA as a proxy for 2010 volumes. With uncertainty as to the
path of the economy's recovery, FHFA's estimation for 2011 origination
volume is unchanged from 2010.
The proposed rule would set the multifamily goal levels using the
average percentage of very low-income and low-income purchases in 2008
for both Enterprises. The year 2008 was chosen, rather than the average
for 2004-2008, because 2008 performance more closely reflects current
market conditions. Multifamily loan purchase volumes for 2010 were
estimated using 2009 part-year volumes. The average low- and very low-
income origination rates were multiplied by the expected origination
volumes for 2010 and 2011 to derive low- and very low-income unit
volumes for the Enterprises.
Freddie Mac multifamily volume has not kept pace with Fannie Mae's
volume since the beginning of the credit crisis in 2008, especially for
very low-income units, due in part to Freddie Mac's reliance on CMBS
and structured purchases from banks and thrifts. Those sources of
mortgages are not now readily available and are likely to reappear in
only limited volumes in the near term.
Fannie Mae, on the other hand, is better positioned than Freddie
Mac to purchase affordable units through its flow business. For
example, Fannie Mae has a group dedicated to purchasing mortgages on
small multifamily properties (5 to 50 units). Smaller properties, in
general, have higher percentages of affordable units than larger
properties. Furthermore, Fannie Mae's DUS program allows it to share
credit losses with lenders. Mortgages on small multifamily properties,
however, are often more at risk of delinquency and default than other
multifamily mortgage property types. Perhaps more
[[Page 9057]]
importantly, mortgages on small properties are usually more expensive
to originate and underwrite than mortgages on large properties because
the costs, mostly fixed, are spread over fewer units.\79\ The DUS
program helps Fannie Mae mitigate some of that credit risk of
purchasing affordable multifamily units.
---------------------------------------------------------------------------
\79\ ``Why do Small Multifamily Properties Bedevil Us?'' Shekar
Narasimhan, The Brookings Institution, Nov. 2001, http://www.brookings.edu/articles/2001/11metropolitanpolicy_narasihan.aspx.
---------------------------------------------------------------------------
Since Fannie Mae will likely purchase significantly more
multifamily units in 2010 than Freddie Mac, based on 2009 data, the
proposed rule would set different goals for each of the Enterprises, as
was done in previous years. Based on 2008 Enterprise affordable housing
performance, FHFA anticipates that for low-income units and very low-
income units, multifamily mortgages acquired by Freddie Mac will
finance fewer units than multifamily mortgages acquired by Fannie Mae
in 2010 and 2011. The disparity will be even greater for very low-
income units. Freddie Mac will likely purchase multifamily loans that
finance about half as many very low-income units as will be financed by
multifamily loans acquired by Fannie Mae in 2010 and 2011. While in
conservatorship, FHFA expects Freddie Mac's board of directors and new
senior management team to assess Freddie Mac's business model with
respect to multifamily housing.
Proposed Sec. 1282.13 would establish the multifamily special
affordable housing goals and subgoals as follows. Unlike with the
single-family goals described above, FHFA has not defined these goals
as prospective targets, with compliance to be assessed by reference to
actual market data. Rather, because the availability of the necessary
market data is less certain for the multifamily market, FHFA has set
goals in the traditional prospective manner, but these goals remain
subject to the statutory provisions enabling them to be adjusted, or
providing relief from enforcement, if market conditions so require.
Multifamily low-income housing goals. The annual goal for Fannie
Mae's purchases of mortgages on multifamily residential housing
affordable to low-income families would be at least 237,000 dwelling
units for each of 2010 and 2011. The annual goal for Freddie Mac's
purchases of mortgages on multifamily residential housing affordable to
low-income families would be at least 215,000 such dwelling units for
each of 2010 and 2011.
Multifamily very low-income housing subgoals. The annual subgoal
for Fannie Mae's purchases of mortgages on multifamily residential
housing affordable to very low-income families would be at least 57,000
dwelling units for each of 2010 and 2011. The annual subgoal for
Freddie Mac's purchases of mortgages on multifamily residential housing
affordable to very low-income families would be at least 28,000 such
dwelling units for each of 2010 and 2011.
These proposed multifamily goals reflect the financial and
operational condition of the Enterprises in conservatorship.
VII. Section-by-Section Analysis
A. Definitions--Proposed Sec. 1282.1
Proposed Sec. 1282.1 would set forth definitions applicable to the
housing goals provisions. The proposed rule includes a number of
technical amendments to conform the definitions to the statutory
definitions in the Safety and Soundness Act, as amended by HERA.
The proposed rule would remove a number of definitions that were
used in regulatory provisions that have been revised or eliminated
based on HERA's amendments of the Safety and Soundness Act. Proposed
Sec. 1282.1 would no longer include definitions for ``central city,''
``ECOA,'' ``government-sponsored enterprise, or GSE,'' ``home purchase
mortgage,'' ``New England,'' ``ongoing program,'' ``other underserved
area,'' ``owner-occupied unit,'' ``portfolio of loans,'' ``real estate
mortgage investment conduit (REMIC),'' ``rural area,'' ``underserved
area,'' and ``wholesale exchange.''
Proposed Sec. 1282.1 would add new definitions of ``extremely low-
income,'' ``low-income,'' and ``moderate-income,'' and it would revise
the income levels in the definition of ``very low-income.'' The
proposed rule would also replace the definition of ``low-income area''
with a new definition for ``families in low-income areas.'' Each of
these definitions is revised to be substantially the same as the
corresponding definition in section 1303 of the Safety and Soundness
Act, as amended by HERA.\80\
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\80\ 12 U.S.C. 4502.
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Proposed Sec. 1282.1 would add new definitions for ``borrower
income,'' ``FEMA,'' ``HMDA,'' ``minority census tract,'' ``mortgage
revenue bond,'' ``non-metropolitan area,'' ``owner-occupied housing,''
``private label security,'' and ``purchase money mortgage.'' The new
definitions are intended to reflect common usage and provide certainty
in interpreting the terms as used in new and existing regulatory
provisions.
Proposed Sec. 1282.1 would also make minor conforming revisions to
several definitions. The definition of ``contract rent'' would be
revised to make clear that the market rent for similar units in the
neighborhood, as used by the lender or appraiser in underwriting a
property, may be used as the anticipated rent for unoccupied units. The
proposed rule would add language to the definition of ``utilities''
clarifying that charges for cable or telephone service shall not be
included. Proposed Sec. 1282.1 would clarify that Metropolitan
Divisions are included in the definition of ``metropolitan area'' to
facilitate comparisons with census and HMDA information. Unnecessary
references to the form of payment would be eliminated from the
definition of ``mortgage purchase.'' Proposed Sec. 1282.1 would remove
the definition of ``refinancing'' and incorporate those provisions in a
new definition of ``refinancing mortgage.'' In order to avoid confusion
about whether a transaction should be treated as a loan modification or
a refinancing, proposed Sec. 1282.1 would exclude workout agreements
from the definition. The definition of ``mortgage'' in proposed Sec.
1282.1 would not include references to personal property manufactured
housing loans pending further review of the appropriate treatment of
such loans under the Enterprise and Bank housing goals.
The definitions for ``mortgages contrary to good lending
practices'' and ``mortgages with unacceptable terms or conditions or
resulting from unacceptable practices'' would be deleted, with their
substantive provisions revised and consolidated into a single new
definition of ``mortgage with unacceptable terms or conditions.'' The
definition of ``HOEPA mortgage'' would be revised to conform FHFA's
definition to the coverage in HOEPA itself. The definition of
``mortgage with unacceptable terms or conditions'' in proposed Sec.
1282.1 would include a new provision regarding mortgages with annual
percentage rates (APRs) above a certain level. The new provision is
intended to cover mortgages that were formerly included in the
definition of ``HOEPA mortgage.'' The provision in the definition of
``mortgage with unacceptable terms or conditions'' relating to a
borrower's ability to pay would be replaced with a provision
incorporating interagency guidance on nontraditional and subprime
mortgages. This change is intended to cover similar types of mortgages
while providing greater consistency between the
[[Page 9058]]
provisions of the housing goals and other regulatory provisions.
Designated disaster areas. The new definition of ``families in low-
income areas'' includes families with incomes at or below 100 percent
of AMI who reside in ``designated disaster areas.'' The proposed rule
would define ``designated disaster areas'' as areas at the census tract
level and include only census tracts in counties approved for
individual assistance within the declared major disaster area where the
average real property damage severity, as reported by the Federal
Emergency Management Agency (FEMA), exceeds $1,000 per household for
that census tract.
Disaster areas are declared when an area is adversely affected by
some unforeseen event. However, not all disasters impact housing to the
same degree, and the severity of the impact varies within the declared
area. Presidential Major Disaster Declarations are defined by FEMA at
the county level in the area affected by the major disaster and can be
declared to be eligible for public assistance, individual assistance or
both. Public assistance is available to local governments for the
repair, replacement or clean-up of public infrastructure. Individual
assistance is broken down further into two categories, housing needs
and ``other than housing needs.'' \81\ Housing needs include repair,
replacement and construction of homeowner residences. The proposed rule
would limit the definition of ``designated disaster areas'' to those
counties eligible for individual assistance, and it would establish a
minimum average real property damage severity.
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\81\ Federally declared disaster areas are managed by FEMA and
can be tracked at FEMA's Web site. See http://www.fema.gov/news/disasters.fema.
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For purposes of complying with the Community Reinvestment Act
(CRA), regulators have made the determination that ``[e]xaminers will
consider institution activities related to disaster recovery that
revitalize or stabilize a designated disaster area for 36 months
following the date of designation. Where there is a demonstrable
community need to extend the period for recognizing revitalization or
stabilization activities in a particular disaster area to assist in
long-term recovery efforts, this time period may be extended.'' \82\ To
accommodate the Enterprises' business planning requirements, for
purposes of the low-income areas housing goal, the proposed rule would
treat a designated disaster area as effective beginning no later than
January 1 of the year following the FEMA designation and continuing
through December 31 of the third full calendar year following the FEMA
designation. If data is available in a particular case to support
treatment as a designated disaster area from an earlier date, FHFA may
provide for such treatment.
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\82\ The Department of the Treasury, the Federal Reserve Board
and the Federal Deposit Insurance Corporation, Community
Reinvestment Act; Interagency Questions and Answers Regarding
Community Reinvestment; Notice, 74 FR 509 (Jan. 6, 2009).
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FHFA welcomes comments on the proposed changes to the definitions
under Sec. 1282.1.
B. Housing Goals--Proposed Sec. Sec. 1282.11 Through 1282.13
As required by sections 1331(a) and 1333(a)(2) of the Safety and
Soundness Act, as amended by HERA, this subpart establishes four
single-family housing goals and one multifamily special affordable
housing goal for 2010 and 2011. The subpart would also establish one
multifamily special affordable housing subgoal for 2010 and 2011. The
single-family housing goals would be based both on the proposed
benchmark levels and on an evaluation of the Enterprise's performance
relative to the market for each housing goal in each year. Proposed
Sec. 1282.11(b) would require the Director to establish housing goals
for a particular year by December 1 of the previous year.\83\ Although
the initial final rule establishing the new housing goals under the
Safety and Soundness Act, as amended by HERA, will not be published for
effect until early 2010, FHFA will evaluate performance under the
housing goals established for 2010 on a calendar year basis.
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\83\ See 12 U.S.C. 4561(b).
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Proposed Sec. 1282.12(b) would establish criteria for determining
the size of the market based on HMDA data. The criteria for
establishing the size of the market reflect the types of mortgages that
would be counted for purposes of the housing goals and that would
typically be eligible for purchase by an Enterprise. Additional details
regarding the housing goals are discussed above, along with the factors
considered by FHFA in establishing the proposed housing goals.
