On Wednesday, the Federal Housing Finance Agency (FHFA) announced a proposed rule that would establish new affordable housing goals for Government-Sponsored Enterprises (GSEs), Fannie Mae and Freddie Mac. Potentially most significant, the proposed rule would prohibit affordable housing goals credit for mortgages in private-label securities, which may effectively prohibit Fannie and Freddie from relying on Alt-A and subprime mortgages to achieve their affordable housing goals. The Housing and Economic Recovery Act of 2008 (HERA) shifted the authority to set GSE affordable housing goals from the Department of Housing and Urban Development to FHFA.
FHFA is proposing single-family home purchase goals in 2010 and 2011 for low-income families, very low-income families and families in low-income/high minority/disaster areas. The proposed rule also contains goals for single-family refinance mortgages for low-income families. FHFA also is proposing a separate set of goals for the GSEs for purchases of multifamily mortgages for low-income and very low-income families. FHFA has not proposed a set of overall goals for all single-family and multifamily mortgages combined.
According to the FHFA, the proposed rule “utilizes prospective, or ‘benchmark’ goals and adds a market-based alternative measure for each single-family goal.” A GSE would successfully satisfy a particular single-family home purchase goal if either (1) it exceeds the prospective benchmark goal contained in the proposed rule or (2) the share of the GSE’s business for the year attributable to the goal category is equal to or greater than the category’s share of the overall market.
The public comment period for the proposed rule is 45 days from the date it is published in the Federal Register.