FHFA Establishes Higher Annual Housing Goals for Mortgages Purchased by Enterprises
Written By: Joel Palmer, Op-Ed Writer
The Federal Housing Finance Agency (FHFA) is requiring Fannie Mae and Freddie Mac to target minority communities and low-income neighborhoods as part of its annual housing goals.
FHFA issued its final rule last month that establishes benchmarks for the next three years for the enterprises.
The single-family home purchase goals for 2022, 2023 and 2024 include two new single-family home purchase subgoals: one targeting minority communities and the other targeting low-income neighborhoods. The new minority census tract subgoal is designed to improve access to fair and sustainable mortgage financing in communities of color.
An enterprise mortgage purchase qualifies under the new subgoal if the borrower has an income at or below area median income (AMI) and the property is in a census tract where the median income is at or below AMI and where minorities make up at least 30 percent of the population.
"The enterprises' housing goals will support equitable access to sustainable, affordable housing opportunities in a safe and sound manner that bolsters the health of communities," said FHFA Acting Director Sandra L. Thompson. "The new subgoals for minority and low-income census tracts will help preserve and support affordable housing opportunities as well as allow those communities to retain ownership of the neighborhoods they helped build.”
To meet a single-family housing goal or subgoal, the percentage of mortgage purchases by an enterprise in that category must exceed either the benchmark level or the market level for that year. The market level is determined retrospectively each year, based on Home Mortgage Disclosure Act (HMDA) data.
FHFA proposed increases to the benchmark levels for the single-family housing goals for the next three years, which are:
Low-income housing purchase goal of 28%
Very low-income home purchase goal of 7%
Minority census tract subgoal of 10%
Low-income census tract subgoal of 4%
Low-income refinance goal of 26%
As written in the final rule document: “Several commenters noted that higher benchmark levels will incentivize Fannie Mae and Freddie Mac to marshal their considerable resources and market presence to address the nation’s affordable housing crisis.”
The single-family housing goals low income and very low income purchasers are considerably higher than the previous three goals. In addition, the targets exceed past performance by both enterprises and the market as a whole in most of the past 10 years, according to the rule document.
“Although Fannie Mae and Freddie Mac expressed support for the proposed increases to the single-family home purchase benchmark levels, both enterprises expressed concerns about uncertainty in the housing and loan origination markets,” the rule document said.
Fannie Mae and Freddie Mac emphasized that market factors and regulatory issues outside their control could pose risks to their ability to meet the proposed benchmark levels. Those factors include extreme home price appreciation, the shortfall in affordable housing supply, and disruptions in income and employment stability resulting from the COVID-19 pandemic. There was also concern raised about secondary market dynamics, such as lender interest in holding loans in their portfolios rather than selling them, consumer demand, and lender preference for conventional loans.
The Federal Housing Enterprises Financial Safety and Soundness Act of 1992 requires FHFA to establish annual housing goals for mortgages purchased by the enterprises.
About the Author
As an NAMU® Opinion Editorial Contributor, Joel Palmer is a freelance writer who spent 10 years as a business and financial reporter and another 10 years in marketing for the insurance and financial services industries. He regularly writes about the mortgage industry, as well as residential and commercial real estate, investments, and retirement income planning. He has also ghostwritten books on starting a business, marketing, and retirement income planning.