C. Discretionary Adjustment of Housing Goals--Proposed Sec. 1282.14
Consistent with the requirements of section 1334 of the Safety and
Soundness Act, as amended by HERA, proposed Sec. 1282.14 would provide
for an Enterprise to petition the Director to reduce the level of any
goal or subgoal.\84\ Proposed Sec. 1282.14 would set forth the
standards and procedures for consideration by the Director in
determining whether to reduce a goal or subgoal level.
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\84\ 12 U.S.C. 4564.
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D. General Counting Requirements--Proposed Sec. 1282.15
Proposed Sec. 1282.15 would set forth general requirements for the
counting of Enterprise mortgage purchases toward the achievement of the
housing goals. Performance under the single-family housing goals would
be evaluated based on the percentage of all single-family, owner-
occupied mortgages purchased by an Enterprise that meet a particular
goal. Performance under the multifamily housing goals would be
evaluated based on the total number of units that meet a particular
goal and are financed by mortgages purchased by an Enterprise.
The data estimation methodologies in this section would be revised
to reflect changes in the affordable housing goals for 2010. The
methodology for estimating affordability for single-family rental
properties would be eliminated as unnecessary because the single-family
housing goals are measured in terms of mortgages rather than units. The
option to exclude single-family owner-occupied units with missing data
up to one percent of the total number of single-family owner-occupied
units backing mortgages purchased by an Enterprise would also be
removed because it is no longer in use by either Enterprise. The option
to request approval of alternative methodologies would also be removed.
In light of the shorter time period for which the affordable housing
goals are being established, it should not be necessary to make changes
to the rules for missing data prior to FHFA's proposal of new housing
goals for later years.
E. Special Counting Requirements--Proposed Sec. 1282.16
Proposed Sec. 1282.16 would set forth special counting
requirements for the receipt of full, partial or no credit for a
transaction toward achievement of the housing goals. A number of
clarifying and conforming changes would be made to this section to
ensure consistent application of the counting rules among the
Enterprises. Proposed Sec. 1282.16(b) would make clear that where a
mortgage falls within one of the categories excluded from consideration
under the housing goals, the mortgage should be excluded even if it
otherwise would fall within one of the special counting rules in
proposed Sec. 1282.16(c). For example, a non-conventional mortgage
that would
[[Page 9059]]
be excluded from consideration pursuant to proposed Sec. 1282.16(b)(3)
could not be counted even if it otherwise would be counted as a
seasoned mortgage under proposed Sec. 1282.16(c)(6). Proposed Sec.
1282.16(c) would also make clear that where a transaction falls under
more than one of the special counting rules in Sec. 1282.16(c), all of
the applicable requirements must be satisfied in order for the loan to
be counted for purposes of the affordable housing goals.
Proposed Sec. 1282.16(b) would eliminate the current exclusion of
jumbo conforming loans from consideration for purposes of the
affordable housing goals.\85\ These loans had been excluded from
consideration in the past because the goals had been established based
on market estimates that preceded the increases in the conforming loan
limits. Because the higher loan limits have been considered in the
evaluation of the market for this proposed rule, it is no longer
necessary to exclude such loans from consideration for purposes of the
affordable housing goals.
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\85\ See 12 CFR 1282.16(b)(10).
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Proposed Sec. 1282.16(b)(1) would be revised to refer more
specifically to equity investments in low-income housing tax credits,
which are consistent with the Charter Acts of the Enterprises. Proposed
Sec. 1282.16(b)(11) would make explicit the existing prohibition on
counting mortgages toward performance under the affordable housing
goals if the mortgage has previously been counted for purposes of the
performance of either Enterprise under the housing goals. In order to
limit excessively burdensome recordkeeping that could result, the rule
would make clear that this limitation only extends back for five years.
Proposed Sec. 1282.16(b)(12) would exclude purchases of mortgages
secured by properties that have not been certified as ready for
occupancy from consideration for purposes of the affordable housing
goals. Proposed Sec. 1282.16(b)(14) would reflect the statutory
limitation on housing goals credit for mortgages receiving assistance
under the Housing Trust Fund and the Capital Magnet Fund established by
HERA.\86\
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\86\ See 12 U.S.C. 4568, 4569.
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Proposed Sec. 1282.16(c) would no longer include real estate
mortgage investment conduits (REMICs) as mortgage purchases for
purposes of the housing goals, consistent with the general exclusion of
PLS under proposed Sec. 1282.16(b)(13). Proposed Sec. 1282.16(c)
would also eliminate consideration of expiring assistance contracts,
reflecting the changes under HERA to the former special affordable
housing goal. Proposed Sec. 1282.16(c)(5) would amend the provisions
regarding cooperative housing and condominiums to reflect HERA's
treatment of single-family housing and multifamily housing under
separate goals. Proposed Sec. 1282.16(c)(8) would remove current
limitations on counting mortgage revenue bonds related to the source of
funds for repayment and the presence of additional credit enhancements.
The proposed rule would require that an Enterprise have sufficient
information available to determine the eligibility of any underlying
mortgages before counting such mortgages or units for purposes of the
housing goals. Proposed Sec. 1282.16(c)(10) would reflect the accepted
terminology for the Administration's Making Home Affordable program.
Proposed Sec. 1282.16(d) would relocate existing provisions
regarding HOEPA mortgages and mortgages with unacceptable terms or
conditions from current Sec. 1282.16(c). Placing these provisions in a
separate paragraph reflects the fact that unlike other types of
mortgage purchases, HOEPA mortgages and mortgages with unacceptable
terms and conditions must be counted in the denominator as mortgage
purchases but can never be counted in the numerator, regardless of
whether the mortgages would otherwise qualify based on the
affordability and other counting criteria. The proposed treatment is
consistent with past practice and with section 1332(i) of the Safety
and Soundness Act, as amended by HERA, which provides that no credit
may be given for mortgages that FHFA determines are ``unacceptable or
contrary to good lending practices.'' \87\
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\87\ 12 U.S.C. 4562(i).
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Proposed Sec. 1282.16(e) would clarify that FHFA may provide
guidance on the treatment of any transactions under the affordable
housing goals. Such guidance may be provided in response to a request
from one or both Enterprises, or it may be provided at the initiation
of FHFA.
Private Label Securities. Proposed Sec. 1282.16(b)(13) would
exclude PLS from counting for purposes of the affordable housing goals.
Historically, the Enterprises--particularly Freddie Mac--relied on PLS
purchases to help them achieve certain affordable housing goals.
Freddie Mac met the 2005 and 2006 affordable housing goals and subgoals
in part through its purchases of AAA-rated tranches of PLS backed by
subprime mortgages that were targeted to satisfy goals and subgoals. As
house price appreciation and rising interest rates reduced housing
affordability, PLS proliferated as the subprime share of the market
grew to more than 20 percent. Fannie Mae and Freddie Mac began to
follow suit in response to declining market share and in pursuit of
higher profits. The Enterprises not only modified their own
underwriting standards, but they also bought hundreds of billions of
dollars' worth of AAA-rated tranches of subprime and Alt-A PLS for the
yield and, in certain instances, to satisfy specific housing goals and
subgoals.
The results of providing large-scale funding for such loans were
adverse for borrowers who entered into mortgages that did not sustain
homeownership and for the Enterprises themselves. Although Fannie Mae
and Freddie Mac have a combined 57 percent share of mortgages
outstanding in their guaranteed portfolio, the mortgages in that
portfolio account for only 25 percent of serious delinquencies.
However, while PLS account for 12 percent of all mortgages outstanding,
PLS account for 34 percent of serious delinquencies. As delinquencies
in PLS portfolios triggered downgrades, 90 percent of the PLS holdings
of the Enterprises experienced a downgrade. In light of that record,
FHFA proposes to exclude PLS from consideration under the housing
goals.
In addition to the recent dismal performance of PLS, it is
reasonable to separate any future growth of the PLS market from the
Enterprises' housing goals. The housing goals reflect Congress' concern
that the Enterprises' charter mission to support the stability,
liquidity and affordability of the secondary market not be managed to
the detriment or neglect of goal-eligible mortgages. In this way the
goals may be seen as a mechanism to ensure that each Enterprise serves
all segments of the mortgage market available to it. Even to the extent
that a non-GSE secondary mortgage market returns, loans backing new or
seasoned PLS would not count in either the numerator or the denominator
for purposes of assessing housing goals.
FHFA invites comment on the proposed exclusion of PLS and on
alternatives to not counting PLS mortgages in meeting the housing
goals. For example, mortgages backing such securities could be counted
if an appropriate senior Enterprise officer certified that the
mortgages are compliant with all existing regulations regarding good
mortgage practices, and with the interagency guidance on subprime
lending and non-traditional
[[Page 9060]]
loans. Such certification, for example, could be required to include a
description of the methods used to determine that loans included in
such PLS met those conditions. The certification could also require
regular and ongoing review of PLS purchases to ensure that they meet
existing requirements regarding good mortgage practices and recent
interagency regulatory guidance on non-traditional and subprime loans.
Commercial Mortgage Backed Securities (CMBS) would also be excluded
from counting toward the affordable housing goals under the proposed
rule. FHFA invites comment on whether CMBS should be treated
differently than other PLS for purposes of the affordable housing
goals.
Home Equity Conversion Mortgages and Subordinate Liens. Proposed
Sec. 1282.16(b)(3) would exclude the purchases of all non-conventional
single-family mortgages, including HECMs, from counting towards the
Enterprises' housing goals. Certain non-conventional mortgages,
including HECMs, have been counted toward the goals in the past. HERA,
however, amended section 1332(a) of the Safety and Soundness Act to
restrict the single-family housing goals to include only conventional
mortgages.\88\ This restriction does not preclude the Enterprises'
purchase of Charter-compliant non-conventional single-family mortgages,
including HECMs, but such purchases would not count toward the housing
goals--that is, such purchases would be excluded from both the
numerator and denominator in calculating goal performance.
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\88\ 12 U.S.C. 4562(a).
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Proposed Sec. 1282.16(b)(10) would also exclude the purchases of
subordinate lien mortgages (second mortgages) from counting towards the
Enterprises' housing goals. This exclusion would reflect the fact that,
under section 1331 of the Safety and Soundness Act, as amended, the
single-family housing goals are limited to purchase money or
refinancing mortgages. This would exclude ``piggy-back'' liens that may
be acquired by an Enterprise along with the corresponding first lien
mortgage and subordinate lien mortgages, such as home equity loans,
acquired separately by an Enterprise where the Enterprise does not also
acquire the corresponding first lien mortgage. This provision would not
preclude the Enterprises' purchase of Charter-compliant subordinate
lien mortgages, but as with HECMs, such purchases would not count
toward the housing goals. FHFA seeks comments on this provision.
F. Affordability Definitions--Proposed Sec. Sec. 1282.17 Through
1282.19
Proposed Sec. 1282.17 would set forth definitions and establish
cutoff points or boundaries for the statutory and traditionally defined
levels of affordability based on area median income for owners and
tenants of rental units where the family size and income are known to
the Enterprise. In addition to the levels of affordability that
currently appear at Sec. 1282.17, this section would include an
additional paragraph (e) for extremely low-income borrowers and tenants
with income at or below 30 percent of AMI with adjustments for family
size. Although the Enterprise housing goals do not specifically target
extremely low-income borrowers or tenants, the proposed rule would
establish cutoffs for determining such affordability to facilitate any
reporting or analysis of such data that is required.
Proposed Sec. 1282.18 would set forth definitions and establish
cutoff points or boundaries for the statutory and traditionally defined
levels of affordability based on AMI for tenants of rental units where
the family size is not known to the Enterprise. In addition to the
levels of affordability that currently appear at Sec. 1282.18, this
section would include an additional paragraph (e) for extremely low-
income tenants with income at or below 30 percent of AMI with
adjustments for unit size.
Proposed Sec. 1282.19 would set forth definitions and establish
cutoff points or boundaries for the statutory and traditionally defined
levels of affordability based on AMI for tenants of rental units where
tenant income is not known to the Enterprise. In addition to the levels
of affordability that currently appear at Sec. 1282.19, this section
would include an additional paragraph (e) for extremely low-income
tenants with income at or below 30 percent of AMI with adjustments for
unit size.
