The Federal Housing Finance Agency (FHFA)—the federal agency in charge of regulating both Fannie Mae and Freddie Mac—recently proposed a rule that would establish housing goals for the Government Sponsored Enterprises (GSE) for 2015 through 2017. The Housing and Economic Recovery Act of 2008 requires the FHFA to establish annual housing goals for both Fannie and Freddie, and the agency’s current housing goals are set to expire at the end of this year.
The suite of goals includes a set of goals for single-family financing for the GSEs, as well as separate goals for multifamily financing. The FHFA is proposing the following three alternative approaches for establishing single-family housing goals:
- Alternative 1: Use the current two-step process, which involves setting both a prospective benchmark level and a retrospective market level measure based on Home Mortgage Disclosure Act data.
- Alternative 2: Set only prospective benchmark levels.
- Alternative 3: Use only the retrospective market level measure.
Under the first alternative, the goal for single-family purchase mortgages to low-income families would remain at the current 23% of overall purchases through 2017. Likewise, the current goal of 7% for purchases by very-low income families would remain unchanged as well. If the second alternative is used, the FHFA would consider adopting single-family benchmark levels in the final rule that are lower than the proposed levels. If alternative three is chosen, the FHFA would not set a prospective benchmark level.
In addition to these three alternatives, the FHFA also proposed a sub-goal of increasing the goal for purchases within low-income areas from the current 11% to 14% for the next three years.
When it comes to refinancing, the FHFA gets a little more assertive with its goals for serving low-income families. The agency is proposing to increase the percentage of all refinancing that’s targeted for low-income families over the next three years to 27% from the current 20%.
As mentioned, the FHFA’s proposed rule also includes benchmarks for multifamily housing goals as well, and for the first time would establish a sub-goal for small multifamily properties—5 to 50 units—that are affordable to low-income families. The agency’s proposed multifamily benchmark levels would remain the same for Fannie, but would gradually increase for Freddie.
Fannie Mae’s goal for multifamily units for low-income families would stay at 250,000, and its goal for very low-income families would remain at 60,000 from 2015 to 2017. Freddie Mac’s multifamily goal for low-income families would increase by 10,000 units per-year (200,000 to 230,000), and its goal for multifamily units for very low-income families would increase by roughly 3,330 units per-year (40,000 to 50,000).
The FHFA is requesting comment from the industry on all aspects of its proposed rule, and comments are due no later than October 28, 2014. All comments should be submitted to the FHFA’s Division of Housing Mission and Goals via fhfa.gov.