[Federal Register Volume 85, Number 245 (Monday, December 21, 2020)]
[Proposed Rules]
[Pages 82965-82970]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-28084]


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FEDERAL HOUSING FINANCE AGENCY

12 CFR Part 1282

RIN 2590-AB12


Enterprise Housing Goals

AGENCY: Federal Housing Finance Agency.

ACTION: Advance notice of proposed rulemaking.

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SUMMARY: The Federal Housing Finance Agency (FHFA) is publishing an 
Advance Notice of Proposed Rulemaking (ANPR) requesting public comment 
on a variety of questions related to potential changes to the 
regulation establishing housing goals for Fannie Mae and Freddie Mac 
(Enterprises). FHFA will consider public comments received on these 
questions in order to inform rulemaking that is planned for 2021 to 
establish single-family and multifamily housing goals benchmark levels 
for 2022 and

[[Page 82966]]

beyond, and to make other changes to the Enterprise housing goals 
regulation, as appropriate.

DATES: Comments must be received on or before February 28, 2021.

ADDRESSES: You may submit your comments on the ANPR, identified by 
regulatory information number (RIN) 2590-AB12, by any one of the 
following methods:
    <bullet> Agency website: https://www.fhfa.gov/open-for-comment-or-input.
    <bullet> Federal eRulemaking Portal: https://www.regulations.gov. 
Follow the instructions for submitting comments. If you submit your 
comment to the Federal eRulemaking Portal, please also send it by email 
to FHFA at <a href="/cdn-cgi/l/email-protection#92c0f7f5d1fdfffff7fce6e1d2f4faf4f3bcf5fde4"><span class="__cf_email__" data-cfemail="97c5f2f0d4f8fafaf2f9e3e4d7f1fff1f6b9f0f8e1">[email protected]</span></a> to ensure timely receipt by FHFA. 
Include the following information in the subject line of your 
submission: Comments/RIN 2590-AB12.
    <bullet> Hand Delivered/Courier: The hand delivery address is: 
Alfred M. Pollard, General Counsel, Attention: Comments/RIN 2590-AB12, 
Federal Housing Finance Agency, Eighth Floor, 400 Seventh Street SW, 
Washington, DC 20219. Deliver the package at the Seventh Street 
entrance Guard Desk, First Floor, on business days between 9 a.m. and 5 
p.m.
    <bullet> U.S. Mail, United Parcel Service, Federal Express, or 
Other Mail Service: The mailing address for comments is: Alfred M. 
Pollard, General Counsel, Attention: Comments/RIN 2590-AB12, Federal 
Housing Finance Agency, Eighth Floor, 400 Seventh Street SW, 
Washington, DC 20219. Please note that all mail sent to FHFA via U.S. 
Mail is routed through a national irradiation facility, a process that 
may delay delivery by approximately two weeks.

FOR FURTHER INFORMATION CONTACT: Ted Wartell, Associate Director, 
Office of Housing & Community Investment, Division of Housing Mission 
and Goals, at (202) 649-3157, <a href="/cdn-cgi/l/email-protection#e9bd8c8dc7be889b9d8c8585a98f818f88c78e869f"><span class="__cf_email__" data-cfemail="baeedfde94eddbc8cedfd6d6fadcd2dcdb94ddd5cc">[email protected]</span></a>; Padmasini Raman, 
Supervisory Policy Analyst, Office of Housing & Community Investment, 
Division of Housing Mission and Goals, at (202) 649-3633, 
<a href="/cdn-cgi/l/email-protection#98c8f9fcf5f9ebf1f6f1b6caf9f5f9f6d8fef0fef9b6fff7ee"><span class="__cf_email__" data-cfemail="6838090c05091b010601463a09050906280e000e09460f071e">[email protected]</span></a>; or Kevin Sheehan, Associate General Counsel, 
Office of General Counsel, (202) 649-3086, <a href="/cdn-cgi/l/email-protection#83c8e6f5eaedadd0ebe6e6ebe2edc3e5ebe5e2ade4ecf5"><span class="__cf_email__" data-cfemail="d69db3a0bfb8f885beb3b3beb7b896b0beb0b7f8b1b9a0">[email protected]</span></a>. 
These are not toll-free numbers. The mailing address is: Federal 
Housing Finance Agency, 400 Seventh Street SW, Washington, DC 20219. 
The telephone number for the Telecommunications Device for the Deaf is 
(800) 877-8339.