G. Housing Goals Enforcement--Proposed Sec. Sec. 1282.20 and 1282.21
Proposed Sec. 1282.20 would provide that the Director shall
determine whether an Enterprise has met the affordable housing goals,
in accordance with the standards established under the Safety and
Soundness Act, as amended by HERA. If the Director determines that an
Enterprise has failed to meet any housing goal, the Director shall
provide notice to the Enterprise in accordance with 12 U.S.C. 4566(b).
The determination of compliance with the single-family housing goals
would be based both on the size of the market for that year and the
benchmark levels established in this subpart. The provision formerly
found at Sec. 1282.20 referenced the obligation of the Enterprises
under the Safety and Soundness Act to engage in certain kinds of
activities in meeting the affordable housing goals. The regulatory
provision did not add to or expand the requirements of the statute and
would be removed as unnecessary, but the statutory obligation remains
in effect.\89\
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\89\ See 12 U.S.C. 4565(b).
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Proposed Sec. 1282.21 would include requirements for submission of
a housing plan by an Enterprise for failure or substantial probability
of failure to meet any housing goal that was or is feasible. The
requirement to submit a housing plan would be at the discretion of the
Director.
H. Reporting Requirements--Proposed Subpart D
Proposed subpart D would relocate existing reporting requirements
from part 81, subpart E of title 24 of the Code of Federal Regulations.
Proposed Sec. 1282.65 would relocate an existing regulatory provision
on data certification from 24 CFR 81.102. These provisions have
continued in effect pursuant to section 1302 of HERA. Upon the
effective date of the final housing goals rule, the reporting
requirement and Enterprise data integrity provisions in 24 CFR part 81
will no longer be in effect.
The proposed rule would make various conforming changes throughout
subpart D. Proposed Sec. 1282.62(b) would require the Enterprises to
submit loan-level mortgage data on a quarterly basis. Previously such
submissions were required only semi-annually. Advances in technology
limit the burden of more frequent submissions, and the additional data
provided will facilitate FHFA's monitoring of performance under the
housing goals. Proposed Sec. Sec. 1282.62(c) and 1282.63 would revise
the time periods for submission to FHFA of the required Mortgage
Reports and Annual Housing Activities Reports (AHARs), respectively.
The shorter time periods will permit FHFA to evaluate the performance
of the Enterprises on a more timely basis. Proposed Sec. 1282.63 would
also require that the Enterprises make their AHARs available to the
public online. FHFA does not expect that the requirement to make
available online information that is already publicly available will be
burdensome to the Enterprises. Proposed Sec. 1282.64 would eliminate
the requirement for the Enterprises to submit information that is
typically made publicly available by each Enterprise. The Director may
[[Page 9061]]
continue to request such reports, information and data as the Director
deems necessary. Proposed subpart D would not include the provisions
regarding submission of additional data or reports and the addresses
for submission of information that were formerly found at 24 CFR 81.65
and 81.66. Proposed Sec. 1282.64 is sufficiently broad to encompass
any requests for additional data or reports that the Director deems
necessary.
Proposed Sec. 1282.65 would simplify the detailed procedures laid
out in the previous data integrity provision found at 24 CFR 81.102.
FHFA will implement the data integrity process pursuant to its general
regulatory authority over the Enterprises. FHFA expects that the
Enterprises will continue to work cooperatively with FHFA to identify
and resolve any discrepancies or errors in the housing goals data
reported to FHFA. The proposed provision would maintain the most
important aspects of the data integrity process in the regulation,
including the requirement that the Enterprises certify the accuracy of
their submissions.
I. Book-Entry Procedures--Proposed Part 1249
Proposed part 1249 would relocate existing regulatory provisions on
book-entry procedures from part 81, subpart H of title 24 of the Code
of Federal Regulations. These provisions have continued in effect
pursuant to section 1302 of HERA. Upon the effective date of the final
housing goals rule, the book-entry procedures in 24 CFR part 81 will no
longer be in effect. The proposed rule would also relocate definitions
that are currently found in Sec. 1282.2 and that are applicable only
to the book-entry procedures in proposed part 1249 to a new section
1249.10 in that part. The proposed rule would make conforming changes
throughout the part, including a clarification that the waiver
provision in proposed Sec. 1249.17 applies only to the book-entry
provisions in part 1249. Section 1249.15 would be amended to reflect
the transfer of authority from the Secretary of HUD to the Director.
The proposed rule would not make any changes to the substance of the
book-entry provisions.
VIII. Paperwork Reduction Act
The proposed rule does not contain any information collection
requirement that requires the approval of the Office of Management and
Budget under the Paperwork Reduction Act (44 U.S.C. 3501 et seq.).
IX. 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. The General Counsel
of FHFA certifies that the proposed rule, if adopted as a final rule,
is not likely to have a significant economic impact on a substantial
number of small business entities because the regulation is applicable
only to the Enterprises, which are not small entities for purposes of
the Regulatory Flexibility Act.
List of Subjects
12 CFR Part 1249
Federal Reserve System, Securities.
12 CFR Part 1282
Mortgages, Reporting and recordkeeping requirements.
Accordingly, for the reasons stated in the preamble, under the
authority of 12 U.S.C. 4511, 4513, 4526, FHFA proposes to amend chapter
XII of title 12 of the Code of Federal Regulations by adding part 1249
and revising part 1282 to read as follows:
CHAPTER XII--FEDERAL HOUSING FINANCE AGENCY
SUBCHAPTER C--ENTERPRISES
PART 1249--BOOK-ENTRY PROCEDURES
Sec.
1249.10 Definitions.
1249.11 Maintenance of Enterprise Securities.
1249.12 Law governing rights and obligations of United States,
Federal Reserve Banks, and Enterprises; rights of any person against
United States, Federal Reserve Banks, and Enterprises; law governing
other interests.
1249.13 Creation of Participant's Security Entitlement; security
interests.
1249.14 Obligations of Enterprises; no adverse claims.
1249.15 Authority of Federal Reserve Banks.
1249.16 Withdrawal of Eligible Book-entry Enterprise Securities for
conversion to definitive form.
1249.17 Waiver of regulations.
1249.18 Liability of Enterprises and Federal Reserve Banks.
1249.19 Additional provisions.
Authority: 12 U.S.C. 4501, 4502, 4511, 4513, 4526.
Sec. 1249.10 Definitions.
(a) General. Unless the context requires otherwise, terms used in
this part that are not defined in this part, have the meanings as set
forth in 31 CFR 357.2. Definitions and terms used in 31 CFR part 357
should read as though modified to effectuate their application to the
Enterprises.
(b) Other terms. As used in this part, the term:
Book-entry Enterprise Security means an Enterprise Security issued
or maintained in the Book-entry System. Book-entry Enterprise Security
also means the separate interest and principal components of a Book-
entry Enterprise Security if such security has been designated by the
Enterprise as eligible for division into such components and the
components are maintained separately on the books of one or more
Federal Reserve Banks.
Book-entry System means the automated book-entry system operated by
the Federal Reserve Banks acting as the fiscal agent for the
Enterprises, on which Book-entry Enterprise Securities are issued,
recorded, transferred and maintained in book-entry form.
Definitive Enterprise Security means an Enterprise Security in
engraved or printed form, or that is otherwise represented by a
certificate.
Eligible Book-entry Enterprise Security means a Book-entry
Enterprise Security issued or maintained in the Book-entry System which
by the terms of its Security Documentation is eligible to be converted
from book-entry form into definitive form.
Enterprise Security means any security or obligation of Fannie Mae
or Freddie Mac issued under its respective Charter Act in the form of a
Definitive Enterprise Security or a Book-entry Enterprise Security.
Entitlement Holder means a Person or an Enterprise to whose account
an interest in a Book-entry Enterprise Security is credited on the
records of a Securities Intermediary.
Federal Reserve Bank Operating Circular means the publication
issued by each Federal Reserve Bank that sets forth the terms and
conditions under which the Reserve Bank maintains book-entry Securities
accounts (including Book-entry Enterprise Securities) and transfers
book-entry Securities (including Book-entry Enterprise Securities).
[[Page 9062]]
Participant means a Person or Enterprise that maintains a
Participant's Securities Account with a Federal Reserve Bank.
Person, as used in this part, means and includes an individual,
corporation, company, governmental entity, association, firm,
partnership, trust, estate, representative, and any other similar
organization, but does not mean or include the United States, an
Enterprise, or a Federal Reserve Bank.
Revised Article 8 has the same meaning as in 31 CFR 357.2.
Securities Documentation means the applicable statement of terms,
trust indenture, securities agreement or other documents establishing
the terms of a Book-entry Enterprise Security.
Security means any mortgage participation certificate, note, bond,
debenture, evidence of indebtedness, collateral-trust certificate,
transferable share, certificate of deposit for a security, or, in
general, any interest or instrument commonly known as a ``security''.
Transfer message means an instruction of a Participant to a Federal
Reserve Bank to effect a transfer of a Book-entry Security (including a
Book-entry Enterprise Security) maintained in the Book-entry System, as
set forth in Federal Reserve Bank Operating Circulars.
Sec. 1249.11 Maintenance of Enterprise Securities.
An Enterprise Security may be maintained in the form of a
Definitive Enterprise Security or a Book-entry Enterprise Security. A
Book-entry Enterprise Security shall be maintained in the Book-entry
System.
Sec. 1249.12 Law governing rights and obligations of United States,
Federal Reserve Banks, and Enterprises; rights of any person against
United States, Federal Reserve Banks, and Enterprises; law governing
other interests.
(a) Except as provided in paragraph (b) of this section, the
following rights and obligations are governed solely by the book-entry
regulations contained in this part, the Securities Documentation, and
Federal Reserve Bank Operating Circulars (but not including any choice
of law provisions in the Securities Documentation to the extent such
provisions conflict with the Book-entry regulations contained in this
part):
(1) The rights and obligations of an Enterprise and the Federal
Reserve Banks with respect to:
(i) A Book-entry Enterprise Security or Security Entitlement; and
(ii) The operation of the Book-entry System as it applies to
Enterprise Securities; and
(2) The rights of any Person, including a Participant, against an
Enterprise and the Federal Reserve Banks with respect to:
(i) A Book-entry Enterprise Security or Security Entitlement; and
(ii) The operation of the Book-entry System as it applies to
Enterprise Securities;
(b) A security interest in a Security Entitlement that is in favor
of a Federal Reserve Bank from a Participant and that is not recorded
on the books of a Federal Reserve Bank pursuant to Sec. 1249.13(c)(1),
is governed by the law (not including the conflict-of-law rules) of the
jurisdiction where the head office of the Federal Reserve Bank
maintaining the Participant's Securities Account is located. A security
interest in a Security Entitlement that is in favor of a Federal
Reserve Bank from a Person that is not a Participant, and that is not
recorded on the books of a Federal Reserve Bank pursuant to Sec.
1249.13(c)(1), is governed by the law determined in the manner
specified in paragraph (d) of this section.
(c) If the jurisdiction specified in the first sentence of
paragraph (b) of this section is a State that has not adopted Revised
Article 8, then the law specified in paragraph (b) of this section
shall be the law of that State as though Revised Article 8 had been
adopted by that State.
(d) To the extent not otherwise inconsistent with this part, and
notwithstanding any provision in the Securities Documentation setting
forth a choice of law, the provisions set forth in 31 CFR 357.11
regarding law governing other interests apply and shall be read as
though modified to effectuate the application of 31 CFR 357.11 to the
Enterprises.
Sec. 1249.13 Creation of Participant's Security Entitlement; security
interests.
(a) A Participant's Security Entitlement is created when a Federal
Reserve Bank indicates by book-entry that a Book-entry Enterprise
Security has been credited to a Participant's Securities Account.
(b) A security interest in a Security Entitlement of a Participant
in favor of the United States to secure deposits of public money,
including without limitation deposits to the Treasury tax and loan
accounts, or other security interest in favor of the United States that
is required by Federal statute, regulation, or agreement, and that is
marked on the books of a Federal Reserve Bank is thereby effected and
perfected, and has priority over any other interest in the securities.
