[Federal Register Volume 75, Number 247 (Monday, December 27, 2010)]
[Rules and Regulations]
[Pages 81096-81110]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-32350]


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FEDERAL HOUSING FINANCE AGENCY

12 CFR Part 1281

RIN 2590-AA16


Federal Home Loan Bank Housing Goals

AGENCY: Federal Housing Finance Agency.

ACTION: Final rule.

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SUMMARY: Section 1205 of the Housing and Economic Recovery Act of 2008 
(HERA) amended the Federal Home Loan Bank Act (Bank Act) by adding a 
new section 10C(a) that requires the Director of the Federal Housing 
Finance Agency (FHFA) to establish housing goals with respect to the 
Federal Home Loan Banks' (Banks) purchase of mortgages, if any. Section 
10C(b) provides that the Banks' housing goals are to be consistent with 
the housing goals established by FHFA for the Federal National Mortgage 
Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation 
(Freddie Mac) (collectively, the Enterprises) under sections 1331 
through 1334 of the Federal Housing Enterprises Financial Safety and 
Soundness Act of 1992 (Safety and Soundness Act), as amended by HERA, 
taking into consideration the unique mission and ownership structure of 
the Banks.
    To implement section 10C, FHFA is adopting a final rule that is 
substantially the same as the proposed rule published by FHFA for 
notice and comment. The final rule establishes three single-family 
owner-occupied purchase money mortgage goals and one single-family 
refinancing mortgage goal applicable to the Banks' purchases of single-
family owner-occupied mortgages, if any, under their Acquired Member 
Assets (AMA) programs, consistent with the single-family housing goals 
for the Enterprises. A Bank will be subject to the housing goals if its 
AMA-approved mortgage purchases in a given year exceed a volume 
threshold of $2.5 billion.

DATES: This rule is effective January 26, 2011.

FOR FURTHER INFORMATION CONTACT: Brian Doherty, Acting Senior Associate 
Director, (202) 408-2991, Charles E. McLean, Associate Director, (202) 
408-2537, or Rafe R. Ellison, Senior Program Analyst, (202) 408-2968, 
Office of Housing and Community Investment, 1625 Eye Street, NW., 
Washington, DC 20006. (These are not toll-free numbers.) For legal 
matters, contact Kevin Sheehan, Attorney, (202) 414-8952, or Sharon 
Like, Managing Associate General Counsel, (202) 414-8950, Office of 
General Counsel, Federal Housing Finance Agency, Fourth Floor, 1700 G 
Street, NW., Washington, DC 20552. (These are not toll-free numbers.) 
The telephone number for the Telecommunications Device for the Hearing 
Impaired is (800) 877-8339.

SUPPLEMENTARY INFORMATION:

I. Background

A. Federal Home Loan Bank System

    The Federal Home Loan Bank System (System) was created by the Bank 
Act to support mortgage lending and related community investment. See 
12 U.S.C. 1421 et seq. The System is composed of 12 Banks with more 
than 8,000 member financial institutions, and the System's fiscal 
agent, the Office of Finance. The Banks fulfill their statutory mission 
primarily by providing secured loans (called advances) to their 
members. The Bank Act provides the Banks explicit authority to make 
secured advances. 12 U.S.C. 1430(a). Advances provide members with a 
source of funding for mortgages and asset-liability management, 
liquidity for a member's short-term needs, and additional funds for 
housing finance and community investment. Advances are collateralized 
primarily by residential mortgage loans and government and agency 
securities. 12 U.S.C. 1430(a)(3). Community financial institutions 
(CFIs) (i.e., members with average total assets of less than $1 billion 
(as adjusted annually for inflation)) may also pledge small business, 
small agriculture or community development loans as collateral for 
advances. 12 U.S.C. 1430(a)(3)(E).
    Consolidated obligations, consisting of bonds and discount notes, 
are the principal source for the Banks to fund advances and 
investments. The Office of Finance issues all consolidated obligations 
on behalf of the 12 Banks. Although each Bank is primarily liable for 
the portion of consolidated obligations corresponding to the proceeds 
received by that Bank, each Bank is also jointly and severally liable 
with the other eleven Banks for the payment of principal of, and 
interest on, all consolidated obligations. See 12 CFR 966.9.

B. Bank AMA Programs

    In July 2000, the Federal Housing Finance Board (FHFB) adopted a 
final regulation authorizing the Banks to establish Acquired Member 
Assets (AMA) programs. See 12 CFR part 955. A Bank may participate in 
an AMA program at its discretion; FHFA does not have the authority to 
compel a Bank to engage in any mortgage purchase activities. Each Bank 
must receive approval from FHFA pursuant to the requirements for new 
business activities in order to establish an AMA program. See 12 CFR 
part 980. A majority of the Banks have implemented AMA programs 
pursuant to the AMA approval authority.
    In order for a Bank to acquire a mortgage loan under an AMA 
program, the loan must meet the requirements set forth under a three-
part test established by the regulation. The three-part test consists 
of: A loan type requirement; a member or housing associate nexus 
requirement; and a credit risk-sharing requirement. 12 CFR 955.2. The 
AMA regulation generally authorizes the Banks to purchase conforming 
whole loans on single-family residential real property not more than 90 
days delinquent. In addition, the Banks are authorized to purchase 
conforming whole loans on single-family residential real property 
regardless of delinquency status if the loan is insured or guaranteed 
by the U.S. government, although such loans are not eligible to be 
counted toward the Enterprises' housing goals, as provided in the 
Safety and Soundness Act.\1\ The Banks acquire AMA from their 
participating members

[[Page 81097]]

through either a purchase or funding transaction. The Banks are not 
authorized under the AMA programs to securitize the mortgages they 
purchase.
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    \1\ See 12 U.S.C. 4562. For that reason, consistent with the 
proposed rule, the final rule provides that such loans are not 
eligible to be counted toward the Banks' housing goals either. The 
AMA regulation also authorizes the Banks to purchase other real 
estate-related collateral, including: second liens and commercial 
real estate loans; small business, small farm and small agri-
business loans; whole loans secured by manufactured housing 
regardless of whether the housing qualifies as residential real 
property; and state and local housing finance agency bonds, subject 
to prior new business activity approval by FHFA under 12 CFR part 
980. See 12 CFR 955.2(a).
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    To date, FHFA has approved two AMA programs--the Mortgage 
Partnership Finance (MPF) program and the Mortgage Purchase Program 
(MPP)--that authorize the Banks to purchase only eligible single-
family, fixed-rate mortgages, including manufactured housing loans, 
from participating financial institution (PFI) members. The Banks are 
not approved to purchase any other types of mortgages under the AMA 
programs, including mortgages secured by multifamily properties. In 
operation, the Banks have limited their AMA programs to purchasing 
conforming, conventional and government-insured or -guaranteed fixed-
rate whole first mortgages on single-family residential property with 
maturities ranging from 5 to 30 years. Banks have also purchased 
participations in AMA-approved loan pools after the original Bank 
acquired the loans. As of June 30, 2010, the combined value of the AMA 
mortgage loans in the 12 Banks' portfolios was $67 billion, 
representing approximately seven percent of the Banks' total combined 
assets. In contrast, the Banks' outstanding advances, their primary 
business line, totaled $540 billion as of June 30, 2010, representing 
58 percent of the Banks' total combined assets.\2\
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    \2\ See ``Federal Home Loan Banks Second Quarter 2010 Combined 
Financial Report, Combined Statement of Condition,'' at 4.
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    The MPF and MPP programs are designed such that the Banks manage 
the interest-rate risk and the PFI assumes a substantial portion of the 
risks associated with originating the mortgage, particularly the credit 
risk. The AMA regulation requires that PFIs provide credit enhancement 
to give the mortgages the Banks purchase the credit quality equivalent 
to an instrument rated at least investment grade (the fourth highest 
credit rating category or triple-B), although the approved AMA programs 
require PFIs to enhance the loans to the second highest investment 
grade (double-A). 12 CFR 955.3. The PFI may provide this credit 
enhancement through various means, such as establishing a risk account 
to cover losses in excess of a borrower's equity and primary mortgage 
insurance on mortgages purchased by a Bank, accepting direct liability 
to pay credit losses up to a specified amount, or entering into a 
contractual obligation to provide supplemental mortgage guaranty 
insurance.
    As previously noted, advances remain the core business activity of 
the Banks and a principal means by which they fulfill their mission. 
Participation in an AMA program is elective. The acquisition of AMA has 
presented certain risk management challenges for some Banks. The AMA 
are long-term, fixed-rate loans, and the portfolio requires careful 
attention to interest rate risk management in order to match the 
duration of assets and liabilities and to adjust for loan prepayments. 
The Banks must also competitively price their product in the market 
without eroding their own financial interest. Given these challenges 
and in light of recent interest rate and earnings volatility, several 
Banks have scaled down their purchases of AMA and returned to their 
core products. After peaking in 2003, when the Banks purchased over 
$91.2 billion in AMA, annual AMA purchases have steadily declined to an 
annualized average of about $6.7 billion during the period between 2006 
and 2009. Several Banks either have stopped accepting additional master 
commitments to purchase AMA from their members or no longer accept 
delivery. In 2007, 2008 and 2009, the principal pay-down and maturities 
of AMA held for portfolio were greater than purchases and funding of 
new loans held for portfolio.\3\
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    \3\ See ``Federal Home Loan Banks Combined Financial Report for 
2008'' at 78-80, and ``Federal Home Loan Banks Combined Financial 
Report for 2009'' at 55-56.
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C. Bank Housing Goals Statutory Provisions