SUPPLEMENTARY INFORMATION:

I. Comments

    FHFA invites comments on all aspects of this ANPR. Copies of all 
comments will be posted without change, including any personal 
information you provide such as your name, address, email address, and 
telephone number, on the FHFA website at https://www.fhfa.gov. In 
addition, copies of all comments received will be available for 
examination by the public through the electronic rulemaking docket for 
this ANPR, also located on the FHFA website.

II. Advance Notice of Proposed Rulemaking

    This ANPR seeks public comments on a variety of questions related 
to potential changes to the Enterprise housing goals regulation.\1\ 
FHFA plans to issue a proposed rule in 2021 that would establish new 
benchmark levels for the Enterprise housing goals for 2022 and beyond, 
as well as make other changes to the regulation as appropriate. Based 
on the comments received in response to this ANPR, FHFA may propose 
revisions to the Enterprise housing goals regulation for comment in the 
proposed rule planned for 2021 or in a later rulemaking. FHFA invites 
comments on the specific questions set forth in this ANPR, and on any 
other issues that commenters think should be addressed as part of the 
rulemaking that will establish the housing goals benchmark levels for 
2022 and beyond.
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    \1\ 12 CFR part 1282.
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    Question 1: Are there categories of loans that should be excluded 
from receiving housing goals credit under the Federal Housing 
Enterprises Financial Safety and Soundness Act of 1992 (Safety and 
Soundness Act) provisions on ``unacceptable business and lending 
practices?''
    The Safety and Soundness Act requires FHFA to exclude ``segments of 
the market determined to be unacceptable or contrary to good lending 
practices, inconsistent with safety and soundness, or unauthorized for 
purchase by the enterprises'' from consideration in setting the single-
family housing goals.\2\ FHFA may not give credit toward achievement of 
the housing goals for mortgages that are ``determined to be 
unacceptable or contrary to good lending practices, inconsistent with 
safety and soundness, or unauthorized for purchase by the 
enterprises.'' \3\
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    \2\ See 12 U.S.C. 4562(e)(1).
    \3\ See 12 U.S.C. 4562(i).
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    The current exclusions under the Enterprise housing goals 
regulation generally focus on types of loans or other product 
characteristics, rather than loans that are unacceptable or contrary to 
good lending practices. However, FHFA may also make exclusions based on 
factors considered in underwriting loans. For single-family loan 
purchases, the Enterprises use their own automated underwriting systems 
to evaluate whether a loan is eligible for purchase based on factors 
including, but not limited to, a borrower's creditworthiness. These 
automated underwriting systems assess a borrower's ability to make his 
or her mortgage payments over a two- or three-year time period 
following origination. The Enterprises establish a cut-off threshold 
based on their credit risk appetite, and only those loans for which the 
borrowers' predicted risk is deemed below that threshold are eligible 
to be sold to the Enterprises. The Enterprises also price loans 
according to their pricing grids to partially account for the risk 
profile of a loan.
    FHFA generally considers all conventional conforming first lien 
mortgages that are owner-occupied as potentially eligible for single-
family housing goals credit, subject to certain exclusions. For 
instance, under the Safety and Soundness Act, investor loans are 
excluded, and under the Enterprise housing goals regulation, investor 
loans and second loans (i.e., any subordinate lien mortgages) are 
excluded, from consideration for the single-family housing goals.\4\ As 
another example, mortgages for secondary residences are excluded from 
consideration for the single-family housing goals.\5\
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    \4\ See 12 U.S.C. 4562(a) and 12 CFR 1282.16(b)(10).
    \5\ See 12 CFR 1282.16(b)(8).
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    FHFA requests comment on whether there are other categories of 
loans that should be excluded from receiving housing goals credit under 
the statute's ``unacceptable business and lending practices'' 
provisions. For example, should FHFA consider factors to promote 
borrower sustainability? How would FHFA determine and measure 
sustainability? Should risk-layering be considered in a manner that is 
distinct from the eligibility requirements of the Enterprises? \6\ What 
criteria should be used to identify such loans? What public policies 
should FHFA consider when assessing certain categories of loans? Are 
there other loan characteristics that could be, in some instances, not 
in the long-term interest