Where a security interest in favor of the United States in a Security
Entitlement of a Participant is marked on the books of a Federal
Reserve Bank, such Federal Reserve Bank may rely, and is protected in
relying, exclusively on the order of an authorized representative of
the United States directing the transfer of the security. For purposes
of this paragraph, an ``authorized representative of the United
States'' is the official designated in the applicable regulations or
agreement to which a Federal Reserve Bank is a party, governing the
security interest.
(c)(1) An Enterprise and the Federal Reserve Banks have no
obligation to agree to act on behalf of any Person or to recognize the
interest of any transferee of a security interest or other limited
interest in favor of any Person except to the extent of any specific
requirement of Federal law or regulation or to the extent set forth in
any specific agreement with the Federal Reserve Bank on whose books the
interest of the Participant is recorded. To the extent required by such
law or regulation or set forth in an agreement with a Federal Reserve
Bank, or the Federal Reserve Bank Operating Circular, a security
interest in a Security Entitlement that is in favor of a Federal
Reserve Bank, an Enterprise, or a Person may be created and perfected
by a Federal Reserve Bank marking its books to record the security
interest. Except as provided in paragraph (b) of this section, a
security interest in a Security Entitlement marked on the books of a
Federal Reserve Bank shall have priority over any other interest in the
securities.
(2) In addition to the method provided in paragraph (c)(1) of this
section, a security interest, including a security interest in favor of
a Federal Reserve Bank, may be perfected by any method by which a
security interest may be perfected under applicable law as described in
Sec. 1249.12(b) or (d). The perfection, effect of perfection or non-
perfection and priority of a security interest are governed by such
applicable law. A security interest in favor of a Federal Reserve Bank
shall be treated as a security interest in favor of a clearing
corporation in all respects under such law, including with respect to
the effect of perfection and priority of such security interest. A
Federal Reserve Bank Operating Circular shall be treated as a rule
adopted by a clearing corporation for such purposes.
Sec. 1249.14 Obligations of Enterprises; no adverse claims.
(a) Except in the case of a security interest in favor of the
United States or a Federal Reserve Bank or otherwise as provided in
Sec. 1249.13(c)(1), for the
[[Page 9063]]
purposes of this part, the Enterprise and the Federal Reserve Banks
shall treat the Participant to whose Securities Account an interest in
a Book-entry Enterprise Security has been credited as the person
exclusively entitled to issue a Transfer Message, to receive interest
and other payments with respect thereof and otherwise to exercise all
the rights and powers with respect to such Security, notwithstanding
any information or notice to the contrary. Neither the Federal Reserve
Banks nor an Enterprise is liable to a Person asserting or having an
adverse claim to a Security Entitlement or to a Book-entry Enterprise
Security in a Participant's Securities Account, including any such
claim arising as a result of the transfer or disposition of a Book-
entry Enterprise Security by a Federal Reserve Bank pursuant to a
Transfer Message that the Federal Reserve Bank reasonably believes to
be genuine.
(b) The obligation of the Enterprise to make payments (including
payments of interest and principal) with respect to Book-entry
Enterprise Securities is discharged at the time payment in the
appropriate amount is made as follows:
(1) Interest or other payments on Book-entry Enterprise Securities
is either credited by a Federal Reserve Bank to a Funds Account
maintained at such Federal Reserve Bank or otherwise paid as directed
by the Participant.
(2) Book-entry Enterprise Securities are redeemed in accordance
with their terms by a Federal Reserve Bank withdrawing the securities
from the Participant's Securities Account in which they are maintained
and by either crediting the amount of the redemption proceeds,
including both redemption proceeds, where applicable, to a Funds
Account at such Federal Reserve Bank or otherwise paying such
redemption proceeds as directed by the Participant. No action by the
Participant ordinarily is required in connection with the redemption of
a Book-entry Enterprise Security.
Sec. 1249.15 Authority of Federal Reserve Banks.
(a) Each Federal Reserve Bank is hereby authorized as fiscal agent
of the Enterprises to perform the following functions with respect to
the issuance of Book-entry Enterprise Securities offered and sold by an
Enterprise to which this part applies, in accordance with the
Securities Documentation, Federal Reserve Bank Operating Circulars,
this part, and any procedures established by the Director consistent
with these authorities:
(1) To service and maintain Book-entry Enterprise Securities in
accounts established for such purposes;
(2) To make payments with respect to such securities, as directed
by the Enterprise;
(3) To effect transfer of Book-entry Enterprise Securities between
Participants' Securities Accounts as directed by the Participants;
(4) To effect conversions between Book-entry Enterprise Securities
and Definitive Enterprise Securities with respect to those securities
as to which conversion rights are available pursuant to the applicable
Securities Documentation; and
(5) To perform such other duties as fiscal agent as may be
requested by the Enterprise.
(b) Each Federal Reserve Bank may issue Federal Reserve Bank
Operating Circulars not inconsistent with this part, governing the
details of its handling of Book-entry Enterprise Securities, Security
Entitlements, and the operation of the Book-entry System under this
part.
Sec. 1249.16 Withdrawal of Eligible Book-entry Enterprise Securities
for conversion to definitive form.
(a) Eligible Book-entry Enterprise Securities may be withdrawn from
the Book-entry System by requesting delivery of like Definitive
Enterprise Securities.
(b) A Federal Reserve Bank shall, upon receipt of appropriate
instructions to withdraw Eligible Book-entry Enterprise Securities from
book-entry in the Book-entry System, convert such securities into
Definitive Enterprise Securities and deliver them in accordance with
such instructions. No such conversion shall affect existing interests
in such Enterprise Securities.
(c) All requests for withdrawal of Eligible Book-entry Enterprise
Securities must be made prior to the maturity or date of call of the
securities.
(d) Enterprise Securities which are to be delivered upon withdrawal
may be issued in either registered or bearer form, to the extent
permitted by the applicable Securities Documentation.
Sec. 1249.17 Waiver of regulations.
The Director reserves the right, in the Director's discretion, to
waive any provision(s) of this part in any case or class of cases for
the convenience of an Enterprise, the United States, or in order to
relieve any person(s) of unnecessary hardship, if such action is not
inconsistent with law, does not adversely affect any substantial
existing rights, and the Director is satisfied that such action will
not subject an Enterprise or the United States to any substantial
expense or liability.
Sec. 1249.18 Liability of Enterprises and Federal Reserve Banks.
An Enterprise and the Federal Reserve Banks may rely on the
information provided in a Transfer Message, and are not required to
verify the information. An Enterprise and the Federal Reserve Banks
shall not be liable for any action taken in accordance with the
information set out in a Transfer Message, or evidence submitted in
support thereof.
Sec. 1249.19 Additional provisions.
(a) Additional requirements. In any case or any class of cases
arising under these regulations, an Enterprise may require such
additional evidence and a bond of indemnity, with or without surety, as
may in the judgment of the Enterprise be necessary for the protection
of the interests of the Enterprise.
(b) Notice of attachment for Enterprise Securities in Book-entry
System. The interest of a debtor in a Security Entitlement may be
reached by a creditor only by legal process upon the Securities
Intermediary with whom the debtor's securities account is maintained,
except where a Security Entitlement is maintained in the name of a
secured party, in which case the debtor's interest may be reached by
legal process upon the secured party. These regulations do not purport
to establish whether a Federal Reserve Bank is required to honor an
order or other notice of attachment in any particular case or class of
cases.
* * * * *
SUBCHAPTER E--HOUSING GOALS AND MISSION
PART 1282--ENTERPRISE HOUSING GOALS AND MISSION
Sec.
Subpart A--General
1282.1 Definitions.
Subpart B--Housing Goals
1282.11 General.
1282.12 Single-family housing goals.
1282.13 Multifamily special affordable housing goal and subgoal.
1282.14 Discretionary adjustment of housing goals.
1282.15 General counting requirements.
1282.16 Special counting requirements.
1282.17 Affordability--Income level definitions--family size and
income known (owner-occupied units, actual tenants, and prospective
tenants).
1282.18 Affordability--Income level definitions--family size not
known (actual or prospective tenants).
[[Page 9064]]
1282.19 Affordability--Rent level definitions--tenant income is not
known.
1282.20 Determination of compliance with housing goals; notice of
determination.
1282.21 Housing plans.
Subpart C--[Reserved]
Subpart D--Reporting Requirements
1282.61 General.
1282.62 Mortgage reports.
1282.63 Annual Housing Activities Report.
1282.64 Periodic reports.
1282.65 Enterprise data integrity.
Authority: 12 U.S.C. 4501, 4502, 4511, 4513, 4526, 4561-4566,
4603.
Subpart A--General
Sec. 1282.1 Definitions.
(a) Statutory terms. All terms defined in the Safety and Soundness
Act are used in accordance with their statutory meaning unless
otherwise defined in paragraph (b) of this section.
(b) Other terms. As used in this part, the term:
AHAR means the Annual Housing Activities Report that an Enterprise
submits to the Director under section 309(n) of the Fannie Mae Charter
Act or section 307(f) of the Freddie Mac Act.
AHAR information means data or information contained in the AHAR.
AHS means the American Housing Survey published by HUD and the
Department of Commerce.
Balloon mortgage means a mortgage providing for payments at regular
intervals, with a final payment (``balloon payment'') that is at least
5 percent more than the periodic payments. The periodic payments may
cover some or all of the periodic principal or interest. Typically, the
periodic payments are level monthly payments that would fully amortize
the mortgage over a stated term and the balloon payment is a single
payment due after a specified period (but before the mortgage would
fully amortize) and pays off or satisfies the outstanding balance of
the mortgage.
Borrower income means the total gross income relied on in making
the credit decision.
Charter Act means the Fannie Mae Charter Act, as amended, or the
Freddie Mac Act, as amended.
Contract rent means the total rent that is, or is anticipated to
be, specified in the rental contract as payable by the tenant to the
owner for rental of a dwelling unit, including fees or charges for
management and maintenance services and those utility charges that are
included in the rental contract. In determining contract rent, rent
concessions shall not be considered, i.e., contract rent is not
decreased by any rent concessions. Contract rent is rent net of rental
subsidies. Anticipated rent for unoccupied units may be the market rent
for similar units in the neighborhood as determined by the lender or
appraiser for underwriting purposes.
Conventional mortgage means a mortgage other than a mortgage as to
which an Enterprise has the benefit of any guaranty, insurance or other
obligation by the United States or any of its agencies or
instrumentalities.
Day means a calendar day.
Designated disaster area means any census tract (1) that is located
in a county designated by FEMA as adversely affected by a declared
major disaster, (2) where individual assistance payments were
authorized by FEMA, and (3) where average damage severity, as reported
by FEMA, exceeds $1,000 per household in the census tract. A census
tract shall be treated as a ``designated disaster area'' for purposes
of this part beginning on the January 1 after the FEMA designation of
the county, or such earlier date as determined by FHFA, and continuing
through December 31 of the third full calendar year following the FEMA
designation.
Director means the Director of FHFA or his or her designee.
Dwelling unit means a room or unified combination of rooms intended
for use, in whole or in part, as a dwelling by one or more persons, and
includes a dwelling unit in a single-family property, multifamily
property, or other residential or mixed-use property.
Enterprise means Fannie Mae or Freddie Mac (Enterprises means,
collectively, Fannie Mae and Freddie Mac).
Extremely low-income means:
(i) In the case of owner-occupied units, income not in excess of 30
percent of area median income; and
(ii) In the case of rental units, income not in excess of 30
percent of area median income, with adjustments for smaller and larger
families in accordance with this part.
Families in low-income areas means:
(i) Any family that resides in a census tract or block numbering
area in which the median income does not exceed 80 percent of the area
median income;
(ii) Any family with an income that does not exceed area median
income that resides in a minority census tract; and
(iii) Any family with an income that does not exceed area median
income that resides in a designated disaster area.