    Section 10C(a) of the Bank Act, as amended by HERA, requires the 
Director of FHFA to ``establish housing goals with respect to the 
purchase of mortgages, if any, by the [Banks],'' which ``shall be 
consistent with the goals established under sections 1331 through 1334 
of the [Safety and Soundness Act, as amended].'' 12 U.S.C. 1430c(a). 
Section 10C(b) provides that, in establishing the goals for the Banks, 
``the Director shall consider the unique mission and ownership 
structure of the [Banks].'' 12 U.S.C. 1430c(b). In addition, section 
10C(c) provides that, ``to facilitate an orderly transition,'' the 
Director shall establish interim target goals for the purchase of 
mortgages by the Banks for the calendar years 2009 and 2010. 12 U.S.C. 
1430c(c). Section 10C(d) provides that the monitoring and enforcement 
requirements of section 1336 of the Safety and Soundness Act shall 
apply to the Banks in the same manner and to the same extent as they 
apply to the Enterprises. 12 U.S.C. 1430c(d). Section 10C(e) requires 
the Director to annually report to Congress on the performance of the 
Banks in meeting the housing goals under section 10C. 12 U.S.C. 
1430c(e).
    Sections 1331 through 1333 of the Safety and Soundness Act, as 
amended by HERA, require the Director of FHFA to establish new housing 
goals effective for 2010 and beyond for the Enterprises. The new 
Enterprise housing goals include four goals for conventional conforming 
single-family owner-occupied housing, one multifamily special 
affordable housing goal, and one multifamily special affordable housing 
subgoal. See 12 U.S.C. 4561, 4563(a)(2). The single-family housing 
goals target purchase money mortgages for low-income families,\4\ 
families that reside in low-income areas,\5\ and very low-income 
families,\6\ and refinancing mortgages for low-income families. See 12 
U.S.C. 4562. The multifamily special affordable housing goal targets 
multifamily housing affordable to low-income families, and the 
multifamily special affordable housing subgoal targets multifamily 
housing affordable to very low-income families. See 12 U.S.C. 4563. In 
a separate rulemaking, FHFA has published in the Federal Register a 
final rule for the new housing goals for the Enterprises for 2010 and 
2011 pursuant to the requirements of sections 1331 through 1333 of the 
Safety and Soundness Act, as amended. 75 FR 55892 (Sept. 14, 2010).
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    \4\ ``Low-income'' is defined as income not in excess of 80 
percent of area median income. See 12 U.S.C. 4502(14).
    \5\ ``Families in low-income areas'' is defined to include 
families living in census tracts where the median income does not 
exceed 80 percent of the area median income and families with 
incomes not in excess of the area median income that either live in 
a minority census tract or in a designated disaster area. See 12 
U.S.C. 4502(28).
    \6\ ``Very low-income'' is defined as income not in excess of 50 
percent of area median income. See 12 U.S.C. 4502(24).
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D. Banks' and Enterprises' Differences

    Section 1313 of the Safety and Soundness Act, as amended, 12 U.S.C. 
4513(f), requires the Director of FHFA to consider the differences 
between the Banks and the Enterprises whenever promulgating regulations 
that affect the Banks. In preparing the final rule, pursuant to section 
1313, the Director considered the differences between the Banks and the 
Enterprises with respect to the Banks' cooperative ownership structure, 
mission of providing liquidity to members, affordable housing and 
community development mission, capital structure, and joint and several 
liability, and determined that the final rule is appropriate. As 
described below, there are significant differences between the 
Enterprise housing goals and the Bank housing goals--including

[[Page 81098]]

establishing a volume threshold for the Banks to avoid adverse impact 
on Bank AMA programs, particularly with respect to CFIs that are PFIs--
that recognize the significant differences between the Banks' 
businesses and purposes and those of the Enterprises.
    Each Bank is a cooperative owned by financial institution members 
that act as both owners and customers of the cooperative. Members, as 
owners, are entitled to receive shares of the cooperative's earnings 
and access to the cooperative's products and services, including the 
AMA programs. A Bank is authorized to serve only members of its 
cooperative, and, as discussed above, its primary business is providing 
advances to its members.
    Fannie Mae and Freddie Mac have been owned by investors through 
their holdings of preferred or common stock shares since 1968 and 1989, 
respectively. An Enterprise's primary business is securitizing 
mortgages originated by financial institutions, and guaranteeing the 
timely payment of principal and interest on the mortgage-backed 
securities (MBS). The Enterprises also purchase mortgages for their 
mortgage portfolios. FHFA has instructed the Enterprises to 
significantly reduce the size of their mortgage portfolios over time. 
The Banks are restricted to purchasing loans from their members, most 
of which are regulated depositories. By contrast, the Enterprises have 
access to a broad, nationwide network of financial institutions from 
which they purchase mortgages. Also, unlike the Banks, for which 
participation in the AMA is an elective activity, the fundamental 
statutory purpose of the Enterprises is to bring stability in the 
secondary market for residential mortgages by purchasing and making 
commitments to purchase residential mortgages. See 12 U.S.C. 1451 note; 
12 U.S.C. 1716.
    The Banks' and Enterprises' different ownership structures and 
associated statutory restrictions in the Bank Act and the Federal 
National Mortgage Association Charter Act and the Federal Home Loan 
Mortgage Corporation Act (together, the Charter Acts), respectively, 
have a significant impact on their respective mortgage purchase 
activities. The Enterprises' mortgage purchase activities are 
substantially greater than that of the Banks. In calendar year 2009, 
the Banks' combined number of single-family mortgage purchases was 
slightly over 48,000, while Fannie Mae purchased approximately 3.51 
million single-family mortgages and Freddie Mac purchased approximately 
2.42 million single-family mortgages. The disparity between the Banks' 
and Enterprises' mortgage purchase businesses was great even during the 
peak years of the AMA programs. In 2003, the Banks purchased 
approximately 606,000 single-family mortgages, which was only 4.3 
percent of the approximately 14.02 million single-family mortgages 
purchased by the Enterprises in that year (see Figure 1).
[GRAPHIC] [TIFF OMITTED] TP27DE10.000

II. Proposed Rule

    On May 28, 2010, FHFA published in the Federal Register a proposed 
rule to establish new housing goals for the Banks. The 45-day comment 
period closed July 12, 2010. See 75 FR 29947 (May 28, 2010). FHFA 
received a total of 9 comment letters on the proposed rule. Five of the 
comment letters were from Banks, one was from a not-for-profit 
organization, two were from trade

[[Page 81099]]

associations, and one was from a corporation.
    FHFA has considered all of the comments on the proposed rule and 
has determined to adopt a final rule that is substantially the same as 
the proposed rule. The comments are discussed below in the Analysis of 
Final Rule section. Comments that raised issues beyond the scope of the 
proposed rule are not addressed in this final rule, but may be 
considered by FHFA at a future date.

III. Applicability of Bank Housing Goals to 2011 and Beyond

    HERA requires FHFA to establish 2009 and 2010 interim target 
housing goals for the Banks that facilitate an orderly transition and 
are consistent with those of the Enterprises. In order to facilitate an 
orderly transition, the final rule establishes housing goals for 2011 
and beyond. The Banks' unique ownership structure and mission is such 
that FHFA needed to add criteria to the Bank housing goals that are not 
necessary for those of the Enterprises, and FHFA required additional 
time to develop those criteria. The Banks' administrative and 
monitoring challenges will be reduced by enabling the Banks to 
establish policies and procedures to meet the housing goals 
requirements with the knowledge that these requirements will not be 
changed the following year. FHFA believes this approach will facilitate 
an orderly transition to housing goals.

IV. Summary of Final Rule

A. Market-Based Housing Goals

    Consistent with the proposed rule, the final rule establishes 
market-based single-family housing goals for the Banks in a manner 
largely consistent with the market-based single-family housing goals 
for the Enterprises. Separate goals are established for AMA-approved 
mortgages on owner-occupied single-family housing. The goals for 
purchase money mortgages separately measure performance on purchase 
money mortgages for low-income families, for families in low-income 
areas, and for very low-income families. The goal for refinancing 
mortgages measures performance on refinancing mortgages for low-income 
families.
    The final rule does not establish benchmark levels to measure the 
Banks' housing goals performance. The Banks' performance under the 
housing goals will be measured relative to the actual goals-qualifying 
shares of the district-level primary mortgage market during the year in 
their districts. FHFA will calculate the actual goals-qualifying shares 
of the market using all mortgages originated in the geographic 
boundaries of each Bank district (meaning that the properties securing 
the mortgages are located in the district), including mortgages 
originated both by members and non-members.
    A Bank meets a housing goal if its annual performance meets or 
exceeds the actual share of the market in that district that fits the 
criteria for a particular housing goal for that year. A Bank fails to 
meet a housing goal if it falls short of the actual market share for 
that goal in that year. All mortgages purchased by a Bank that meet the 
requirements of the final rule will count toward the Bank's goal 
performance, regardless of where the properties securing the mortgages 
are located, but the market share against which the Bank's performance 
will be evaluated will be the market share of mortgages secured by 
properties located in the district, as described above. The housing 
goals do not apply to an individual Bank unless it has exceeded the 
$2.5 billion volume threshold.

B. Volume Threshold

    Consistent with the proposed rule, the final rule establishes a 
dollar volume threshold of $2.5 billion that a Bank's total unpaid 
principal balance (UPB) of AMA-approved mortgage purchases in a given 
year must exceed before the Bank is subject to the housing goals. The 
volume threshold recognizes the Banks' unique mission and ownership 
structure and the current status of the AMA programs, specifically, 
their mission to provide liquidity to their members.

V. Analysis of Final Rule

A. Definitions--Sec.  1281.1

    The final rule sets forth definitions applicable to the Bank 
housing goals provisions. A number of the definitions are the same as 
those applicable to the Enterprise housing goals, and other definitions 
were modified to reflect their applicability to the Banks' AMA 
programs.
    ``Designated disaster area.'' The definition of ``families in low-
income areas'' includes families with incomes at or below 100 percent 
of area median income (AMI) who reside in ``designated disaster 
areas.'' The final rule defines ``designated disaster area'' as any 
census tract that is located in a county designated by the Federal 
Government as adversely affected by a declared major disaster 
administered by the Federal Emergency Management Agency (FEMA), where 
individual assistance payments were authorized by FEMA. In order to 
remain consistent with the revised definition in the final 2010-2011 
Enterprise housing goals rule, the final Bank housing goals rule 
definition does not include the proposed requirement that average 
damage severity, as reported by FEMA, exceed $1,000 per household in a 
census tract.
    Disaster areas are declared when an area is adversely affected by 
some unforeseen event. However, not all disasters impact housing to the 
same degree, and the severity of the impact varies within the declared 
area. Presidential Major Disaster Declarations are defined by FEMA at 
the county level in the area affected by the major disaster and can be 
declared to be eligible for public assistance, individual assistance, 
or both. Public assistance is available to local governments for the 
repair, replacement, or clean-up of public infrastructure. Individual 
assistance is broken down further into two categories, housing needs 
and ``other than housing needs.'' \7\ Housing needs include repair, 
replacement, and construction of homeowner residences. Consistent with 
the proposed rule and with the Community Reinvestment Act (CRA), the 
final rule limits the definition of ``designated disaster areas'' to 
those counties eligible for individual assistance.
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    \7\ Federally declared disaster areas are managed by FEMA and 
can be tracked at FEMA's Web site. See http://www.fema.gov/news/disasters.fema.
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    For purposes of complying with CRA, regulators have made the 
determination that ``[e]xaminers will consider institution activities 
related to disaster recovery that revitalize or stabilize a designated 
disaster area for 36 months following the date of designation. Where 
there is a demonstrable community need to extend the period for 
recognizing revitalization or stabilization activities in a particular 
disaster area to assist in long-term recovery efforts, this time period 
may be extended.'' \8\ To accommodate the Banks' business planning 
requirements, for purposes of the low-income areas housing goal, the 
final rule, consistent with the proposed rule, will treat a designated 
disaster area as effective beginning on the January 1 after the FEMA 
designation of the county and continuing through December 31 of the 
third full calendar year following the FEMA designation. If data are 
available in a particular case to support treatment as a designated 
disaster area from an earlier date or for a longer period of