[[Page 82967]]

of the borrower, even if they are not treated as abusive or unfair 
under existing consumer protection statutes?
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    \6\ Some examples of factors associated with higher risk include 
high debt-to-income ratio, high loan-to-value ratio, or low credit 
score, among others. ``Risk-layering'' refers to loans with more 
than one such factor.
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    Question 2: Are there ways to determine whether the low-income 
areas home purchase subgoal has resulted in the displacement of 
residents from certain communities, or to measure the extent of any 
such displacement? Should FHFA consider modifying the low-income areas 
home purchase subgoal to address such concerns? If so, how?
    Concerns have been raised about gentrification in low-income areas 
and high-minority census tracts, and the potential displacement of 
long-time low-income residents from such areas and tracts. The current 
Enterprise housing goals regulation does not restrict the income of 
borrowers whose mortgages qualify for the low-income areas home 
purchase subgoal if the mortgages are on properties located in a low-
income census tract. Under the regulation, the Enterprises can meet the 
low-income areas home purchase subgoal by acquiring home purchase 
mortgages that are either: (1) Originated for borrowers located in low-
income census tracts (defined as census tracts with median income less 
than or equal to 80 percent of area median income (AMI)); or (2) 
originated for borrowers with incomes less than or equal to AMI who 
reside in minority census tracts (defined as census tracts with a 
minority population of at least 30 percent and a tract median income of 
less than 100 percent of AMI).\7\ There are no borrower income 
requirements for criterion (1). While Enterprise mortgage acquisitions 
could qualify under either or both criteria, the share of the 
Enterprises' mortgage acquisitions satisfying criterion (1) has been 
consistently higher than the share of Enterprise mortgage acquisitions 
satisfying criterion (2) in recent years. For example, among the 
Enterprises' mortgage acquisitions in 2019, 15.0 percent of mortgages 
met only criterion (1), 10.2 percent met only criterion (2), and 6.4 
percent met both criteria, as can be seen in Table 1 below. All of 
these shares have been increasing steadily since 2010.
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    \7\ See 12 CFR 1281.1 and 1282.12(f).
    [GRAPHIC] [TIFF OMITTED] TP21DE20.051
    

[[Page 82968]]


    FHFA's analysis of Home Mortgage Disclosure Act (HMDA) data in 
Table 2 shows that both low-income areas and high-minority areas have 
increasing shares of borrowers with incomes at or above 100 percent of 
AMI, although loans to borrowers with incomes over 100 percent of AMI 
do not qualify for the minority areas component of the goal. For 
instance, the share of loans made to borrowers with incomes greater 
than 100 percent of AMI and residing in these low-income census tracts 
increased from 38.8 percent in 2010 to 44.2 percent in 2016, after 
dropping to 36.5 percent in 2012. This share has been relatively stable 
since then, with a 43.3 percent share in 2019. Nonetheless, borrowers 
with higher incomes have made up an increasing share of the mortgage 
market in low-income areas.
    A similar trend exists among borrowers residing in high minority 
census tracts, with the share of higher income borrowers increasing 
from 42.5 percent in 2010 to 50 percent in 2016. That share declined to 
47.8 percent in 2019 after hovering around 49 percent in 2018 and 2019.
[GRAPHIC] [TIFF OMITTED] TP21DE20.052

    Table 3 shows that the share of loans made to borrowers with 
incomes greater than 100 percent of AMI and residing in low-income 
census tracts increased from 40.7 percent in 2010 to 42.8 percent in 
2016. However, that share has declined since then, dropping to a low of 
37 percent in 2019. This trend is similar among borrowers residing in 
high minority census tracts, with the share of higher income borrowers 
increasing from 45.4 percent in 2010 to 48.5 percent in 2016, after 
dropping to a low of 42.8 percent in 2012. This share has since 
declined to 42.8 percent in 2019.

[[Page 82969]]