Family means one or more individuals who occupy the same dwelling
unit.
Fannie Mae means the Federal National Mortgage Association and any
affiliate thereof.
Fannie Mae Charter Act means the Federal National Mortgage
Association Charter Act, as amended (12 U.S.C. 1715 et seq.).
FEMA means the Federal Emergency Management Agency.
FHFA means the Federal Housing Finance Agency.
FOIA means the Freedom of Information Act, as amended (5 U.S.C.
552).
Freddie Mac means the Federal Home Loan Mortgage Corporation and
any affiliate thereof.
Freddie Mac Act means the Federal Home Loan Mortgage Corporation
Act, as amended (12 U.S.C. 1451 et seq.).
Ginnie Mae means the Government National Mortgage Association.
HMDA means the Home Mortgage Disclosure Act (12 U.S.C. 2801 et
seq.).
HOEPA mortgage means a mortgage covered by section 103(aa) of the
Home Ownership Equity Protection Act (HOEPA) (15 U.S.C. 1602(aa)), as
implemented by the Board of Governors of the Federal Reserve System.
HUD means the United States Department of Housing and Urban
Development.
Lender means any entity that makes, originates, sells, or services
mortgages, and includes the secured creditors named in the debt
obligation and document creating the mortgage.
Low-income means:
(i) In the case of owner-occupied units, income not in excess of 80
percent of area median income; and
(ii) In the case of rental units, income not in excess of 80
percent of area median income, with adjustments for smaller and larger
families in accordance with this part.
Median income means, with respect to an area, the unadjusted median
family income for the area as most recently determined by HUD. FHFA
will provide the Enterprises annually with information specifying how
the median family income estimates for metropolitan areas are to be
applied for the purposes of determining median family income.
Metropolitan area means a metropolitan statistical area (MSA), or a
portion of such an area, including Metropolitan Divisions, for which
median family income estimates are determined by HUD.
Minority means any individual who is included within any one or
more of the following racial and ethnic categories:
(i) American Indian or Alaskan Native--a person having origins in
any of the original peoples of North and
[[Page 9065]]
South America (including Central America), and who maintains Tribal
affiliation or community attachment;
(ii) Asian--a person having origins in any of the original peoples
of the Far East, Southeast Asia, or the Indian subcontinent, including,
for example, Cambodia, China, India, Japan, Korea, Malaysia, Pakistan,
the Philippine Islands, Thailand, and Vietnam;
(iii) Black or African American--a person having origins in any of
the black racial groups of Africa;
(iv) Hispanic or Latino--a person of Cuban, Mexican, Puerto Rican,
South or Central American, or other Spanish culture or origin,
regardless of race; and
(v) Native Hawaiian or Other Pacific Islander--a person having
origins in any of the original peoples of Hawaii, Guam, Samoa, or other
Pacific Islands.
Minority census tract means a census tract that has a minority
population of at least 30 percent and a median income of less than 100
percent of the area median income.
Moderate-income means:
(i) In the case of owner-occupied units, income not in excess of
area median income; and
(ii) In the case of rental units, income not in excess of area
median income, with adjustments for smaller and larger families in
accordance with this part.
Mortgage means a member of such classes of liens, including
subordinate liens, as are commonly given or are legally effective to
secure advances on, or the unpaid purchase price of, real estate under
the laws of the State in which the real estate is located, together
with the credit instruments, if any, secured thereby, and includes
interests in mortgages. ``Mortgage'' includes a mortgage, lien,
including a subordinate lien, or other security interest on the stock
or membership certificate issued to a tenant-stockholder or resident-
member by a cooperative housing corporation, as defined in section 216
of the Internal Revenue Code of 1986, and on the proprietary lease,
occupancy agreement, or right of tenancy in the dwelling unit of the
tenant-stockholder or resident-member in such cooperative housing
corporation.
Mortgage data means data obtained by the Director from the
Enterprises under section 309(m) of the Fannie Mae Charter Act and
section 307(e) of the Freddie Mac Act.
Mortgage purchase means a transaction in which an Enterprise bought
or otherwise acquired a mortgage or an interest in a mortgage for
portfolio, resale, or securitization.
Mortgage revenue bond means a tax-exempt bond or taxable bond
issued by a State or local government or agency where the proceeds from
the bond issue are used to finance residential housing.
Mortgage with unacceptable terms or conditions means a single-
family mortgage, including a reverse mortgage, or a group or category
of such mortgages, with one or more of the following terms or
conditions:
(i) Excessive fees, where the total points and fees charged to a
borrower exceed the greater of 5 percent of the loan amount or a
maximum dollar amount of $1,000, or an alternative amount requested by
an Enterprise and determined by the Director as appropriate for small
mortgages.
(A) For purposes of this definition, points and fees include:
(1) Origination fees;
(2) Underwriting fees;
(3) Broker fees;
(4) Finder's fees; and
(5) Charges that the lender imposes as a condition of making the
loan, whether they are paid to the lender or a third party;
(B) For purposes of this definition, points and fees do not
include:
(1) Bona fide discount points;
(2) Fees paid for actual services rendered in connection with the
origination of the mortgage, such as attorneys' fees, notary's fees,
and fees paid for property appraisals, credit reports, surveys, title
examinations and extracts, flood and tax certifications, and home
inspections;
(3) The cost of mortgage insurance or credit-risk price
adjustments;
(4) The costs of title, hazard, and flood insurance policies;
(5) State and local transfer taxes or fees;
(6) Escrow deposits for the future payment of taxes and insurance
premiums; and
(7) Other miscellaneous fees and charges that, in total, do not
exceed 0.25 percent of the loan amount;
(ii) An annual percentage rate that exceeds by more than 8
percentage points the yield on Treasury securities with comparable
maturities as of the fifteenth day of the month immediately preceding
the month in which the application for the extension of credit was
received;
(iii) Prepayment penalties, except where:
(A) The mortgage provides some benefit to the borrower (e.g., a
rate or fee reduction for accepting the prepayment premium);
(B) The borrower is offered the choice of another mortgage that
does not contain payment of such a premium;
(C) The terms of the mortgage provision containing the prepayment
penalty are adequately disclosed to the borrower; and
(D) The prepayment penalty is not charged when the mortgage debt is
accelerated as the result of the borrower's default in making his or
her mortgage payments;
(iv) The sale or financing of prepaid single-premium credit life
insurance products in connection with the origination of the mortgage;
(v) Underwriting practices contrary to the Interagency Guidance on
Nontraditional Mortgage Product Risks (71 FR 58609) (Oct. 4, 2006), the
Interagency Statement on Subprime Mortgage Lending (72 FR 37569) (July
10, 2007), or similar guidance subsequently issued by Federal banking
agencies;
(vi) Failure to comply with fair lending requirements; or
(vii) Other terms or conditions that are determined by the Director
to be an unacceptable term or condition of a mortgage.
Multifamily housing means a residence consisting of more than four
dwelling units. The term includes cooperative buildings and condominium
projects.
Non-metropolitan area means a county, or a portion of a county,
including those counties that comprise Micropolitan Statistical Areas,
located outside any metropolitan area for which median family income
estimates are published annually by HUD.
Owner-occupied housing means single-family housing in which a
mortgagor resides, including two- to four-unit owner-occupied
properties where one or more units are used for rental purposes.
Participation means a fractional interest in the principal amount
of a mortgage.
Private label security means any mortgage-backed security that is
neither issued nor guaranteed by Fannie Mae, Freddie Mac, Ginnie Mae,
or any other government agency.
Proprietary information means all mortgage data and all AHAR
information that the Enterprises submit to the Director in the AHARs
that contain trade secrets or privileged or confidential, commercial,
or financial information that, if released, would be likely to cause
substantial competitive harm.
Public data means all mortgage data and all AHAR information that
the Enterprises submit to the Director in the AHARs that the Director
determines are not proprietary and may appropriately be disclosed
consistent with other applicable laws and regulations.
Purchase money mortgage means a mortgage given to secure a loan
used for
[[Page 9066]]
the purchase of a single-family residential property.
Refinancing mortgage means a mortgage undertaken by a borrower that
satisfies or replaces an existing mortgage of such borrower. The term
does not include:
(i) A renewal of a single payment obligation with no change in the
original terms;
(ii) A reduction in the annual percentage rate of the mortgage as
computed under the Truth in Lending Act (15 U.S.C. 1601 et seq.), with
a corresponding change in the payment schedule;
(iii) An agreement involving a court proceeding;
(iv) The renewal of optional insurance purchased by the mortgagor
and added to an existing mortgage;
(v) A renegotiated balloon mortgage on a multifamily property where
the balloon payment was due within 1 year after the date of the closing
of the renegotiated mortgage; and
(vi) A conversion of a balloon mortgage note on a single-family
property to a fully amortizing mortgage note where the Enterprise
already owns or has an interest in the balloon note at the time of the
conversion.
Rent means, for a dwelling unit:
(i) When the contract rent includes all utilities, the contract
rent; or
(ii) When the contract rent does not include all utilities, the
contract rent plus:
(A) The actual cost of utilities not included in the contract rent;
or
(B) A utility allowance.
Rental housing means dwelling units in multifamily housing and
dwelling units that are not owner-occupied in single-family housing.
Rental unit means a dwelling unit that is not owner-occupied and is
rented or available to rent.
Residence means a property where one or more families reside.
Residential mortgage means a mortgage on single-family or
multifamily housing.
Safety and Soundness Act means the Federal Housing Enterprises
Financial Safety and Soundness Act of 1992, as amended (12 U.S.C. 4501
et seq.).
Seasoned mortgage means a mortgage on which the date of the
mortgage note is more than 1 year before the Enterprise purchased the
mortgage.
Second mortgage means any mortgage that has a lien position
subordinate only to the lien of the first mortgage.
Secondary residence means a dwelling where the mortgagor maintains
(or will maintain) a part-time place of abode and typically spends (or
will spend) less than the majority of the calendar year. A person may
have more than one secondary residence at a time.
Single-family housing means a residence consisting of one to four
dwelling units. Single-family housing includes condominium dwelling
units and dwelling units in cooperative housing projects.
Utilities means charges for electricity, piped or bottled gas,
water, sewage disposal, fuel (oil, coal, kerosene, wood, solar energy,
or other), and garbage and trash collection. Utilities do not include
charges for cable or telephone service.
Utility allowance means either:
(i) The amount to be added to contract rent when utilities are not
included in contract rent (also referred to as the ``AHS-derived
utility allowance''), as issued periodically by FHFA; or
(ii) The utility allowance established under the HUD Section 8
Program (42 U.S.C. 1437f) for the area where the property is located.
Very low-income means:
(i) In the case of owner-occupied units, income not in excess of 50
percent of area median income; and
(ii) In the case of rental units, income not in excess of 50
percent of area median income, with adjustments for smaller and larger
families in accordance with this part.
Working day means a day when FHFA is officially open for business.
Subpart B--Housing Goals
Sec. 1282.11 General.
(a) General. Pursuant to the requirements of the Safety and
Soundness Act (12 U.S.C. 4561 through 4566), this subpart establishes:
(1) Three single-family owner-occupied purchase money mortgage
housing goals, a single-family refinancing mortgage housing goal, a
multifamily special affordable housing goal and a multifamily special
affordable housing subgoal;
(2) Requirements for measuring performance under the goals; and
(3) Procedures for monitoring and enforcing the goals.
(b) Annual goals. Each housing goal shall be established by
regulation no later than December 1 of the preceding year, except that
any housing goal may be adjusted by regulation to reflect subsequent
available data and market developments.
Sec. 1282.12 Single-family housing goals.
(a) Single-family housing goals. An Enterprise shall be in
compliance with a single-family housing goal if its performance under
the housing goal meets or exceeds either:
(1) The share of the market that qualifies for the goal, or
(2) The benchmark level for the goal.