[[Page 81100]]

time, FHFA may provide for such treatment by notice to the Banks.
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    \8\ The Department of the Treasury, the Federal Reserve Board 
and the Federal Deposit Insurance Corporation, Community 
Reinvestment Act; Interagency Questions and Answers Regarding 
Community Reinvestment; Notice, 74 FR 498, 509 (Jan. 6, 2009).
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    ``Families in low-income areas.'' Consistent with the proposed 
rule, the definition of ``families in low-income areas'' in the final 
rule includes families with incomes at or below 100 percent of AMI who 
reside in ``minority census tracts,'' which is defined by the Safety 
and Soundness Act to mean a census tract that has a minority population 
of at least 30 percent and a median family income of less than 100 
percent of AMI. 12 U.S.C. 4502(29). In addition, the definition of 
``families in low-income areas'' includes families with incomes at or 
below 100 percent of AMI who reside in ``designated disaster areas.''
    ``Mortgage.'' Consistent with the proposed rule and the final 
Enterprise 2010-2011 housing goals rule, the definition of ``mortgage'' 
in the final rule does not include personal property manufactured 
housing loans. Therefore, any purchases of personal property 
manufactured housing loans will not qualify for credit under the Bank 
housing goals.
    ``Mortgage purchase.'' Consistent with the proposed rule, the final 
rule defines ``mortgage purchase'' as a transaction in which a Bank 
bought or otherwise acquired a mortgage. The Banks commented that the 
phrase ``otherwise acquired a mortgage'' is overly broad and could be 
read to include the Banks' Affordable Housing Program (AHP) and 
collateral received from members. The Banks requested that FHFA clarify 
the definition to mean a transaction in which a Bank bought or 
otherwise acquired a mortgage pursuant to the Bank's authority under 
the AMA regulation. The final rule does not limit the definition of 
``mortgage purchase'' to mean only purchases of AMA-approved mortgages, 
because the types of mortgage purchases that are covered by the Bank 
housing goals are set out in Sec.  1281.11. That section provides that 
the Bank housing goals are limited to purchases of AMA-approved 
mortgages.
    ``Refinancing mortgage.'' Consistent with the final Enterprise 
2010-2011 housing goals rule, the definition of ``refinancing 
mortgage'' in the final Bank housing goals rule provides that changes 
to a loan as a result of a workout agreement generally will not be 
treated as a separate refinancing mortgage. The proposed Bank housing 
goals rule did not address workout agreements in the definition 
``refinancing mortgage,'' but the provision is included in the final 
rule to maintain consistency with the long-standing definition of 
``refinancing'' under the Enterprise housing goals.

B. Housing Goals--Proposed Sec. Sec.  1281.10 and 1281.11

    General. Consistent with the proposed rule, Sec.  1281.10 of the 
final rule provides an overview of the contents of this subpart. FHFA 
will evaluate Bank performance under the housing goals established for 
2010 on a calendar year basis.
    Volume Threshold. Consistent with the proposed rule, Sec.  
1281.11(a) of the final rule establishes a volume threshold that will 
trigger application of the housing goals to a Bank. Specifically, a 
Bank that in a calendar year purchased AMA-approved mortgages with a 
total UPB greater than $2.5 billion will be subject to the housing 
goals for that year, a threshold that FHFA selected as one which would 
result in goals being applied to substantial AMA programs, of a size 
that a number of Banks have operated in the past, while enabling small 
programs, which might serve as mortgage sales outlets for CFIs, to 
operate without compliance burdens that might cause them to be 
abandoned. To illustrate the magnitude of this volume threshold, it is 
currently equal to approximately 0.25 percent of the overall single-
family market, which equaled $986 billion (approximately $1.0 
trillion). (FHFA arrived at this estimate of the size of the market by 
using 2008 HMDA mortgage origination data to calculate the total UPB of 
conforming, first lien mortgages originated in 2008 that were secured 
by owner-occupied, single-family residences. Mortgages for home 
improvement and Home Ownership and Equity Protection Act (HOEPA) 
mortgages were excluded to be consistent with the market estimate 
approach for the Enterprise housing goals.) Looking at this threshold 
another way, assuming that the average UPB of the mortgages a Bank 
purchases equals $200,000, a Bank would need to purchase only 12,500 
mortgages in a given year to meet the volume threshold. In FHFA's view, 
below this threshold it would be challenging for Banks to ensure that 
the small numbers of AMA mortgages purchased--in transactions that the 
Banks do not themselves initiate--are representative of the market and 
include sufficient affordable mortgages to meet housing goals.
    FHFA requested comment on whether a volume threshold should apply, 
whether the proposed volume threshold of $2.5 billion is appropriate, 
whether a higher or lower threshold should apply, and whether the 
volume threshold alternatives discussed in the proposed rule or any 
other alternatives might be used. The Banks recommended establishing a 
volume threshold at $5.0 billion, or on a sliding scale up to $5 
billion, if the Bank met specified qualitative factors that serve the 
Banks' housing mission, such as a Bank's purchase of Federal Housing 
Administration (FHA) or U.S. Department of Veterans Affairs (VA) 
mortgages and its use of Bank AHP funds in conjunction with AMA 
mortgage purchases. The Banks stated that applying a higher threshold 
to Banks that met such qualitative measures would encourage the Banks 
to be accountable to their housing mission. The Banks also recommended 
that mortgages purchased from CFIs be excluded when determining whether 
a Bank exceeded the volume threshold. Finally, the Banks commented that 
because a Bank may not know until the fourth quarter whether it will 
exceed the volume threshold that year, the housing goals should apply 
to a Bank only in the year following the year for which the Bank 
exceeded the volume threshold.
    A trade association recommended establishing a volume threshold of 
6,000 AMA-approved mortgages purchased annually. Assuming that the 
average UPB of the mortgages a Bank purchases equals $200,000, the 
volume threshold would be equivalent to $1.2 billion. A not-for-profit 
organization recommended that there be no volume threshold.
    FHFA has considered the comments on the proposed $2.5 billion 
volume threshold and concluded that this volume threshold will 
adequately balance the Banks' missions to support affordable housing 
and to provide liquidity to CFIs. The volume threshold is intended in 
part to ensure that Banks with significant AMA volume in any year are 
subject to the housing goals. For that reason, the Bank housing goals 
will apply in the same calendar year for which a Bank exceeded the 
volume threshold. In determining whether the proposed $2.5 billion is 
an appropriate level for the volume threshold, FHFA considered the 
volume of mortgages purchased by the Banks over the past decade. From 
2002 to 2004, when the Banks had their largest presence in the national 
market, a number of Banks had annual volumes of AMA-approved mortgages 
greater than $2.5 billion: seven Banks in 2002, eight Banks in 2003 and 
four Banks in 2004. A significant percentage of Banks' annual volume of 
AMA-approved mortgage purchases exceeded $5.0 billion in 2002 and 2003: 
four Banks in 2002 and seven Banks in 2003. Annual volumes of AMA-
approved mortgages were significantly lower from 2005 to 2009.

[[Page 81101]]

Although a few Banks had annual volumes exceeding $2.5 billion during 
that period, none of the Banks exceeded an annual volume of $5.0 
billion. (See Table 1.)
    Based on this analysis of the volume of the Banks' AMA-approved 
mortgage purchases, a volume threshold of $2.5 billion is mid-way 
between the higher volume threshold of $5.0 billion and housing goals 
that would apply without regard to the volume of mortgages purchased by 
the Bank. Increasing the volume threshold above $2.5 billion would 
unnecessarily reduce the likelihood that a Bank would be subject to 
housing goals in the future and would not meet the intent of Congress 
that the Banks be subject to housing goals, as reflected in HERA.
[GRAPHIC] [TIFF OMITTED] TP27DE10.001

    The volume threshold is also intended to ensure that Banks with a 
relatively low annual volume of purchases of AMA-approved mortgages, 
i.e., $2.5 billion or less, can continue to serve CFIs without being 
subject to the housing goals. Several Banks offer their AMA programs as 
a service to CFIs, which is consistent with their mission to provide 
liquidity to their members. FHFA set the volume threshold at an amount 
that would ensure that the housing goals would not cause the Banks that 
offer AMA programs primarily to service CFIs to discontinue their 
programs. The AMA programs are an important source of liquidity for 
such CFIs, and the discontinuance of an AMA program could adversely 
impact CFIs, such as those in rural areas, that may have limited or no 
access to the secondary market because of the higher per-mortgage sales 
cost associated with delivering a relatively small number of mortgages 
to purchasers, or the inability of these CFIs to meet purchasers' 
mortgage servicing requirements. Because the volume threshold already 
limits the impact of the housing goals on a Bank with an AMA program 
focused on its small members, the final rule does not exclude mortgages 
purchased from CFIs from counting for purposes of the volume threshold.
    Market-Based Housing Goals. Consistent with the proposed rule, 
Sec.  1281.11(b) of the final rule provides that compliance with the 
housing goals will be measured by comparing a Bank's performance with 
the actual goals-qualifying shares of the primary market during the 
year in the Bank's district. Under this retrospective, market-based 
approach, FHFA will calculate the actual goals-qualifying shares of the 
district-level primary mortgage market during the year using all 
mortgages originated in the geographic boundaries of each Bank district 
(meaning that the properties securing the mortgages are located in the 
district), including mortgages originated both by members and non-
members. The Enterprise housing goals rule includes both this market-
based approach and specific benchmark housing goal levels for the 
Enterprises. Under the Bank housing goals rule, a Bank's performance 
will not be measured against specific benchmark levels. Several 
provisions in the Enterprise housing goals rule that relate to the 
benchmark housing goal levels have been omitted from the Bank housing 
goals rule as unnecessary in light of the retrospective, market-based 
approach.
    As noted in the proposed rule, FHFA believes that the advantages of 
comparing the Bank's performance to actual market performance outweigh 
the disadvantages. A more detailed discussion of the market-based 
approach is included in the final Enterprise 2010-2011 housing goals 
rule. See 75 FR at 55896-55898. The market size analysis used to 
establish the benchmark levels for the Enterprise housing goals does 
not reflect differences between the various Bank districts. The 
difficulties in accurately predicting the size of the market for each 
housing goal in each Bank district make it impractical to set 
meaningful annual benchmark levels for each Bank.
    A disadvantage of the market-based approach is that public 
information on the goal-qualifying shares of the single-family primary 
mortgage market is not available until the release of Home Mortgage 
Disclosure Act (HMDA) data in late summer of the following year. 
However, a Bank that is subject to the housing goals will be active in 
the mortgage market in its district and hence positioned to understand 
how its performance is likely to compare to the overall market in its 
district.
    In the proposed rule, FHFA discussed other possible alternatives 
for measuring market size that had been considered and rejected. The 
Banks recommended using a market measurement that is limited to 
mortgages that are similar to the types of mortgages a Bank might 
purchase under its AMA program, namely, prime, fixed rate, fully 
amortizing mortgage loans that are originated by regulated depository 
institutions in the member's district and that are intended for sale in 
the secondary market. However, FHFA has determined that a more 
inclusive measurement of the market will provide a better basis for 
evaluating the extent

