”The annual housing goals are one measure of the extent to which the Enterprises [Fannie Mae and Freddie Mac] are meeting their public purposes, which include ‘an affirmative obligation to facilitate the financing for affordable housing for low- and moderate-income families in a manner consistent with their overall public purposes, while maintaining a strong financial condition and a reasonable economic return,’” the Federal Housing Finance Agency said in a report containing its proposed annual housing goals for the Enterprises.
The FHFA publicly unveiled housing goals for Fannie Mae and Freddie Mac for the period 2018 to 2020, which contemplate higher benchmark levels for low-income areas single-family home purchases and low-income small multifamily home purchases.
By way of a proposed rule, the agency seeks the public’s comments regarding the 2018-2020 housing benchmarks as well as other changes to related processes.
Fannie and Freddie’s Housing Goals
For the next two years, the Enterprises aim to achieve these goals and subgoals under the single-family and multifamily housing sectors, as follows.
Single-Family Housing Goals
Fannie and Freddie’s combined goals for 2018 to 2020 vis-a-vis 2015 to 2017, cover home purchases and refinances on single-family, owner-occupied properties using conventional, conforming mortgages (i) that are not insured by the FHA or any other government agency, and (ii) whose loan principal balances do not exceed the conforming loan limits.
1. “Low-Income Home Purchase Goal” is kept at 24%. These refer to home purchase loans made by borrowers whose income does not exceed 80% of the area median income (AMI).
2. “Very Low-Income Home Purchase Goal” is kept at 24%. These refer to home purchase loans with borrowers whose income does not exceed 50% of the AMI.
3. “Low-Income Areas Home Purchase Subgoal” is increased from 14% to 15%. These refer to home purchase loans with (a) borrowers in census tracts with tract median income not greater than 80% of the AMI or (b) borrowers with income not greater than 100% of the AMI in census tracts where (i) tract income is less than 100% of AMI, and (ii) minorities comprise at least 30% of the tract population.
4. “Low-Income Refinancing Goal” is kept at 21%. These refer to being refinanced mortgages with borrowers with income not greater than 80% of the AMI.
Multifamily Housing Goals
The Enterprises’ proposed benchmark goals take into account multifamily properties financed by mortgages that were purchased by the Enterprises.
1. “Low-Income Goal” is increased from 300,000 units in 2015-2017 to 315,000 units in 2018-2020. These refer to rental units affordable to families who are earning not greater than 80% of the AMI.
2. “Very Low-Income Goal” is kept at 60,000 units. These refer to rental units affordable to families whose income is no greater than 50% of the AMI.
3. “Low-Income Small Multifamily Subgoal” is kept at 10,000 units. These refer to rental units affordable to families with income no greater than 80% of AMI.
Under the proposed rule, the FHFA wishes to revise the definitions of “median income”, “metropolitan area”, and “non-metropolitan area”, as well as remove the AHS definition.
The FHFA also proposes that in the event it adjusts the housing goals for reasons it determines, that it be able to do so without notice and content rulemaking.
If Fannie or Freddie fails to accomplish a housing goal, the FHFA revises the requirements for the submission of a housing plan to that effect.
Public comments are accepted until the end of a 60-day period since the proposed rule’s publication in the Federal Register.
Justin McHood is a managing partner at Suited Connector and has been recognized by national media outlets as a financial expert for more than a decade.