(b) Size of market. The size of the market for each goal shall be
established annually by FHFA based on data reported pursuant to the
Home Mortgage Disclosure Act for a given year. Unless otherwise
adjusted by FHFA, the size of the market shall be determined based on
the following criteria:
(1) Only owner-occupied, conventional loans shall be considered;
(2) Purchase money mortgages and refinancing mortgages shall only
be counted for the applicable goal or goals;
(3) All mortgages flagged as HOEPA loans or subordinate lien loans
shall be excluded;
(4) All mortgages with original principal balances above the
conforming loan limits for single unit properties for the year being
evaluated (rounded to the nearest $1,000) shall be excluded;
(5) All mortgages with rate spreads of 300 basis points or more
above the applicable average prime offer rate as reported in the Home
Mortgage Disclosure Act data shall be excluded; and
(6) All mortgages that are missing information necessary to
determine appropriate counting under the housing goals shall be
excluded.
(c) Low-income Families Housing Goal. The percentage share of each
Enterprise's total purchases of purchase money mortgages on owner-
occupied single-family housing that consists of mortgages for low-
income families shall meet or exceed either:
(1) The share of such mortgages in the market as defined in
paragraph (b) of this section in each year; or
(2) The benchmark level, which for 2010 and 2011 shall be 27
percent of the total number of purchase money mortgages purchased by
that Enterprise in each year that finance owner-occupied single-family
properties.
(d) Very Low-income Families Housing Goal. The percentage share of
each Enterprise's total purchases of purchase money mortgages on owner-
occupied single-family housing that consists of mortgages for very low-
income families shall meet or exceed either:
(1) The share of such mortgages in the market as defined in
paragraph (b) of this section in each year; or
(2) The benchmark level, which for 2010 and 2011 shall be 8 percent
of the total number of purchase money mortgages purchased by that
Enterprise in each year that finance owner-occupied single-family
properties.
(e) Low-income Areas Housing Goal. The percentage share of each
Enterprise's total purchases of purchase money mortgages on owner-
occupied
[[Page 9067]]
single-family housing that consists of mortgages for families in low-
income areas shall meet or exceed either:
(1) The share of such mortgages in the market as defined in
paragraph (b) of this section in each year; or
(2) The benchmark level, which for 2010 and 2011 shall be 13
percent of the total number of purchase money mortgages purchased by
that Enterprise in each year that finance owner-occupied single-family
properties.
(f) Refinancing Housing Goal. The percentage share of each
Enterprise's total purchases of refinancing mortgages on owner-occupied
single-family housing that consists of refinancing mortgages for low-
income families shall meet or exceed either:
(1) The share of such mortgages in the market as defined in
paragraph (b) of this section in each year; or
(2) The benchmark level, which for 2010 and 2011 shall be 25
percent of the total number of refinancing mortgages purchased by that
Enterprise in each year that finance owner-occupied single-family
properties.
Sec. 1282.13 Multifamily special affordable housing goal and subgoal.
(a) Multifamily housing goal 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.
(b) Multifamily Low-income Housing Goal. For the years 2010 and
2011, the goal for each Enterprise's purchases of mortgages on
multifamily residential housing affordable to low-income families shall
be, for Fannie Mae, at least 237,000 dwelling units affordable to low-
income families in multifamily residential housing financed by
mortgages purchased by that Enterprise in each year, and for Freddie
Mac, at least 215,000 such dwelling units in each year.
(c) Multifamily Very low-income Housing Subgoal. For the years 2010
and 2011, the subgoal for each Enterprise's purchases of mortgages on
multifamily residential housing affordable to very low-income families
shall be, for Fannie Mae, at least 57,000 dwelling units affordable to
very low-income families in multifamily residential housing financed by
mortgages purchased by that Enterprise in each year, and for Freddie
Mac, at least 28,000 such dwelling units in each year.
Sec. 1282.14 Discretionary adjustment of housing goals.
(a) An Enterprise may petition the Director in writing during any
year to reduce any goal or subgoal for that year.
(b) The Director shall seek public comment on any such petition for
a period of 30 days.
(c) The Director shall make a determination regarding the petition
within 30 days after the end of the public comment period. If the
Director requests additional information from the Enterprise after the
end of the public comment period, the Director may extend the period
for a final determination for a single additional 15-day period.
(d) The Director may reduce a goal or subgoal pursuant to a
petition for reduction only if:
(1) Market and economic conditions or the financial condition of
the Enterprise require such 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 Charter Acts (12 U.S.C. 1716; 12 U.S.C. 1451
note).
Sec. 1282.15 General counting requirements.
(a) Calculating the numerator and denominator for single-family
housing goals. Performance under each of the single-family housing
goals shall be measured using a fraction that is converted into a
percentage. Neither the numerator nor the denominator shall include
Enterprise transactions or activities that are not mortgage purchases
as defined by FHFA or that are specifically excluded as ineligible
under Sec. 1282.16(b).
(1) The numerator. The numerator of each fraction is the number of
mortgage purchases of an Enterprise in a particular year that finance
owner-occupied single-family properties that count toward achievement
of a particular single-family housing goal.
(2) The denominator. The denominator of each fraction is the total
number of mortgage purchases of an Enterprise in a particular year that
finance owner-occupied single-family properties. A separate denominator
shall be calculated for purchase money mortgages and for refinancing
mortgages.
(b) Missing data or information for single-family housing goals.
When an Enterprise lacks sufficient data or information to determine
whether the purchase of a mortgage originated after 1992 counts toward
achievement of a particular single-family housing goal, that mortgage
purchase shall be included in the denominator for that housing goal,
except under the circumstances described in this paragraph (b).
(1) Mortgage purchases financing owner-occupied single-family
properties shall be evaluated based on the income of the mortgagors and
the area median income at the time the mortgage was originated. To
determine whether mortgages may be counted under a particular family
income level, i.e., low- or very low-income, the income of the
mortgagors is compared to the median income for the area at the time of
the mortgage application, using the appropriate percentage factor
provided under Sec. 1282.17.
(2) When the income of the mortgagor(s) is not available to
determine whether a mortgage purchase counts toward achievement of a
particular single-family housing goal, an Enterprise's performance with
respect to such mortgage purchase may be evaluated using estimated
affordability information by multiplying the number of mortgage
purchases with missing borrower income information in each census tract
by the percentage of all single-family owner-occupied mortgage
originations in the respective tracts that would count toward
achievement of each goal, as determined by FHFA based on the most
recent Home Mortgage Disclosure Act data available.
(3) The estimation methodology in paragraph (b)(2) of this section
may be used up to a nationwide maximum that shall be calculated by
multiplying, for each census tract, the percentage of all single-family
owner-occupied mortgage originations with missing borrower incomes (as
determined by FHFA based on the most recent Home Mortgage Disclosure
Act data available for home purchase and refinance mortgages,
respectively) by the number of Enterprise mortgage purchases secured by
single-family owner-occupied properties for each census tract, summed
up over all census tracts. Separate nationwide maximums shall be
calculated for purchase money mortgages and for refinancing mortgages.
If the nationwide maximum is exceeded, then the estimated number of
goal-qualifying mortgages will be adjusted by the ratio of the
applicable nationwide maximum to the total number of mortgage purchases
secured by single-family owner-occupied properties for the Enterprise
in that year. Mortgage purchases in excess of the nationwide maximum,
and any units for which estimation information is not available, shall
remain in the
[[Page 9068]]
denominator of the respective goal calculation.
(c) Counting dwelling units for multifamily housing goal and
subgoal. Performance under the multifamily housing goal and subgoal
shall be measured by counting the number of dwelling units that count
toward achievement of a particular housing goal or subgoal in all
multifamily properties financed by mortgages purchased by an Enterprise
in a particular year. Only dwelling units that are financed by mortgage
purchases, as defined by FHFA, and that are not specifically excluded
as ineligible under Sec. 1282.16(b), may be counted for purposes of
the multifamily housing goal and subgoal.
(d) Counting rental units. For purposes of counting rental units
toward achievement of the multifamily housing goal and subgoal,
mortgage purchases financing such units shall be evaluated based on the
income of actual or prospective tenants where such data is available,
i.e., known to a lender.
(1) Use of income. Each Enterprise shall require lenders to provide
to the Enterprise tenant income information, but only when such
information is known to the lender. When the income of actual tenants
is available, the income of the tenant shall be compared to the median
income for the area, adjusted for family size as provided in Sec.
1282.17, or as provided in Sec. 1282.18 if family size is not known.
(i) When such tenant income information is available for all
occupied units, the Enterprise's performance shall be based on the
income of the tenants in the occupied units. For unoccupied units that
are vacant and available for rent and for unoccupied units that are
under repair or renovation and not available for rent, the Enterprise
shall use rent levels for comparable units in the property to determine
affordability, except as provided in paragraph (d)(1)(ii) of this
section.
(ii) When income for tenants is available to a lender because a
project is subject to a Federal housing program that establishes the
maximum income for a tenant or a prospective tenant in rental units,
the income of prospective tenants may be counted at the maximum income
level established under such housing program for that unit. In
determining the income of prospective tenants, the income shall be
projected based on the types of units and market area involved. Where
the income of prospective tenants is projected, each Enterprise must
determine that the income figures are reasonable considering the rents
(if any) on the same units in the past and considering current rents on
comparable units in the same market area.
(2) Use of rent. When the income of the prospective or actual
tenants of a dwelling unit is not available, performance under the
multifamily housing goal and subgoal will be evaluated based on rent
and whether the rent is affordable to the income group targeted by the
housing goal and subgoal. A rent is affordable if the rent does not
exceed the maximum income levels as provided in Sec. 1282.19. In
determining contract rent for a dwelling unit, the actual rent or
average rent by unit type shall be used.
(3) Model units and rental offices. A model unit or rental office
in a multifamily property may be counted for purposes of the
multifamily housing goal and subgoal only if an Enterprise determines
that the number of such units is reasonable and minimal considering the
size of the multifamily property.
(4) Timeliness of information. In evaluating affordability under
the multifamily housing goal and subgoal, each Enterprise shall use
tenant and rental information as of the time of mortgage acquisition.
(e) Missing data or information for multifamily housing goal and
subgoal. (1) When an Enterprise lacks sufficient information to
determine whether a rental unit in a property securing a multifamily
mortgage purchased by an Enterprise counts toward achievement of the
multifamily housing goal or subgoal because neither the income of
prospective or actual tenants, nor the actual or average rental data,
are available, an Enterprise's performance with respect to such unit
may be evaluated using estimated affordability information by
multiplying the number of rental units with missing affordability
information in properties securing multifamily mortgages purchased by
the Enterprise in each census tract by the percentage of all rental
dwelling units in the respective tracts that would count toward
achievement of each goal and subgoal, as determined by FHFA based on
the most recent decennial census.
(2) The estimation methodology in paragraph (e)(1) of this section
may be used up to a nationwide maximum of ten percent of the total
number of rental units in properties securing multifamily mortgages
purchased by the Enterprise in the current year. Multifamily rental
units in excess of this maximum, and any units for which estimation
information is not available, shall not be counted for purposes of the
multifamily housing goal and subgoal.
(f) Credit toward multiple goals. A mortgage purchase (or dwelling
unit financed by such purchase) by an Enterprise in a particular year
shall count toward the achievement of each housing goal for which such
purchase (or dwelling unit) qualifies in that year.
(g) Application of median income. (1) For purposes of determining
an area's median income under Sec. Sec. 1282.17 through 1282.19 and
the definitions in Sec. 1282.1, the area is:
(i) The metropolitan area, if the property which is the subject of
the mortgage is in a metropolitan area; and
(ii) In all other areas, the county in which the property is
located, except that where the State non-metropolitan median income is
higher than the county's median income, the area is the State non-
metropolitan area.
(2) When an Enterprise cannot precisely determine whether a
mortgage is on dwelling unit(s) located in one area, the Enterprise
shall determine the median income for the split area in the manner
prescribed by the Federal Financial Institutions Examination Council
for reporting under the Home Mortgage Disclosure Act, if the Enterprise
can determine that the mortgage is on dwelling unit(s) located in:
(i) A census tract;
(ii) A census place code;
(iii) A block-group enumeration district;
(iv) A nine-digit zip code; or
(v) Another appropriate geographic segment that is partially
located in more than one area (``split area'').