[[Page 81102]]

to which a Bank's purchases under its AMA program address mortgage 
credit needs in the Bank's district.
    The Banks also recommended that mortgages purchased from CFIs be 
excluded from consideration under the Bank housing goals because such 
mortgages are not represented in the HMDA data used to measure the size 
of the market. The Banks recommended that such loans also be excluded 
when determining whether a Bank exceeded the volume threshold and when 
measuring a Bank's actual performance under the housing goals. The 
final rule does not exclude mortgages purchased from CFIs from 
consideration under the housing goals. As discussed above, the volume 
threshold already limits the impact of the housing goals on a Bank with 
an AMA program focused on its small members. In addition, removing all 
mortgages purchased from CFIs from consideration under the housing 
goals would lead to an inaccurate measure of the extent to which a 
Bank's purchases of AMA-approved mortgages meet the housing goals.
    Consistent with the proposed rule, the final rule does not 
establish benchmark levels to measure the Banks' performance under the 
housing goals. FHFA requested comment on whether it would be 
appropriate to establish benchmark levels as a means of measuring the 
Banks' housing goals performance, in addition to measuring performance 
based on a Bank's actual share of goal-qualifying mortgages relative to 
its district-level market share, and if so, whether it would be 
appropriate to set benchmark levels for the Bank housing goals equal to 
the benchmark levels for the Enterprise housing goals. The comments did 
not specifically address establishing benchmark levels for the Banks, 
although a trade association suggested that the Banks should be 
encouraged to exceed the market share.
    FHFA has concluded that it would be inappropriate to set benchmark 
levels for the Banks equal to the benchmark levels for the 
corresponding Enterprise housing goals, because the Enterprise 
benchmarks are based on national mortgage market estimates and no Bank 
has an AMA program with a national scope. In addition, FHFA has 
concluded that setting benchmark levels based on district-level market 
size estimates would be inappropriate because the market sizes cannot 
be reliably estimated in advance.
    Section 1281.11(b) establishes criteria for determining the size of 
the market for each Bank district based on HMDA data on mortgages 
secured by property located in that Bank district. The criteria for 
establishing the size of the market reflect the types of mortgages that 
will count for purposes of the housing goals and that are typically 
eligible for purchase by a Bank. The criteria are the same as those in 
the proposed rule except for the definition of higher-priced loan to be 
used in the measurement of market size. The proposed rule would have 
excluded from the measurement of the market any mortgages with rate 
spreads of 300 basis points or more above the applicable Average Prime 
Offer Rate (APOR) reported under HMDA. Consistent with the definition 
in the final Enterprise 2010-2011 housing goals rule, for purposes of 
measuring the market for each Bank district, mortgages with rate 
spreads of 150 basis points above the applicable APOR reported under 
HMDA will be excluded. The 150 basis point rate spread is consistent 
with the definition of higher-priced loan used by the Federal Reserve 
Board.
    Bank Housing Goals. Consistent with the proposed rule, Sec.  
1281.11(c) through 1281.11(f) of the final rule establishes four 
single-family housing goals applicable to any Bank that exceeds the 
volume threshold in a particular year. Goals are established for 
purchase money mortgages for low-income families, for families in low-
income areas, and for very low-income families. In addition, a goal is 
established for refinancing mortgages for low-income families. The 
single-family housing goals will be based on an evaluation of the 
Bank's performance relative to the market for each housing goal in each 
year. The Banks have not been approved to purchase multifamily loans 
under the AMA programs. Accordingly, unlike the new Enterprise housing 
goals, the Bank housing goals do not include a multifamily special 
affordable housing goal or multifamily special affordable housing 
subgoal.
    Two commenters recommended expanding the coverage of the Bank 
housing goals beyond the scope of the Enterprise housing goals. A not-
for-profit organization recommended that FHFA give Bank housing goals 
credit for rental units in single-family properties, stating that such 
units provide an important source of affordable housing. A trade 
association suggested that FHFA consider adding a neighborhood goal for 
refinance lending, in addition to the borrower goal. In order to remain 
consistent with the Enterprise housing goals, the final rule does not 
alter the basic structure of the proposed Bank housing goals. The Bank 
housing goals do not include any investor-owned single-family 
properties, and they do not provide additional credit for any rental 
units in owner-occupied single-family properties. The Bank housing 
goals also do not include a separate goal for refinancing mortgages in 
low-income areas.
    In contrast to the new Enterprise housing goals, the Bank housing 
goals also do not include a low-income areas subgoal. Because the Bank 
housing goals do not include benchmark levels set prospectively, there 
is no need for a separate subgoal to address the unpredictable impact 
designated disaster areas may have from year to year.

C. General Counting Requirements--Sec.  1281.12

    Consistent with the proposed rule, Sec.  1281.12 of the final rule 
sets forth general requirements for the counting of Bank AMA-approved 
mortgage purchases toward the achievement of the housing goals. 
Performance under the housing goals will be evaluated based on the 
percentage of all AMA-approved mortgages on single-family, owner-
occupied properties purchased by a Bank that meet a particular goal.
    As proposed, Sec.  1281.12(a) of the final rule provides that 
performance under each of the single-family housing goals shall be 
measured using a fraction that is converted into a percentage. Neither 
the numerator nor the denominator shall include Bank transactions or 
activities that are not AMA-approved mortgage purchases as defined by 
FHFA or that are specifically excluded as ineligible under Sec.  
1281.13(b). The numerator is the number of AMA-approved mortgage 
purchases of a Bank in a particular year that finance owner-occupied 
single-family properties that count toward achievement of a particular 
housing goal. The denominator is the total number of AMA-approved 
mortgage purchases of a Bank in a particular year that finance owner-
occupied, single-family properties.
    As proposed, Sec.  1281.12(b) of the final rule provides that when 
a Bank lacks sufficient data or information, e.g., income of mortgagor, 
to determine whether the purchase of a mortgage counts toward 
achievement of a particular housing goal, that mortgage purchase shall 
be included in the denominator for that housing goal, but may not be 
included in the numerator. The Banks may not use missing data 
estimation methodologies, as used by the Enterprises, in light of the 
complexity of developing an estimation methodology suitable for the 
Banks. FHFA invited comment on whether a method for estimating missing 
affordability data would be feasible for

[[Page 81103]]

the Bank housing goals but did not receive comments on this issue.
    The provisions in Sec.  1281.12(c) through (f), which address 
credit toward multiple goals, application of median income, sampling 
and newly available data, respectively, are consistent with the 
provisions in the proposed rule and the final Enterprise 2010-2011 
housing goals rule.
    The MPF program allows Banks to purchase a percentage of a mortgage 
or mortgage pool initially acquired by another Bank under the program. 
As discussed in the proposed rule, for purposes of receiving credit 
under one of the housing goals, each mortgage will be assigned to the 
Bank that initially acquired the mortgage regardless of whether an 
interest in the mortgage was later sold to another Bank.
    In September 2008, FHFA approved the Chicago Bank's request to 
establish the MPF Xtra program, under which the Bank would buy certain 
qualified, conforming mortgages from eligible members for immediate 
sale to Fannie Mae. As discussed in the proposed rule, the MPF Xtra 
program is not an AMA program authorized under 12 CFR part 955.\9\ 
Under the MPF Xtra program, the Bank serves essentially as a conduit or 
intermediary with respect to the sale of the mortgages to Fannie Mae. 
The mortgages may be counted by Fannie Mae toward compliance with its 
housing goals. If the mortgages were also to be considered for purposes 
of the Bank housing goals, double-counting of the mortgages could 
occur. Avoiding double-counting of mortgage purchases is consistent 
with the Enterprise housing goals. An Enterprise cannot receive credit 
towards a housing goal for a mortgage purchase if the other Enterprise 
received credit for that mortgage. Additionally, under the Enterprise 
housing goals, credit towards a housing goal is only awarded for a 
mortgage where the Enterprise purchases the mortgage or assumes the 
credit risks associated with the mortgage. The Bank does not fund MPF 
Xtra mortgages or assume any credit risks in MPF Xtra transactions. For 
these reasons, under the final rule, mortgages purchased by a Bank 
pursuant to the MPF Xtra program will not be considered for purposes of 
the Bank housing goals.
---------------------------------------------------------------------------

    \9\ In May 2007, FHFB also approved the Atlanta Bank's request 
to offer the Global Mortgage Alliance Program (GMAP), under which 
the Bank would facilitate the sale of certain qualified conforming 
mortgage loans from eligible members to another of its members--
Global Mortgage Alliance, LLC, which would then securitize those 
loans. To date, no transactions have occurred under GMAP. The GMAP 
is not an AMA program authorized under part 955. Both the MPF Xtra 
and GMAP programs were separately authorized under the Banks' 
incidental authority contained in sections 11(a) and 11(e)(1) of the 
Bank Act. See 12 U.S.C. 1431(a), 1431(e)(1).
---------------------------------------------------------------------------

