[Federal Register Volume 75, Number 38 (Friday, February 26, 2010)]
[Proposed Rules]
[Pages 9034-9072]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-3310]



[[Page 9033]]

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Part II





Federal Housing Finance Agency





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12 CFR Parts 1249 and 1282



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2010-2011 Enterprise Affordable Housing Goals; Enterprise Book-Entry 
Procedures; Proposed Rule

Federal Register / Vol. 75 , No. 38 / Friday, February 26, 2010 / 
Proposed Rules

[[Page 9034]]


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FEDERAL HOUSING FINANCE AGENCY

12 CFR Parts 1249 and 1282

RIN 2590-AA26


2010-2011 Enterprise Affordable Housing Goals; Enterprise Book-
Entry Procedures

AGENCY: Federal Housing Finance Agency.

ACTION: Proposed rule.

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SUMMARY: Section 1128(b) of the Housing and Economic Recovery Act of 
2008 (HERA) amended the Federal Housing Enterprises Financial Safety 
and Soundness Act of 1992 (Safety and Soundness Act) to provide for the 
establishment, monitoring and enforcement of new affordable housing 
goals effective for 2010 and 2011 for the Federal National Mortgage 
Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation 
(Freddie Mac) (collectively, the Enterprises). Section 1332(a) of the 
Safety and Soundness Act, as amended by HERA, requires the Federal 
Housing Finance Agency (FHFA) to establish three single-family owner-
occupied purchase money mortgage goals and a single-family refinancing 
mortgage goal. Section 1333(a) of the Safety and Soundness Act requires 
FHFA to establish a multifamily special affordable housing goal, as 
well as providing for a multifamily special affordable housing subgoal. 
FHFA is issuing and seeking comments on a proposed rule that would 
establish new affordable housing goals for 2010 and 2011, consistent 
with the Safety and Soundness Act, as amended. The proposed rule would 
also revise and update the rules for counting mortgages for purposes of 
the affordable housing goals to ensure clarity and consistency with the 
new goals.

DATES: Written comments must be received on or before April 12, 2010.

ADDRESSES: You may submit your comments, identified by regulatory 
information number (RIN) 2590-AA26, by any one of the following 
methods:
    <bullet> U.S. Mail, United Parcel Post, Federal Express, or Other 
Mail Service: The mailing address for comments is: Alfred M. Pollard, 
General Counsel, Attention: Comments/RIN 2590-AA26, Federal Housing 
Finance Agency, Fourth Floor, 1700 G Street, NW., Washington, DC 20552.
    <bullet> Hand Delivered/Courier: The hand delivery address is: 
Alfred M. Pollard, General Counsel, Attention: Comments/RIN 2590-AA26, 
Federal Housing Finance Agency, Fourth Floor, 1700 G Street, NW., 
Washington, DC 20552. The package should be logged at the Guard Desk, 
First Floor, on business days between 9 a.m. and 5 p.m.
    <bullet> E-mail: Comments to Alfred M. Pollard, General Counsel, 
may be sent by e-mail to <a href="/cdn-cgi/l/email-protection#4b192e2c082426262e253f380b2d232d2a652c243d"><span class="__cf_email__" data-cfemail="1644737155797b7b7378626556707e707738717960">[email protected]</span></a>. Please include ``RIN 
2590-AA26'' in the subject line of the message.
    <bullet> Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments. If you submit your 
comment to the Federal eRulemaking Portal, please also send it by e-
mail to FHFA at <a href="/cdn-cgi/l/email-protection#c795a2a084a8aaaaa2a9b3b487a1afa1a6e9a0a8b1"><span class="__cf_email__" data-cfemail="35675052765a5858505b414675535d53541b525a43">[email protected]</span></a> to ensure timely receipt by the 
Agency. Please include ``RIN 2590-AA26'' in the subject line of the 
message.