(h) Sampling not permitted. Performance under the housing goals for
each year shall be based on a complete tabulation of mortgage purchases
(or dwelling units) for that year; a sampling of such purchases (or
dwelling units) is not acceptable.
(i) Newly available data. When an Enterprise uses data to determine
whether a mortgage purchase (or dwelling unit) counts toward
achievement of any goal and new data is released after the start of a
calendar quarter, the Enterprise need not use the new data until the
start of the following quarter.
Sec. 1282.16 Special counting requirements.
(a) General. FHFA shall determine whether an Enterprise shall
receive full, partial, or no credit toward achievement of any of the
housing goals for a transaction that otherwise qualifies under this
part. In this determination, FHFA will consider whether a transaction
or activity of the Enterprise is substantially equivalent to a mortgage
purchase and either creates a new market or adds liquidity to an
existing market, provided however that such
[[Page 9069]]
mortgage purchase actually fulfills the Enterprise's purposes and is in
accordance with its Charter Act.
(b) Not counted. The following transactions or activities shall not
be counted for purposes of the housing goals and shall not be included
in the numerator or the denominator in calculating either Enterprise's
performance under the housing goals, even if the transaction or
activity would otherwise be counted pursuant to paragraph (c) of this
section:
(1) Equity investments in low-income housing tax credits;
(2) Purchases of State and local government housing bonds except as
provided in paragraph (c)(8) of this section;
(3) Purchases of non-conventional single-family mortgages;
(4) Commitments to buy mortgages at a later date or time;
(5) Options to acquire mortgages;
(6) Rights of first refusal to acquire mortgages;
(7) Any interests in mortgages that the Director determines, in
writing, shall not be treated as interests in mortgages;
(8) Mortgage purchases to the extent they finance any dwelling
units that are secondary residences;
(9) Single-family refinancing mortgages that result from conversion
of balloon notes to fully amortizing notes, if the Enterprise already
owns or has an interest in the balloon note at the time conversion
occurs;
(10) Purchases of subordinate lien mortgages (second mortgages);
(11) Purchases of mortgages or interests in mortgages that were
previously counted by either Enterprise under any current or previous
housing goal within the five years immediately preceding the current
performance year;
(12) Purchases of mortgages where the property has not been
approved for occupancy;
(13) Purchases of private label securities;
(14) Enterprise contributions to the Housing Trust Fund (12 U.S.C.
4568) and the Capital Magnet Fund (12 U.S.C. 4569), and mortgage
purchases funded with such grant amounts; and
(15) Any combination of factors in paragraphs (b)(1) through
(b)(14) of this section.
(c) Other special rules. Subject to FHFA's determination of whether
an Enterprise shall receive full, partial, or no credit for a
transaction toward achievement of any of the housing goals as provided
in paragraph (a) of this section, the transactions and activities
identified in this paragraph (c) shall be treated as mortgage purchases
as described. A transaction or activity that is covered by more than
one paragraph below must satisfy the requirements of each such
paragraph. The mortgages (or dwelling units, for the multifamily
housing goals) from each such transaction or activity shall be included
in the denominator in calculating the Enterprise's performance under
the housing goals, and shall be included in the numerator, as
appropriate.
(1) Credit enhancements. (i) Mortgages (or dwelling units) financed
under a credit enhancement entered into by an Enterprise shall be
treated as mortgage purchases for purposes of the housing goals only
when:
(A) The Enterprise provides a specific contractual obligation to
ensure timely payment of amounts due under a mortgage or mortgages
financed by the issuance of housing bonds (such bonds may be issued by
any entity, including a State or local housing finance agency); and
(B) The Enterprise assumes a credit risk in the transaction
substantially equivalent to the risk that would have been assumed by
the Enterprise if it had securitized the mortgages financed by such
bonds.
(ii) When an Enterprise provides a specific contractual obligation
to ensure timely payment of amounts due under any mortgage originally
insured by a public purpose mortgage insurance entity or fund, the
Enterprise may, on a case-by-case basis, seek approval from the
Director for such activities to count toward achievement of the housing
goals.
(2) [Reserved.]
(3) Risk-sharing. Mortgages purchased under risk-sharing
arrangements between an Enterprise and any Federal agency under which
the Enterprise is responsible for a substantial amount (50 percent or
more) of the risk shall be treated as mortgage purchases for purposes
of the housing goals.
(4) Participations. Participations purchased by an Enterprise shall
be treated as mortgage purchases for purposes of the housing goals only
when the Enterprise's participation in the mortgage is 50 percent or
more.
(5) Cooperative housing and condominiums. (i) The purchase of a
mortgage on a cooperative housing unit (``a share loan'') or a mortgage
on a condominium unit shall be treated as a mortgage purchase for
purposes of the housing goals. Such a purchase shall be counted in the
same manner as a mortgage purchase of single-family owner-occupied
units.
(ii) The purchase of a mortgage on a cooperative building (``a
blanket loan'') or a mortgage on a condominium project shall be treated
as a mortgage purchase for purposes of the housing goals. The purchase
of a blanket loan or a condominium project mortgage shall be counted in
the same manner as a mortgage purchase of a multifamily rental
property.
(iii) Where an Enterprise purchases both a blanket loan on a
cooperative building and share loans for units in the same building,
both the blanket loan and the share loan(s) shall be treated as
mortgage purchases for purposes of the housing goals. Where an
Enterprise purchases both a condominium project mortgage and mortgages
on condominium dwelling units in the same project, both the condominium
project mortgages and the mortgages on condominium dwelling units shall
be treated as mortgage purchases for purposes of the housing goals.
(6) Seasoned mortgages. An Enterprise's purchase of a seasoned
mortgage shall be treated as a mortgage purchase for purposes of the
housing goals, except where the Enterprise has already counted the
mortgage under any current or previous housing goal within the five
years immediately preceding the current performance year.
(7) Purchase of refinancing mortgages. The purchase of a
refinancing mortgage by an Enterprise shall be treated as a mortgage
purchase for purposes of the housing goals only if the refinancing is
an arms-length transaction that is borrower-driven.
(8) Mortgage revenue bonds. The purchase or guarantee by an
Enterprise of a mortgage revenue bond issued by a State or local
housing finance agency shall be treated as a purchase of the underlying
mortgages for purposes of the housing goals only to the extent the
Enterprise has sufficient information to determine whether the
underlying mortgages or mortgage-backed securities qualify for
inclusion in the numerator for one or more housing goal.
(9) [Reserved.]
(10) Loan modifications. An Enterprise's modification of a loan in
accordance with the Making Home Affordable program announced on March
4, 2009, that is held in the Enterprise's portfolio or that is in a
pool backing a security guaranteed by the Enterprise, shall be treated
as a mortgage purchase for purposes of the housing goals.
(11) [Reserved.]
(12) [Reserved.]
(13) [Reserved.]
(14) Seller dissolution option. (i) Mortgages acquired through
transactions involving seller dissolution options shall be treated as
mortgage purchases for purposes of the housing goals, only when:
[[Page 9070]]
(A) The terms of the transaction provide for a lockout period that
prohibits the exercise of the dissolution option for at least one year
from the date on which the transaction was entered into by the
Enterprise and the seller of the mortgages; and
(B) The transaction is not dissolved during the one-year minimum
lockout period.
(ii) The Director may grant an exception to the one-year minimum
lockout period described in paragraphs (c)(14)(i)(A) and (B) of this
section, in response to a written request from an Enterprise, if the
Director determines that the transaction furthers the purposes of the
Safety and Soundness Act and the Enterprise's Charter Act;
(iii) For purposes of this paragraph (c)(14), ``seller dissolution
option'' means an option for a seller of mortgages to the Enterprises
to dissolve or otherwise cancel a mortgage purchase agreement or loan
sale.
(d) HOEPA mortgages and mortgages with unacceptable terms or
conditions. HOEPA mortgages and mortgages with unacceptable terms or
conditions, as defined in Sec. 1282.1, shall be treated as mortgage
purchases for purposes of the housing goals and shall be included in
the denominator for each applicable single-family housing goal, but
such mortgages shall not be counted in the numerator for any housing
goal.
(e) FHFA review of transactions. FHFA may determine whether and how
any transaction or class of transactions shall be counted for purposes
of the housing goals, including treatment of missing data. FHFA will
notify each Enterprise in writing of any determination regarding the
treatment of any transaction or class of transactions under the housing
goals.
Sec. 1282.17 Affordability--Income level definitions--family size and
income known (owner-occupied units, actual tenants, and prospective
tenants).
In determining whether a dwelling unit is affordable where income
information (and family size, for rental housing) is known to the
Enterprise, the affordability of the unit shall be determined as
follows:
(a) Moderate-income means:
(1) In the case of owner-occupied units, income not in excess of
100 percent of area median income; and
(2) In the case of rental units, where the income of actual or
prospective tenants is available, income not in excess of the following
percentages of area median income corresponding to the following family
sizes:
------------------------------------------------------------------------
Percentage of
Number of persons in family area median
income
------------------------------------------------------------------------
1...................................................... 70
2...................................................... 80
3...................................................... 90
4...................................................... 100
5 or more.............................................. *
------------------------------------------------------------------------
* 100% plus (8% multiplied by the number of persons in excess of 4).
(b) Low-income (80%) means:
(1) In the case of owner-occupied units, income not in excess of 80
percent of area median income; and
(2) In the case of rental units, where the income of actual or
prospective tenants is available, income not in excess of the following
percentages of area median income corresponding to the following family
sizes:
------------------------------------------------------------------------
Percentage of
Number of persons in family area median
income
------------------------------------------------------------------------
1...................................................... 56
2...................................................... 64
3...................................................... 72
4...................................................... 80
5 or more.............................................. *
------------------------------------------------------------------------
* 80% plus (6.4% multiplied by the number of persons in excess of 4).
(c) Low-income (60%) means:
(1) In the case of owner-occupied units, income not in excess of 60
percent of area median income; and
(2) In the case of rental units, where the income of actual or
prospective tenants is available, income not in excess of the following
percentages of area median income corresponding to the following family
sizes:
------------------------------------------------------------------------
Percentage of
Number of persons in family area median
income
------------------------------------------------------------------------
1...................................................... 42
2...................................................... 48
3...................................................... 54
4...................................................... 60
5 or more.............................................. *
------------------------------------------------------------------------
* 60% plus (4.8% multiplied by the number of persons in excess of 4).
(d) Very low-income means:
(1) In the case of owner-occupied units, income not in excess of 50
percent of area median income; and
(2) In the case of rental units, where the income of actual or
prospective tenants is available, income not in excess of the following
percentages of area median income corresponding to the following family
sizes:
------------------------------------------------------------------------
Percentage of
Number of persons in family area median
income
------------------------------------------------------------------------
1...................................................... 35
2...................................................... 40
3...................................................... 45
4...................................................... 50
5 or more.............................................. *
------------------------------------------------------------------------
* 50% plus (4% multiplied by the number of persons in excess of 4).
(e) Extremely low-income means:
(1) In the case of owner-occupied units, income not in excess of 30
percent of area median income; and
(2) In the case of rental units, where the income of actual or
prospective tenants is available, income not in excess of the following
percentages of area median income corresponding to the following family
sizes:
------------------------------------------------------------------------
Percentage of
Number of persons in family area median
income
------------------------------------------------------------------------
1...................................................... 21
2...................................................... 24
3...................................................... 27
4...................................................... 30
5 or more.............................................. *
------------------------------------------------------------------------
* 30% plus (2.4% multiplied by the number of persons in excess of 4).
Sec. 1282.18 Affordability--Income level definitions--family size not
known (actual or prospective tenants).