D. Special Counting Requirements--Sec.  1281.13

    Consistent with the proposed rule, Sec.  1281.13 of the final rule 
sets forth special counting requirements for the receipt of full, 
partial or no credit for a transaction toward achievement of the 
housing goals, a number of which are discussed further below.
    Section 1281.13(b) specifies the types of transactions that shall 
not be counted for purposes of the housing goals and shall not be 
included in the numerator or the denominator in calculating a Bank's 
performance under the housing goals. The intent of this section is to 
specify the counting treatment for transactions in which the Banks are 
authorized to engage under the approved AMA programs. The counting 
rules do not purport to authorize the purchase of any types of 
mortgages, but are intended solely to indicate whether such mortgages 
shall receive full, partial or no credit toward the housing goals. 
Accordingly, transactions in which the Banks are not authorized to 
engage under the approved AMA programs are not included in paragraph 
(b). The Bank counting rules differ in some respects from the counting 
rules for the Enterprise housing goals. For example, the Banks are not 
authorized to purchase private label securities (PLS) under the AMA 
programs; therefore it is not necessary to exclude PLS from counting 
under the Bank housing goals. On the other hand, while the Banks are 
authorized to purchase non-conventional loans under the AMA authority, 
such loans are excluded from counting under the Enterprise housing 
goals and, therefore, have been excluded from counting under the Bank 
housing goals as well.
    Section 1281.13(b) of the final rule makes clear that where a 
mortgage falls within one of the categories excluded from consideration 
under the housing goals, the mortgage shall be excluded even if it 
otherwise falls within one of the special counting rules in Sec.  
1281.13(c). For example, a non-conventional mortgage that would be 
excluded from consideration pursuant to Sec.  1281.13(b)(1) cannot be 
counted even if it otherwise counts as a seasoned mortgage under Sec.  
1281.13(c)(2).
    Home Equity Conversion Mortgages. Section 1281.13(b)(1) of the 
final rule excludes the purchases of all non-conventional single-family 
mortgages, including Home Equity Conversion Mortgages (HECMs), from 
counting towards the Banks' housing goals--that is, such purchases 
shall be excluded from both the numerator and denominator in 
calculating goal performance. This is consistent with the counting 
treatment for the new Enterprise housing goals, as HERA amended section 
1332(a) of the Safety and Soundness Act to restrict the Enterprise 
single-family housing goals to include only conventional mortgages. See 
12 U.S.C. 4562(a).
    Mortgages financing secondary residences. Section 1281.13(b)(6) of 
the final rule prohibits the counting of mortgage purchases to the 
extent they finance any dwelling units that are secondary residences. 
This is consistent with the counting treatment for the new Enterprise 
housing goals, as HERA amended section 1332(a) of the Safety and 
Soundness Act to restrict the Enterprise single-family housing goals to 
include only purchases of owner-occupied mortgages. See 12 U.S.C. 4562.
    Subordinate liens. Section 1281.13(b)(8) of the final rule excludes 
the purchases of subordinate lien mortgages (second mortgages) from 
counting towards the Banks' housing goals. HERA amended section 1331 of 
the Safety and Soundness Act to provide that the Enterprise single-
family housing goals are limited to purchase money or refinancing 
mortgages. See 12 U.S.C. 4561. Consistent with the counting treatment 
for the new Enterprise housing goals, the Bank housing goals exclude 
home equity loans from counting for purposes of the housing goals. The 
Bank housing goals also exclude other subordinate lien mortgages, such 
as ``piggy-back'' loans that may be acquired by a Bank along with the 
corresponding first lien mortgage. Subordinate lien mortgages are 
excluded because it is difficult to determine whether such loans are 
purchase money loans or home equity loans, and because first lien 
mortgages provide a better measure of a Bank's support for residential 
housing.
    Previously counted mortgages. Section 1281.13(b)(9) of the final 
rule prohibits the counting of mortgages toward performance under the 
housing goals if the mortgages have previously been counted for 
purposes of the performance of the Bank under the housing goals. In 
order to limit excessively burdensome recordkeeping that could result, 
the rule makes clear that this limitation only extends back for five 
years. Although the Banks have not previously been subject to housing 
goals, this language is included for applicability in future years.
    Construction-to-permanent loans. Section 1281.13(b)(10) of the 
final rule

[[Page 81104]]

excludes purchases of mortgages secured by properties that have not 
been approved for occupancy from consideration for purposes of the 
housing goals.
    Housing goals credit for certain transactions. Section 1281.13(c) 
of the final rule provides that certain types of transactions shall be 
counted for purposes of the housing goals, including mortgages on 
cooperative housing and condominium units, seasoned mortgages, and 
refinancing mortgages. Section 1281.13(c) does not include certain 
types of transactions that are eligible for housing goals credit under 
the Enterprise housing goals, including credit enhancements for goal-
qualifying mortgages, entering into risk sharing agreements with 
federal agencies to finance qualifying mortgages, and purchasing 
mortgage revenue bonds backed by qualifying mortgages. Such 
transactions are not eligible for Bank housing goals credit because of 
the more limited scope of the approved AMA programs. Section 1281.13(c) 
makes clear that where a transaction falls under more than one of the 
special counting rules in Sec.  1281.13(c), all of the applicable 
requirements must be satisfied in order for the loan to be counted for 
purposes of the housing goals.
    HOEPA mortgages and mortgages with unacceptable terms and 
conditions. Consistent with the proposed rule, Sec.  1281.13(d) of the 
final rule provides that HOEPA mortgages and mortgages with 
unacceptable terms and conditions must be counted in the denominator as 
mortgage purchases but may not be counted in the numerator, regardless 
of whether the mortgages would otherwise qualify based on the 
affordability and other counting criteria. This treatment is consistent 
with past practice for the Enterprises and with section 1332(i) of the 
Safety and Soundness Act, as amended by HERA, which provides that no 
credit may be given for mortgages that FHFA determines are 
``unacceptable or contrary to good lending practices.'' 12 U.S.C. 
4562(i).
    The proposed rule defined ``mortgages with unacceptable terms or 
conditions'' to include mortgages with excessive fees or interest 
rates, as well as mortgages with prepayment penalties, mortgages sold 
with prepaid single-premium credit life insurance products, and 
mortgages originated using practices that violate fair lending laws or 
that are contrary to the Interagency Guidance on Nontraditional 
Mortgage Product Risks (71 FR 58609) (Oct. 4, 2006), the Interagency 
Statement on Subprime Mortgage Lending (72 FR 37569) (July 10, 2007), 
or similar guidance subsequently issued by federal banking agencies.
    A trade association commented that FHFA should strengthen the terms 
and conditions that constitute unacceptable mortgages, and recommended 
the use of Regulation Z and HOEPA rather than interagency guidance to 
determine whether a mortgage is eligible to be counted under the 
housing goals. The final rule does not change the proposed definition 
of ``mortgages with unacceptable terms or conditions.'' While the final 
rule specifically references interagency guidance on subprime and 
nontraditional loans, FHFA expects the Banks to ensure that mortgage 
loans they acquire comply with Regulation Z and HOEPA, as well as any 
federal law related to minimum standards for mortgages and predatory 
lending. As markets and abusive practices evolve, FHFA may determine 
additional terms and conditions to be unacceptable.
    FHFA guidance. Section 1281.13(e) of the final rule provides that 
FHFA may provide guidance on the treatment of any transactions under 
the housing goals. The guidance may be provided in response to a 
request from a Bank, or at the initiation of FHFA.
    Private label securities. As discussed in the proposed rule, 
because FHFA is counting only mortgages purchased through AMA programs 
in determining each Bank's housing goal performance, and the Banks are 
not authorized to purchase PLS through these programs, PLS will not be 
counted in determining a Bank's housing goals performance.
    Housing finance agency obligations and other transactions. 
Consistent with the proposed rule, the final rule provides that only 
mortgages purchased through AMA programs will count in determining each 
Bank's housing goal performance. A trade association commenter 
recommended giving the Banks housing goals credit for Bank advances and 
investments, including transactions such as the purchase of housing 
finance agency (HFA) bonds, investment in housing-related bonds and tax 
credits, and advances to HFAs. The final rule does not expand the types 
of transactions that will receive credit under the housing goals to 
include transactions, such as purchases of HFA obligations, that are 
not AMA-approved mortgage purchases. Expanding the types of Bank 
transactions subject to housing goals beyond AMA-approved mortgage 
purchases would impede the ability of the Banks to make an orderly 
transition to the housing goals, because it would entail the Banks 
collecting information they may not currently collect, and for some 
Banks, modifying their activities involving HFAs.

E. Housing Goals Enforcement--Sec. Sec.  1281.14 and 1281.15

    Consistent with the proposed rule, Sec.  1281.14 of the final rule 
provides that the Director shall determine whether each Bank has 
exceeded the volume threshold on an annual basis. For any Bank that has 
exceeded the volume threshold, the Director will also determine whether 
the Bank has met the housing goals, in accordance with the standards 
established under the Safety and Soundness Act, as amended by HERA. If 
the Director determines that a Bank has failed to meet any housing 
goal, the Director shall provide notice to the Bank in writing of such 
preliminary determination.
    Consistent with the proposed rule, Sec.  1281.15 of the final rule 
includes requirements for submission of a housing plan by a Bank for 
failure to meet any housing goal that is determined to be feasible by 
FHFA. The requirement to submit a housing plan is at the discretion of 
the Director.

F. Reporting Requirements--Sec. Sec.  1281.20 Through 1281.23

    As required for the Enterprises, and consistent with the proposed 
rule, Sec. Sec.  1281.20 through 1281.23 of the final rule establish 
reporting requirements for the Banks with respect to their housing 
goals performance. Section 1281.21(a) requires the Banks to collect and 
compile computerized loan-level data on each AMA-approved mortgage 
purchased, as described in FHFA's Data Reporting Manual (DRM). These 
reporting requirements apply to each Bank, regardless of whether in a 
particular year the Bank expects to exceed the volume threshold and 
thus be subject to the housing goals.
    Section 1281.21(b) requires each Bank to submit to the Director, on 
a semi-annual basis, a Mortgage Report containing aggregations of the 
loan-level mortgage data for year-to-date AMA-approved mortgage 
purchases, and year-to-date dollar volume, number of units, and number 
of AMA-approved mortgages on owner-occupied properties purchased that 
do, and do not, qualify under each housing goal. The loan-level data 
that must be reported are currently collected by FHFA on a semi-annual 
basis. As advances in technology have made more frequent submissions 
less burdensome, FHFA will consider quarterly reporting for the Banks 
in future years. Quarterly reporting would be consistent with the 
current requirements for the Enterprises. The additional data provided 
facilitates

[[Page 81105]]

FHFA's monitoring of Enterprise performance under the housing goals. 
The Enterprises are also required to submit Annual Housing Activities 
Reports (AHARs) to FHFA. The final rule does not require the Banks to 
submit AHARs, but FHFA will consider requiring such reports in the 
future.
    Consistent with the proposed rule, Sec.  1281.22 of the final rule 
requires each Bank to provide to the Director such reports, information 
and data as the Director may request from time to time, or as may be 
supplemented in the DRM.
    As proposed, Sec.  1281.23 of the final rule sets forth the data 
integrity process for Bank housing goals data. The final rule requires 
the senior officer of each Bank who is responsible for submitting any 
report, data or other information for which certification is requested 
by the Director, to certify such report, data or information. FHFA will 
determine on an annual basis the official housing goals performance 
figures for any Bank that is subject to the housing goals, and may 
resolve any error, omission or discrepancy by adjusting the Bank's 
official housing goals performance figure. If the Director determines 
that the year-end data reported by a Bank for a year preceding the 
latest year for which data on housing goals performance was reported to 
FHFA contained a material error, omission or discrepancy, the Director 
may increase the corresponding housing goal for the current year by the 
number of mortgages that the Director determines were overstated in the 
prior year's goal performance.
    FHFA will implement the data integrity process pursuant to its 
general regulatory authority over the Banks. FHFA expects that the 
Banks will work cooperatively with FHFA to identify and resolve any 
discrepancies or errors in the housing goals data reported to FHFA.