[GRAPHIC] [TIFF OMITTED] TP21DE20.053

    The presence of higher-income borrowers in these areas may be a 
sign of improved economic indicators for the community, but there is 
some concern that such a trend as seen particularly in the HMDA data 
analysis could also be accompanied by the displacement of lower income 
households. Change in the mix of renters to owner-occupied households 
often precedes and accompanies these trends. FHFA is aware that this 
particular subgoal may encourage the Enterprises to focus on purchasing 
loans for higher-income households in low-income and high-minority 
areas, and FHFA is also aware of concerns about the impact of rising 
housing costs on current residents in low-income or higher-minority 
areas. However, it is possible that higher-income households would have 
moved into these areas even in the absence of the subgoal. In 
recognition of these issues, FHFA has been very conservative in setting 
the benchmark levels for this subgoal.
    Recently, in response to the issuance of FHFA's proposed rule for 
the 2021 Enterprise housing goals, FHFA received two comment letters 
from policy advocacy organizations that referenced concerns about 
displacement and gentrification related to this subgoal. The comment 
letters supported and encouraged FHFA's efforts to monitor and analyze 
trends regarding this subgoal. The comment letters also requested 
release of additional data on borrower incomes associated with goals-
qualifying loans.
    FHFA requests comment on how best to achieve the policy objectives 
of this subgoal. Should FHFA shift the focus of this subgoal to lower-
income households? Should FHFA impose an AMI limit on borrowers for 
mortgages that qualify for the subgoal? Should FHFA set a limit on the 
number or share of mortgages for borrowers with incomes over 100 
percent of AMI that count towards the subgoal?
    Question 3: Should FHFA revise the low-income areas home purchase 
subgoal to consider loans on properties located in Opportunity Zones, 
and if so, how should such loans be treated?
    Opportunity Zones were created by the 2017 Tax Cuts and Jobs Act, 
and are designed to spur economic development and job creation in 
distressed communities by providing tax benefits to investors who 
invest in these communities.\8\ Investors may defer tax on eligible 
capital gains by making a qualifying investment (including real estate) 
in a Qualified Opportunity Fund (QOF). A QOF is an investment vehicle 
with at least 90 percent of its holdings in a Qualified Opportunity 
Zone (QOZ) property. QOZs are census tracts that meet certain poverty 
rate and median family income requirements and that have been 
designated as such by the U.S. Department of the Treasury, based on 
nominations from the Chief Executive Officers of each State. There are 
around 8,700 QOZ tracts, the majority of which are low-income tracts.
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    \8\ Public Law 115-97, section 13823, 131 Stat. 2054, 2183, 
codified at 26 U.S.C. 1400Z-1 and 1400Z-2 (Dec. 22, 2017). Note: 
Public Law 115-97 is commonly referred to as the ``Tax Cuts and Jobs 
Act,'' but that short title was omitted from the law as enacted.
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    Because the Opportunity Zones program is new, its impact is still 
largely unknown. FHFA has noted that in 2019, over 17 percent of low-
income area home purchase goal loans are in QOZs. Additionally, 12 
percent of multifamily low-income goal units and 20 percent of small 
multifamily low-income goal units are in QOZs. To help track how QOF 
projects are achieving the program's intended goal of community 
revitalization, the U.S. Impact the U.S. Impact [MB1] Investing 
Alliance, the Beeck Center for Social Impact + Innovation at Georgetown 
University, and the Federal Reserve Bank of New York partnered to 
create the Opportunity Zones Reporting Framework, a tool that may be 
used to

[[Page 82970]]

assess the intended goal of community revitalization.\9\
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    \9\ See https://ozframework.org/about-index.
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    FHFA requests comment on whether and how the objectives of the 
Opportunity Zones program would align with the purpose of the 
Enterprise low-income areas home purchase subgoal. Should FHFA consider 
giving credit under this subgoal for loans on properties located in 
Opportunity Zones? What criteria should FHFA use to focus on 
Opportunity Zones that would have the largest benefit to a community? 
If included in the subgoal, how can FHFA ensure that the loans on 
properties in Opportunity Zones benefit these communities? How can FHFA 
use this subgoal to target slow-growing communities that need these 
loans? Should FHFA require the use of the Opportunity Zone Reporting 
Framework for impact tracking? Are there other public policy 
considerations related to Opportunity Zones that FHFA should consider?
    Question 4: Is there evidence that the Enterprise housing goals 
have helped expand low-income homeownership in the marketplace?
    The Safety and Soundness Act directs FHFA to evaluate Enterprise 
support for low-income homeownership by measuring the low-income share 
of the mortgages that the Enterprises have acquired.\10\
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    \10\ See 12 U.S.C. 4562(a)(1).
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    FHFA requests comment on the factors it should consider in 
assessing the effectiveness of the Enterprises' activities in expanding 
low-income homeownership. In order to improve the housing goals, how 
should impacts be evaluated? What are the appropriate counterfactuals 
to consider? Is it possible to determine whether acquired mortgages 
that count toward achievement of the goals would have been originated 
in the absence of the housing goals? FHFA specifically requests comment 
on whether--and under the statute, how--other support activities 
undertaken by the Enterprises should be considered when FHFA reviews 
the Enterprises' performance on the single-family housing goals.

Mark A. Calabria,
Director, Federal Housing Finance Agency.
[FR Doc. 2020-28084 Filed 12-18-20; 8:45 am]
BILLING CODE 8070-01-P


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