In determining whether a rental unit is affordable where family
size is not known to the Enterprise, income will be adjusted using unit
size, and affordability determined as follows:
(a) For moderate-income, the income of prospective tenants shall
not exceed the following percentages of area median income with
adjustments, depending on unit size:
------------------------------------------------------------------------
Percentage of
Unit size area median
income
------------------------------------------------------------------------
Efficiency............................................. 70
1 bedroom.............................................. 75
2 bedrooms............................................. 90
3 bedrooms or more..................................... *
------------------------------------------------------------------------
* 104% plus (12% multiplied by the number of bedrooms in excess of 3).
(b) For low-income (80%), income of prospective tenants shall not
exceed the following percentages of area median income with
adjustments, depending on unit size:
------------------------------------------------------------------------
Percentage of
Unit size area median
income
------------------------------------------------------------------------
Efficiency............................................. 56
1 bedroom.............................................. 60
2 bedrooms............................................. 72
[[Page 9071]]
3 bedrooms or more..................................... *
------------------------------------------------------------------------
* 83.2% plus (9.6% multiplied by the number of bedrooms in excess of 3).
(c) For low-income (60%), income of prospective tenants shall not
exceed the following percentages of area median income with
adjustments, depending on unit size:
------------------------------------------------------------------------
Percentage of
Unit size area median
income
------------------------------------------------------------------------
Efficiency............................................. 42
1 bedroom.............................................. 45
2 bedrooms............................................. 54
3 bedrooms or more..................................... *
------------------------------------------------------------------------
* 62.4% plus (7.2% multiplied by the number of bedrooms in excess of 3).
(d) For very low-income, income of prospective tenants shall not
exceed the following percentages of area median income with
adjustments, depending on unit size:
------------------------------------------------------------------------
Percentage of
Unit size area median
income
------------------------------------------------------------------------
Efficiency............................................. 35
1 bedroom.............................................. 37.5
2 bedrooms............................................. 45
3 bedrooms or more..................................... *
------------------------------------------------------------------------
* 52% plus (6.0% multiplied by the number of bedrooms in excess of 3).
(e) For extremely low-income, income of prospective tenants shall
not exceed the following percentages of area median income with
adjustments, depending on unit size:
------------------------------------------------------------------------
Percentage of
Unit size area median
income
------------------------------------------------------------------------
Efficiency............................................. 21
1 bedroom.............................................. 22.5
2 bedrooms............................................. 27
3 bedrooms or more..................................... *
------------------------------------------------------------------------
* 31.2% plus (3.6% multiplied by the number of bedrooms in excess of 3).
Sec. 1282.19 Affordability--Rent level definitions--tenant income is
not known.
For purposes of determining whether a rental unit is affordable
where the income of the family in the dwelling unit is not known to the
Enterprise, the affordability of the unit is determined based on unit
size as follows:
(a) For moderate-income, maximum affordable rents to count as
housing for moderate-income families shall not exceed the following
percentages of area median income with adjustments, depending on unit
size:
------------------------------------------------------------------------
Percentage of
Unit size area median
income
------------------------------------------------------------------------
Efficiency............................................. 21
1 bedroom.............................................. 22.5
2 bedrooms............................................. 27
3 bedrooms or more..................................... *
------------------------------------------------------------------------
* 31.2% plus (3.6% multiplied by the number of bedrooms in excess of 3).
(b) For low-income (80%), maximum affordable rents to count as
housing for low-income (80%) families shall not exceed the following
percentages of area median income with adjustments, depending on unit
size:
------------------------------------------------------------------------
Percentage of
Unit size area median
income
------------------------------------------------------------------------
Efficiency............................................. 16.8
1 bedroom.............................................. 18
2 bedrooms............................................. 21.6
3 bedrooms or more..................................... *
------------------------------------------------------------------------
* 24.96% plus (2.88% multiplied by the number of bedrooms in excess of
3).
(c) For low-income (60%), maximum affordable rents to count as
housing for low-income (60%) families shall not exceed the following
percentages of area median income with adjustments, depending on unit
size:
------------------------------------------------------------------------
Percentage of
Unit size area median
income
------------------------------------------------------------------------
Efficiency............................................. 12.6
1 bedroom.............................................. 13.5
2 bedrooms............................................. 16.2
3 bedrooms or more..................................... *
------------------------------------------------------------------------
* 18.72% plus (2.16% multiplied by the number of bedrooms in excess of
3).
(d) For very low-income, maximum affordable rents to count as
housing for very low-income families shall not exceed the following
percentages of area median income with adjustments, depending on unit
size:
------------------------------------------------------------------------
Percentage of
Unit size area median
income
------------------------------------------------------------------------
Efficiency............................................. 10.5
1 bedroom.............................................. 11.25
2 bedrooms............................................. 13.5
3 bedrooms or more..................................... *
------------------------------------------------------------------------
* 15.6% plus (1.8% multiplied by the number of bedrooms in excess of 3).
(e) For extremely low-income, maximum affordable rents to count as
housing for extremely low-income families shall not exceed the
following percentages of area median income with adjustments, depending
on unit size:
------------------------------------------------------------------------
Percentage of
Unit size area median
income
------------------------------------------------------------------------
Efficiency............................................. 6.3
1 bedroom.............................................. 6.75
2 bedrooms............................................. 8.1
3 bedrooms or more..................................... *
------------------------------------------------------------------------
* 9.36% plus (1.08% multiplied by the number of bedrooms in excess of
3).
(f) Missing Information. Each Enterprise shall make every effort to
obtain the information necessary to make the calculations in this
section. If an Enterprise makes such efforts but cannot obtain data on
the number of bedrooms in particular units, in making the calculations
on such units, the units shall be assumed to be efficiencies except as
provided in Sec. 1282.15(e)(1).
Sec. 1282.20 Determination of compliance with housing goals; notice
of determination.
(a) Single-family housing goals. The Director shall evaluate each
Enterprise's performance under the Low-income Families Housing Goal,
the Very Low-income Families Housing Goal, the Low-income Areas Housing
Goal, and the Refinancing Mortgages Housing Goal on an annual basis. If
the Director determines that an Enterprise has failed, or there is a
substantial probability that an Enterprise will fail to meet a single-
family housing goal established by this subpart, the Director shall
notify the Enterprise in writing of such preliminary determination.
(b) Multifamily housing goal and subgoal. The Director shall
evaluate each Enterprise's performance under the Multifamily Low-income
Housing Goal and the Multifamily Very Low-income Housing Subgoal on an
annual basis. If the Director determines that an Enterprise has failed,
or there is a substantial probability that an Enterprise will fail to
meet a multifamily housing goal or subgoal established by this subpart,
the Director shall notify the Enterprise in writing of such preliminary
determination.
(c) Any notification to an Enterprise of a preliminary
determination under this section shall provide the Enterprise with an
opportunity to respond in writing in accordance with the procedures at
12 U.S.C. 4566(b).
Sec. 1282.21 Housing plans.
(a) General. If the Director determines that an Enterprise has
failed, or there is a substantial probability that an Enterprise will
fail, to meet any housing goal and that the achievement of the housing
goal was or is feasible, the Director may require the Enterprise to
submit a housing plan for approval by the Director.
[[Page 9072]]
(b) Nature of plan. If the Director requires a housing plan, the
housing plan shall:
(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:
(i) To achieve the goal for the next calendar year; and
(ii) If the Director determines that there is a substantial
probability that the Enterprise will fail to meet a housing goal in the
current year, to make such improvements and changes in its operations
as are reasonable in the remainder of the year; and
(4) Address any additional matters relevant to the plan as
required, in writing, by the Director.
(c) 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.
(d) 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).
(e) Resubmission. If the Director disapproves an initial housing
plan submitted by an Enterprise, the Enterprise shall submit an amended
plan acceptable to the Director 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 the amended plan is not acceptable to the Director, the
Director may afford the Enterprise 15 days to submit a new plan.
Subpart C--[Reserved]
Subpart D--Reporting Requirements
Sec. 1282.61 General.
This subpart establishes data submission and reporting requirements
to carry out the requirements of the Enterprises' Charter Acts and the
Safety and Soundness Act.
Sec. 1282.62 Mortgage reports.
(a) Loan-level data elements. To implement the data collection and
submission requirements for mortgage data, and to assist the Director
in monitoring the Enterprises' housing goal activities, each Enterprise
shall collect and compile computerized loan-level data on each mortgage
purchased in accordance with 12 U.S.C. 1456(e) and 1723a(m). The
Director may, from time to time, issue a list entitled ``Required Loan-
level Data Elements'' specifying the loan-level data elements to be
collected and maintained by the Enterprises and provided to the
Director. The Director may revise the list by written notice to the
Enterprises.
(b) Quarterly Mortgage Reports. Each Enterprise shall submit to the
Director a quarterly Mortgage Report. The fourth quarter Mortgage
Report shall serve as the Annual Mortgage Report and shall be
designated as such. Each Mortgage Report shall include:
(1) Aggregations of the loan-level mortgage data compiled by the
Enterprise under paragraph (a) of this section for year-to-date
mortgage purchases, in the format specified in writing by the Director;
(2) Year-to-date dollar volume, number of units, and number of
mortgages on owner-occupied and rental properties purchased by the
Enterprise that do, and do not, qualify under each housing goal as set
forth in this part; and
(3) Year-to-date computerized loan-level data consisting of the
data elements required under paragraph (a) of this section.
(c) Timing of Reports. The Enterprises shall submit the Mortgage
Report for each of the first 3 quarters of each year within 45 days of
the end of the quarter. Each Enterprise shall submit its Annual
Mortgage Report within 60 days after the end of the calendar year.
(d) Revisions to Reports. At any time before submission of its
Annual Mortgage Report, an Enterprise may revise any of its quarterly
reports for that year.
(e) Format. The Enterprises shall submit to the Director
computerized loan-level data with the Mortgage Report, in the format
specified in writing by the Director.
Sec. 1282.63 Annual Housing Activities Report.
To comply with the requirements in sections 309(n) of the Fannie
Mae Charter Act and 307(f) of the Freddie Mac Act and assist the
Director in preparing the Director's Annual Report to Congress, each
Enterprise shall submit to the Director an AHAR including the
information listed in those sections of the Charter Acts. Each
Enterprise shall submit such report within 60 days after the end of
each calendar year, to the Director, the Committee on Financial
Services of the House of Representatives, and the Committee on Banking,
Housing, and Urban Affairs of the Senate. Each Enterprise shall make
its AHAR available to the public online and at its principal and
regional offices. Before making any such report available to the
public, the Enterprise may exclude from the report any information that
the Director has deemed proprietary.
Sec. 1282.64 Periodic reports.
Each Enterprise shall provide to the Director such reports,
information and data as the Director may request from time to time.
Sec. 1282.65 Enterprise data integrity.
(a) Certification. (1) The senior officer of each Enterprise who is
responsible for submitting the fourth quarter Annual Mortgage Report
and the AHAR under sections 309(m) and (n) of the Fannie Mae Charter
Act or sections 307(e) and (f) of the Freddie Mac Act, as applicable,
or for submitting any other report(s), data or information for which
certification is requested in writing by the Director, shall certify
such report(s), data or information.
(2) The certification shall state as follows: ``To the best of my
knowledge and belief, the information provided herein is true, correct
and complete.''
(b) Adjustment to correct errors, omissions or discrepancies in
AHAR data. FHFA shall determine the official housing goal performance
figure for each Enterprise under the housing goals on an annual basis.
FHFA may resolve any error, omission or discrepancy by adjusting the
Enterprise's official housing goal performance figure. If the Director
determines that the year-end data reported by an Enterprise for a year
preceding the latest year for which data on housing goals performance
was reported to FHFA contained a material error, omission or
discrepancy, the Director may increase the corresponding housing goal
for the current year by the number of mortgages (or dwelling units)
that the Director determines were overstated in the prior year's goal
performance.
Dated: February 16, 2010.
Edward J. DeMarco,
Acting Director, Federal Housing Finance Agency.
[FR Doc. 2010-3310 Filed 2-25-10; 8:45 am]
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