VI. Paperwork Reduction Act

    The final rule does not contain any information collection 
requirement that requires the approval of the Office of Management and 
Budget under the Paperwork Reduction Act (44 U.S.C. 3501 et seq.).

VII. Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) requires that 
a regulation that has a significant economic impact on a substantial 
number of small entities, small businesses or small organizations must 
include an initial regulatory flexibility analysis describing the 
regulation's impact on small entities. Such an analysis need not be 
undertaken if the agency has certified that the regulation will not 
have a significant economic impact on a substantial number of small 
entities. 5 U.S.C. 605(b). FHFA has considered the impact of the final 
rule under the Regulatory Flexibility Act. The General Counsel of FHFA 
certifies that the final rule is not likely to have a significant 
economic impact on a substantial number of small business entities 
because the regulation is applicable only to the Banks, which are not 
small entities for purposes of the Regulatory Flexibility Act.

List of Subjects in 12 CFR Part 1281

    Credit, Federal home loan banks, Housing, Mortgages, Reporting and 
recordkeeping requirements.

0
Accordingly, for the reasons stated in the preamble, under the 
authority of 12 U.S.C. 1430c, FHFA amends chapter XII of title 12 of 
the Code of Federal Regulations, by adding new part 1281 to subchapter 
E to read as follows:

SUBCHAPTER E--HOUSING GOALS AND MISSION

PART 1281--FEDERAL HOME LOAN BANK HOUSING GOALS

Sec.
Subpart A--General
1281.1 Definitions.
Subpart B--Housing Goals
1281.10 General.
1281.11 Bank housing goals.
1281.12 General counting requirements.
1281.13 Special counting requirements.
1281.14 Determination of compliance with housing goals; notice of 
determination.
1281.15 Housing plans.
Subpart C--Reporting Requirements
1281.20 General.
1281.21 Mortgage Reports.
1281.22 Periodic reports.
1281.23 Bank data integrity.


    Authority: 12 U.S.C. 1430c.

Subpart A--General


Sec.  1281.1  Definitions.

    As used in this part:
    Acquired Member Assets (AMA) program means a program that 
authorizes a Bank to hold assets acquired from or through Bank members 
or housing associates by means of either a purchase or a funding 
transaction, subject to the requirements of 12 CFR parts 955 and 980, 
or successor regulations.
    AMA-approved mortgage means a mortgage that meets the requirements 
of the AMA program at 12 CFR part 955, and is approved to be 
implemented under 12 CFR part 980, or successor regulations.
    Balloon mortgage means a mortgage providing for payments at regular 
intervals, with a final payment (balloon payment) that is at least 5 
percent more than the periodic payments. The periodic payments may 
cover some or all of the periodic principal or interest. Typically, the 
periodic payments are level monthly payments that would fully amortize 
the mortgage over a stated term and the balloon payment is a single 
payment due after a specific period (but before the mortgage would 
fully amortize) and pays off or satisfies the outstanding balance of 
the mortgage.
    Bank means a Federal Home Loan Bank established under section 12 of 
the Bank Act (12 U.S.C. 1432).
    Bank Act means the Federal Home Loan Bank Act, as amended (12 
U.S.C. 1421 et seq.).
    Bank System means the Federal Home Loan Bank System, consisting of 
the 12 Banks and the Office of Finance.
    Borrower income means the total gross income relied on in making 
the credit decision.
    Conforming mortgage means, with respect to a Bank, a conventional 
AMA-approved single-family mortgage having an original principal 
obligation that does not exceed the dollar limitation in effect at the 
time of such origination and applicable to such mortgage under 12 CFR 
955.2(a)(1)(i) and 12 U.S.C. 1717(b)(2), as these sections may be 
amended.
    Conventional mortgage means a mortgage other than a mortgage as to 
which a Bank has the benefit of any guaranty, insurance or other 
obligation by the United States or any of its agencies or 
instrumentalities.
    Data Reporting Manual (DRM) means the manual prepared by FHFA in 
connection with the Banks' reporting requirements, as may be 
supplemented from time to time, including reporting requirements under 
this part.
    Day means a calendar day.
    Designated disaster area means any census tract that is located in 
a county designated by the federal government as adversely affected by 
a declared major disaster administered by FEMA, where individual 
assistance payments were authorized by FEMA. A census tract shall be 
treated as a ``designated disaster area'' for purposes of this part 
beginning on the January 1 after the FEMA designation of the county, or 
such earlier date as determined by FHFA, and continuing through 
December 31 of the third full calendar year following the FEMA 
designation. This time period may be adjusted for a particular disaster 
area by notice from FHFA to the Banks.
    Director means the Director of FHFA, or his or her designee.

[[Page 81106]]

    Dwelling unit means a room or unified combination of rooms intended 
for use, in whole or in part, as a dwelling by one or more persons, and 
includes a dwelling unit in a single-family property, multifamily 
property, or other residential or mixed-use property.
    Families in low-income areas means:
    (1) Any family that resides in a census tract or block numbering 
area in which the median income does not exceed 80 percent of the area 
median income;
    (2) Any family with an income that does not exceed area median 
income that resides in a minority census tract; and
    (3) Any family with an income that does not exceed area median 
income that resides in a designated disaster area.
    Family means one or more individuals who occupy the same dwelling 
unit.
    FEMA means the Federal Emergency Management Agency.
    FHFA means the Federal Housing Finance Agency.
    HMDA means the Home Mortgage Disclosure Act of 1975 (12 U.S.C. 
2801, et seq.), as amended.
    HOEPA mortgage means a mortgage covered by section 103(aa) of the 
Truth in Lending Act (15 U.S.C. 1602(aa)), as amended by the Home 
Ownership Equity Protection Act (HOEPA), as implemented by the Board of 
Governors of the Federal Reserve System.
    HUD means the United States Department of Housing and Urban 
Development.
    Low-income means income not in excess of 80 percent of area median 
income.
    Median income means, with respect to an area, the unadjusted median 
family income for the area as most recently determined by HUD. FHFA 
will provide the Banks annually with information specifying how the 
median family income estimates for metropolitan areas are to be applied 
for the purposes of determining median family income.
    Member means an institution that has been approved for membership 
in a Bank and has purchased capital stock in the Bank in accordance 
with 12 CFR 1263.20 or 1263.24(b), or successor regulation(s).
    Metropolitan area means a metropolitan statistical area (MSA), or a 
portion of such an area, including Metropolitan Divisions, for which 
median family income estimates are determined by HUD.
    Minority means any individual who is included within any one or 
more of the following racial and ethnic categories:
    (1) American Indian or Alaskan Native--a person having origins in 
any of the original peoples of North and South America (including 
Central America), and who maintains tribal affiliation or community 
attachment;
    (2) Asian--a person having origins in any of the original peoples 
of the Far East, Southeast Asia, or the Indian subcontinent, including, 
for example, Cambodia, China, India, Japan, Korea, Malaysia, Pakistan, 
the Philippine Islands, Thailand, and Vietnam;
    (3) Black or African American--a person having origins in any of 
the black racial groups of Africa;
    (4) Hispanic or Latino--a person of Cuban, Mexican, Puerto Rican, 
South or Central American, or other Spanish culture or origin, 
regardless of race; and
    (5) Native Hawaiian or Other Pacific Islander--a person having 
origins in any of the original peoples of Hawaii, Guam, Samoa, or other 
Pacific Islands.
    Minority census tract means a census tract that has a minority 
population of at least 30 percent and a median income of less than 100 
percent of the area median income.
    Moderate-income means income not in excess of area median income.
    Mortgage means a member of such classes of liens, including 
subordinate liens, as are commonly given or are legally effective to 
secure advances on, or the unpaid purchase price of, real estate under 
the laws of the State in which the real estate is located, together 
with the credit instruments, if any, secured thereby, and includes 
interests in mortgages. ``Mortgage'' includes a mortgage, lien, 
including a subordinate lien, or other security interest on the stock 
or membership certificate issued to a tenant-stockholder or resident-
member by a cooperative housing corporation, as defined in section 216 
of the Internal Revenue Code of 1986, and on the proprietary lease, 
occupancy agreement, or right of tenancy in the dwelling unit of the 
tenant-stockholder or resident-member in such cooperative housing 
corporation.
    Mortgage data means data obtained by the Director from the Bank or 
Banks under this part and/or the Data Reporting Manual.
    Mortgage purchase means a transaction in which a Bank bought or 
otherwise acquired a mortgage.
    Mortgage with unacceptable terms or conditions means a single-
family mortgage, including a reverse mortgage, or a group or category 
of such mortgages, with one or more of the following terms or 
conditions:
    (1) Excessive fees, where the total points and fees charged to a 
borrower exceed the greater of 5 percent of the loan amount or a 
maximum dollar amount of $1,000, or an alternative amount requested by 
a Bank and determined by the Director as appropriate for small 
mortgages;
    (i) For purposes of this definition, points and fees include:
    (A) Origination fees;
    (B) Underwriting fees;
    (C) Broker fees;
    (D) Finder's fees; and
    (E) Charges that the member imposes as a condition of making the 
loan, whether they are paid to the member or a third party;
    (ii) For purposes of this definition, points and fees do not 
include:
    (A) Bona fide discount points;
    (B) Fees paid for actual services rendered in connection with the 
origination of the mortgage, such as attorneys' fees, notary's fees, 
and fees paid for property appraisals, credit reports, surveys, title 
examinations and extracts, flood and tax certifications, and home 
inspections;
    (C) The cost of mortgage insurance or credit-risk price 
adjustments;
    (D) The costs of title, hazard, and flood insurance policies;
    (E) State and local transfer taxes or fees;
    (F) Escrow deposits for the future payment of taxes and insurance 
premiums; and
    (G) Other miscellaneous fees and charges that, in total, do not 
exceed 0.25 percent of the loan amount;
    (2) An annual percentage rate that exceeds by more than 8 
percentage points the yield on Treasury securities with comparable 
maturities as of the fifteenth day of the month immediately preceding 
the month in which the application for the extension of credit was 
received;
    (3) Prepayment penalties, except where:
    (i) The mortgage provides some benefit to the borrower in exchange 
for the prepayment penalty (e.g., a rate or fee reduction for accepting 
the prepayment premium);
    (ii) The borrower is offered the choice of another mortgage that 
does not contain payment of such a premium;
    (iii) The terms of the mortgage provision containing the prepayment 
penalty are adequately disclosed to the borrower; and
    (iv) The prepayment penalty is not charged when the mortgage debt 
is accelerated as the result of the borrower's default in making his or 
her mortgage payments;
    (4) The sale or financing of prepaid single-premium credit life 
insurance products in connection with the origination of the mortgage;
    (5) Underwriting practices contrary to the Interagency Guidance on

[[Page 81107]]

Nontraditional Mortgage Product Risks (71 FR 58609) (Oct. 4, 2006), the 
Interagency Statement on Subprime Mortgage Lending (72 FR 37569) (July 
10, 2007), or similar guidance subsequently issued by federal banking 
agencies;
    (6) Failure to comply with fair lending requirements; or
    (7) Other terms or conditions that are determined by the Director 
to be an unacceptable term or condition of a mortgage.
    Non-metropolitan area means a county, or a portion of a county, 
including those counties that comprise Micropolitan Statistical Areas, 
located outside any metropolitan area for which median family income 
estimates are published annually by HUD.
    Owner-occupied housing means single-family housing in which a 
mortgagor resides, including two- to four-unit owner-occupied 
properties where one or more units are used for rental purposes.
    Purchase money mortgage means a mortgage given to secure a loan 
used for the purchase of a single-family residential property.
    Refinancing mortgage means a mortgage undertaken by a borrower that 
satisfies or replaces an existing mortgage of such borrower. The term 
does not include:
    (1) A renewal of a single payment obligation with no change in the 
original terms;
    (2) A reduction in the annual percentage rate of the mortgage as 
computed under the Truth in Lending Act, with a corresponding change in 
the payment schedule;
    (3) An agreement involving a court proceeding;
    (4) A workout agreement, in which a change in the payment schedule 
or collateral requirements is agreed to as a result of the mortgagor's 
default or delinquency, unless the rate is increased or the new amount 
financed exceeds the unpaid balance plus earned finance charges and 
premiums for the continuation of insurance;
    (5) The renewal of optional insurance purchased by the mortgagor 
and added to an existing mortgage; or
    (6) A conversion of a balloon mortgage note on a single-family 
property to a fully amortizing mortgage note where the Bank already 
owns or has an interest in the balloon note at the time of the 
conversion.
    Residence means a property where one or more families reside.
    Residential mortgage means a mortgage on single-family housing.
    Seasoned mortgage means a mortgage on which the date of the 
mortgage note is more than one year before the Bank purchased the 
mortgage.
    Second mortgage means any mortgage that has a lien position 
subordinate only to the lien of the first mortgage.
    Secondary residence means a dwelling where the mortgagor maintains 
(or will maintain) a part-time place of abode and typically spends (or 
will spend) less than the majority of the calendar year. A person may 
have more than one secondary residence at a time.
    Single-family housing means a residence consisting of one to four 
dwelling units. Single-family housing includes condominium dwelling 
units and dwelling units in cooperative housing projects.
    Very low-income means income not in excess of 50 percent of area 
median income.

Subpart B--Housing Goals


Sec.  1281.10  General.

    Pursuant to the requirements of the Bank Act, as amended (12 U.S.C. 
1430c), this subpart establishes:
    (a) Three single-family owner-occupied purchase money mortgage 
housing goals, and one single-family refinancing mortgage housing goal;
    (b) A volume threshold for the application of the housing goals to 
a Bank;
    (c) Requirements for measuring performance under the housing goals; 
and
    (d) Procedures for monitoring and enforcing the housing goals.


Sec.  1281.11  Bank housing goals.

    (a) Volume threshold. The housing goals established in this section 
shall apply to a Bank for a calendar year only if the unpaid principal 
balance (UPB) of the Bank's purchases of AMA-approved mortgages in that 
year exceeds $2.5 billion.
    (b) Market-based housing goals. A Bank that is subject to the 
housing goals shall be in compliance with a housing goal if its 
performance under the housing goal meets or exceeds the share of the 
market that qualifies for the housing goal. The size of the market for 
each housing goal shall be established annually by FHFA for each Bank 
district based on data reported pursuant to the Home Mortgage 
Disclosure Act for a given year. Unless otherwise adjusted by FHFA, the 
size of the market for each Bank district shall be determined based on 
the following criteria:
    (1) Only owner-occupied, conventional loans secured by property 
located in that Bank district shall be considered;
    (2) Purchase money mortgages and refinancing mortgages shall be 
counted only for the applicable housing goal or goals;
    (3) All mortgages flagged as HOEPA loans or subordinate lien loans 
shall be excluded;
    (4) All mortgages with original principal balances above the 
conforming loan limits for single unit properties for the year being 
evaluated (rounded to the nearest $1,000) shall be excluded;
    (5) All mortgages with rate spreads of 150 basis points or more 
above the applicable average prime offer rate as reported in the Home 
Mortgage Disclosure Act data shall be excluded; and
    (6) All mortgages that are missing information necessary to 
determine appropriate counting under the housing goals shall be 
excluded.
    (c) Low-income families housing goal. For a Bank that is subject to 
the housing goals, the percentage share of such Bank's total purchases 
of purchase money AMA-approved mortgages on owner-occupied single-
family housing that consists of mortgages for low-income families shall 
meet or exceed the share of such mortgages in the market as defined in 
paragraph (b) of this section.
    (d) Low-income areas housing goal. For a Bank that is subject to 
the housing goals, the percentage share of such Bank's total purchases 
of purchase money AMA-approved mortgages on owner-occupied single-
family housing that consists of mortgages for families in low-income 
areas shall meet or exceed the share of such mortgages in the market as 
defined in paragraph (b) of this section.
    (e) Very low-income families housing goal. For a Bank that is 
subject to the housing goals, the percentage share of such Bank's total 
purchases of purchase money AMA-approved mortgages on owner-occupied 
single-family housing that consists of mortgages for very low-income 
families shall meet or exceed the share of such mortgages in the market 
as defined in paragraph (b) of this section.
    (f) Refinancing housing goal. For a Bank that is subject to the 
housing goals, the percentage share of such Bank's total purchases of 
refinancing AMA-approved mortgages on owner-occupied single-family 
housing that consists of refinancing mortgages for low-income families 
shall meet or exceed the share of such mortgages in the market as 
defined in paragraph (b) of this section.


Sec.  1281.12  General counting requirements.

    (a) Calculating the numerator and denominator for the housing 
goals. Performance under each of the housing goals shall be measured 
using a fraction

[[Page 81108]]

that is converted into a percentage. Neither the numerator nor the 
denominator shall include Bank transactions or activities that are not 
AMA-approved mortgage purchases as defined by FHFA or that are 
specifically excluded as ineligible under Sec.  1281.13(b).
    (1) The numerator. The numerator of each fraction is the number of 
AMA-approved mortgage purchases of a Bank in a particular year that 
finance owner-occupied single-family properties that count toward 
achievement of a particular housing goal.
    (2) The denominator. The denominator of each fraction is the total 
number of AMA-approved mortgage purchases of a Bank in a particular 
year that finance owner-occupied, single-family properties. A separate 
denominator shall be calculated for purchase money mortgages and for 
refinancing mortgages.
    (b) Missing data or information for the housing goals.--(1) When a 
Bank lacks sufficient data or information to determine whether the 
purchase of a mortgage originated after 1992 counts toward achievement 
of a particular housing goal, that mortgage purchase shall be included 
in the denominator for that housing goal and shall not be included in 
the numerator for that housing goal.
    (2) Mortgage purchases financing owner-occupied single-family 
properties shall be evaluated based on the income of the mortgagors and 
the area median income at the time the mortgage was originated. To 
determine whether mortgages may be counted under a particular family 
income level (i.e., low- or very low-income), the income of the 
mortgagors is compared to the median income for the area at the time of 
the mortgage application, using the appropriate percentage factor 
provided under Sec.  1281.1.
    (c) Credit toward multiple goals. A mortgage purchase by a Bank in 
a particular year shall count toward the achievement of each housing 
goal for which such purchase qualifies in that year.
    (d) Application of median income. For purposes of determining an 
area's median income under Sec.  1281.1, the area is:
    (1) The metropolitan area, if the property which is the subject of 
the mortgage is in a metropolitan area; and
    (2) In all other areas, the county in which the property is 
located, except that where the State nonmetropolitan median income is 
higher than the county's median income, the area is the State 
nonmetropolitan area.
    (e) Sampling not permitted. Performance under the housing goals for 
each year shall be based on a complete tabulation of mortgage purchases 
for that year; a sampling of such purchases is not acceptable.
    (f) Newly available data. When a Bank uses data to determine 
whether a mortgage purchase counts toward achievement of any housing 
goal, and new data is released after the start of a calendar quarter, 
the Bank need not use the new data until the start of the following 
quarter.


Sec.  1281.13  Special counting requirements.

    (a) General. FHFA shall determine whether a Bank shall receive 
full, partial, or no credit toward achievement of any of the housing 
goals for a transaction that otherwise qualifies under this part.
    (b) Not counted. The following transactions or activities shall not 
be counted for purposes of the housing goals and shall not be included 
in the numerator or the denominator in calculating a Bank's performance 
under the housing goals, even if the transaction or activity would 
otherwise be counted under paragraph (c) of this section:
    (1) Purchases of non-conventional single-family mortgages;
    (2) Commitments to buy mortgages at a later date or time;
    (3) Options to acquire mortgages;
    (4) Rights of first refusal to acquire mortgages;
    (5) Any interests in mortgages that the Director determines, in 
writing, shall not be treated as interests in mortgages;
    (6) Mortgage purchases to the extent they finance any dwelling 
units that are secondary residences;
    (7) Single-family refinancing mortgages that result from conversion 
of balloon notes to fully amortizing notes, if a Bank already owns, or 
has an interest in, the balloon note at the time conversion occurs;
    (8) Purchases of subordinate lien mortgages (second mortgages);
    (9) Purchases of mortgages that were previously counted by a Bank 
under any current or previous housing goal within the five years 
immediately preceding the current performance year;
    (10) Purchases of mortgages where the property has not been 
approved for occupancy; and
    (11) Any combination of factors in paragraphs (b)(1) through 
(b)(10) of this section.
    (c) Other special rules. Subject to FHFA's determination of whether 
a Bank shall receive full, partial, or no credit for a transaction 
toward achievement of any of the housing goals as provided in paragraph 
(a) of this section, the transactions and activities identified in this 
paragraph (c) shall be treated as mortgage purchases as described. A 
transaction or activity that is covered by more than one paragraph 
below must satisfy the requirements of each such paragraph. The 
mortgages from each such transaction or activity shall be included in 
the denominator in calculating a Bank's performance under the housing 
goals, and shall be included in the numerator, as appropriate.
    (1) Cooperative housing and condominiums. The purchase by a Bank of 
a mortgage on a cooperative housing unit (``a share loan'') or a 
mortgage on a condominium unit shall be treated as a mortgage purchase 
for purposes of the housing goals.
    (2) Seasoned mortgages. The purchase of a seasoned mortgage by a 
Bank shall be treated as a mortgage purchase for purposes of the 
housing goals, except where the Bank has already counted the mortgage 
under any current or previous housing goal within the five years 
immediately preceding the current performance year.
    (3) Purchase of refinancing mortgages. The purchase of a 
refinancing mortgage by a Bank shall be treated as a mortgage purchase 
for purposes of the housing goals only if the refinancing is an arms-
length transaction that is borrower-driven.
    (d) HOEPA mortgages and mortgages with unacceptable terms or 
conditions. The purchase by a Bank of HOEPA mortgages and mortgages 
with unacceptable terms or conditions, as defined in Sec.  1281.1, 
shall be treated as mortgage purchases for purposes of the housing 
goals and shall be included in the denominator for each applicable 
housing goal, but such mortgages shall not be counted in the numerator 
for any housing goal.
    (e) FHFA review of transactions. FHFA may determine whether and how 
any transaction or class of transactions shall be counted for purposes 
of the housing goals. FHFA will notify each Bank in writing of any 
determination regarding the treatment of any transaction or class of 
transactions under the housing goals.


Sec.  1281.14  Determination of compliance with housing goals; notice 
of determination.

    (a) Determination of compliance with housing goals. On an annual 
basis, the Director shall determine whether each Bank has exceeded the 
volume threshold. For each Bank that has exceeded the volume threshold 
in a year, the Director shall determine the Bank's performance under 
each housing goal.

[[Page 81109]]

    (b) Failure to meet a housing goal. If the Director determines that 
a Bank has failed to meet any housing goal, the Director shall notify 
the Bank in writing of such preliminary determination. Any notification 
to a Bank of a preliminary determination under this section shall 
provide the Bank with an opportunity to respond in writing in 
accordance with the following procedures:
    (1) Notice. The Director shall provide written notice to a Bank of 
a preliminary determination under this section, the reasons for such 
determination, and the information on which the Director based the 
determination.
    (2) Response period.--(i) In general. During the 30-day period 
beginning on the date on which notice is provided under paragraph 
(b)(1) of this section, the Bank may submit to the Director any written 
information that the Bank considers appropriate for consideration by 
the Director in finally determining whether such failure has occurred 
or whether the achievement of such goal was feasible.
    (ii) Extended period. The Director may extend the period under 
paragraph (b)(2)(i) of this section for good cause for not more than 30 
additional days.
    (iii) Shortened period. The Director may shorten the period under 
paragraph (b)(2)(i) of this section for good cause.
    (iv) Failure to respond. The failure of a Bank to provide 
information during the 30-day period under this paragraph (b)(2), as 
extended or shortened, shall waive any right of the Bank to comment on 
the proposed determination or action of the Director.
    (3) Consideration of information and final determination. (i) In 
general. After the expiration of the response period under paragraph 
(b)(2) of this section or receipt of information provided during such 
period by a Bank, the Director shall issue a final determination on:
    (A) Whether the Bank has failed to meet the housing goal; and
    (B) Whether, taking into consideration market and economic 
conditions and the financial condition of the Bank, the achievement of 
the housing goal was feasible.
    (ii) Considerations. In making a final determination under 
paragraph (b)(3)(i) of this section, the Director shall take into 
consideration any relevant information submitted by a Bank during the 
response period.


Sec.  1281.15  Housing plans.

    (a) Housing plan requirement. If the Director determines that a 
Bank has failed to meet any housing goal and that the achievement of 
the housing goal was feasible, the Director may require the Bank to 
submit a housing plan for approval by the Director.
    (b) Nature of plan. If the Director requires a housing plan, the 
housing plan shall:
    (1) Be feasible;
    (2) Be sufficiently specific to enable the Director to monitor 
compliance periodically;
    (3) Describe the specific actions that the Bank will take to 
achieve the housing goal for the next calendar year; and
    (4) Address any additional matters relevant to the plan as 
required, in writing, by the Director.
    (c) Deadline for submission. The Bank shall submit the housing plan 
to the Director within 45 days after issuance of a notice requiring the 
Bank to submit a housing plan. The Director may extend the deadline for 
submission of a plan, in writing and for a time certain, to the extent 
the Director determines an extension is necessary.
    (d) Review of housing plan. The Director shall review and approve 
or disapprove a housing plan as follows:
    (1) Approval. The Director shall review each submission by a Bank, 
including a housing plan submitted under this section and, not later 
than 30 days after submission, approve or disapprove the plan or other 
action. The Director may extend the period for approval or disapproval 
for a single additional 30-day period if the Director determines it 
necessary. The Director shall approve any plan that the Director 
determines is likely to succeed, and conforms with the Bank Act, this 
part, and any other applicable provision of law.
    (2) Notice of approval and disapproval. The Director shall provide 
written notice to a Bank submitting a housing plan of the approval or 
disapproval of the plan, which shall include the reasons for any 
disapproval of the plan, and of any extension of the period for 
approval or disapproval.
    (e) Resubmission. If the Director disapproves an initial housing 
plan submitted by a Bank, the Bank shall submit an amended plan 
acceptable to the Director not later than 15 days after the Director's 
disapproval of the initial plan; the Director may extend the deadline 
if the Director determines an extension is in the public interest. If 
the amended plan is not acceptable to the Director, the Director may 
afford the Bank 15 days to submit a new plan.
    (f) Enforcement of housing plan. If the Director finds that a Bank 
has failed to meet any housing goal, and that the achievement of the 
housing goal was feasible, and has required the Bank to submit a 
housing plan under this section, the Director may issue a cease and 
desist order, or impose civil money penalties, if the Bank refuses to 
submit such a plan, fails to submit an acceptable plan, or fails to 
comply with the approved plan. In taking such action, the Director 
shall follow procedures consistent with those provided in 12 U.S.C. 
4581 through 4588 with respect to actions to enforce the housing goals.

Subpart C--Reporting Requirements


Sec.  1281.20  General.

    This subpart establishes data submission and reporting requirements 
to provide the Director with mortgage and other information relating to 
the Banks' performance in connection with the housing goals, as 
supplemented from time to time in the Banks' Data Reporting Manual 
(DRM).


Sec.  1281.21  Mortgage Reports.

    (a) Loan-level data elements. To implement the data collection and 
submission requirements for mortgage data, and to assist the Director 
in monitoring the Banks' housing goal activities, each Bank shall 
collect and compile computerized loan-level data on each AMA-approved 
mortgage purchase, as described in the DRM. The Director may, from time 
to time, issue a list in the DRM specifying the loan-level data 
elements to be collected and maintained by the Banks and provided to 
the Director. The Director may revise the DRM list by written notice to 
the Banks.
    (b) Semi-annual Mortgage Reports. Each Bank shall submit to the 
Director, on a semi-annual basis, a Mortgage Report. The second semi-
annual Mortgage Report each year shall serve as the annual Mortgage 
Report and shall be designated as such. Each Mortgage Report shall 
include:
    (1) Aggregations of the loan-level mortgage data compiled by each 
Bank under paragraph (a) of this section for year-to-date AMA-approved 
mortgage purchases, in the format specified in writing by the Director;
    (2) Year-to-date dollar volume, number of units, and number of AMA-
approved mortgages on owner-occupied properties purchased by each Bank 
that do, and do not, qualify under each housing goal as set forth in 
this part; and
    (3) Year-to-date computerized loan-level data consisting of the 
data elements required under paragraph (a) of this section.
    (c) Timing of Reports. Each Bank shall submit its first semi-annual 
Mortgage Report within 45 days of the end of the

[[Page 81110]]

second quarter. Each Bank shall submit its annual Mortgage Report 
within 60 days after the end of the calendar year.
    (d) Revisions to Reports. At any time before submission of its 
annual Mortgage Report, a Bank may revise its first semi-annual 
Mortgage Report for that year.
    (e) Format. The Banks shall submit to the Director computerized 
loan-level data with the Mortgage Report, in the format specified in 
writing by the Director.


Sec.  1281.22  Periodic reports.

    Each Bank shall provide to the Director such reports, information 
and data as the Director may request from time to time, or as may be 
supplemented in the DRM.


Sec.  1281.23  Bank data integrity.

    (a) Certification. (1) The senior officer of each Bank who is 
responsible for submitting the annual Mortgage Report, or for 
submitting any other report(s), data or other information for which 
certification is requested in writing by the Director, shall certify 
such report(s), data or information.
    (2) The certification shall state as follows: ``To the best of my 
knowledge and belief, the information provided herein is true, correct 
and complete.''
    (b) Adjustment to correct errors, omissions or discrepancies. FHFA 
shall determine on an annual basis the official housing goals 
performance figures for a Bank that is subject to the housing goals. 
FHFA may resolve any error, omission or discrepancy by adjusting the 
Bank's official housing goals performance figure. If the Director 
determines that the year-end data reported by a Bank for a year 
preceding the latest year for which data on housing goals performance 
was reported to FHFA contained a material error, omission or 
discrepancy, the Director may increase the corresponding housing goal 
for the current year by the number of mortgages that the Director 
determines were overstated in the prior year's goal performance.

    Dated: December 20, 2010.
Edward J. DeMarco,
Acting Director, Federal Housing Finance Agency.
[FR Doc. 2010-32350 Filed 12-23-10; 8:45 am]
BILLING CODE 8070-01-P