FOR FURTHER INFORMATION CONTACT: Nelson Hernandez, Senior Associate 
Director, Housing Mission and Goals, (202) 408-2993, Brian Doherty, 
Manager, Housing Mission and Goals, (202) 408-2991, Paul Manchester, 
Principal Economist, Housing Mission and Goals--Quantitative Analysis, 
(202) 408-2946, Sharon Like, Associate General Counsel, (202) 414-8950, 
Lyn Abrams, Attorney, (202) 414-8951, or Kevin Sheehan, Attorney, (202) 
414-8952. These are not toll-free numbers. The mailing address for each 
contact is: Office of General Counsel, Federal Housing Finance Agency, 
Fourth Floor, 1700 G Street, NW., Washington, DC 20552. The telephone 
number for the Telecommunications Device for the Hearing Impaired is 
(800) 877-8339.

SUPPLEMENTARY INFORMATION:

I. Comments

    FHFA invites comments on all aspects of the proposed rule, and will 
revise the language of the proposed rule as appropriate after taking 
all comments into consideration. Copies of all comments will be posted 
without change, including any personal information you provide, such as 
your name and address, on the FHFA Internet Web site at http://www.fhfa.gov. In addition, copies of all comments received will be 
available for examination by the public on business days between the 
hours of 10 a.m. and 3 p.m., at the Federal Housing Finance Agency, 
Fourth Floor, 1700 G Street, NW., Washington, DC 20552. To make an 
appointment to inspect comments, please call the Office of General 
Counsel at (202) 414-3751.

II. Background

A. Establishment of FHFA

    Effective July 30, 2008, HERA amended the Safety and Soundness Act 
to create FHFA as an independent agency of the Federal Government.\1\ 
HERA transferred the safety and soundness supervisory and oversight 
responsibilities over the Enterprises from the Office of Federal 
Housing Enterprise Oversight (OFHEO) to FHFA. HERA also transferred the 
charter compliance authority and responsibility to establish, monitor 
and enforce the affordable housing goals for the Enterprises from the 
Department of Housing and Urban Development (HUD) to FHFA. FHFA is 
responsible for ensuring that the Enterprises operate in a safe and 
sound manner, including maintenance of adequate capital and internal 
controls, that their operations and activities foster liquid, 
efficient, competitive, and resilient national housing finance markets, 
and that they carry out their public policy missions through authorized 
activities.\2\
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    \1\ See Division A, titled the ``Federal Housing Finance 
Regulatory Reform Act of 2008,'' Title I, Sec.  1101, Public Law 
110-289, 122 Stat. 2654 (2008), codified at 12 U.S.C. 4501 et seq.
    \2\ See 12 U.S.C. 4513.
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    Section 1302 of HERA provides, in part, that all regulations, 
orders and determinations issued by the Secretary of HUD (Secretary) 
with respect to the Secretary's authority under the Safety and 
Soundness Act, the Federal National Mortgage Association Charter Act 
and the Federal Home Loan Mortgage Corporation Act (together, the 
Charter Acts), shall remain in effect and be enforceable by the 
Secretary or the Director of FHFA, as the case may be, until modified, 
terminated, set aside or superseded by the Secretary or the Director, 
any court, or operation of law. The Enterprises continue to operate 
under regulations promulgated by OFHEO and HUD until FHFA issues its 
own regulations.\3\ The Enterprises are government-sponsored 
enterprises (GSEs) chartered by Congress for the purpose of 
establishing secondary market facilities for residential mortgages.\4\ 
Specifically, Congress established the Enterprises to provide stability 
in the secondary market for residential mortgages, respond 
appropriately to the private capital market, provide ongoing assistance 
to the secondary market for residential mortgages, and promote access 
to mortgage credit throughout the nation.\5\
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    \3\ See HERA at section 1302, 122 Stat. 2795.
    \4\ See 12 U.S.C. 1716 et seq.; 12 U.S.C. 1451 et seq.
    \5\ Id.
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B. Statutory and Regulatory Background

    Prior to HERA, the Safety and Soundness Act provided the Secretary 
of HUD with the authority to establish, monitor and enforce affordable 
housing

[[Page 9035]]

goals for the Enterprises.\6\ HUD issued regulations establishing 
affordable housing goals for the Enterprises, which were periodically 
updated, most recently in 2004, when HUD established new housing goal 
levels for 2005 through 2008.\7\ HUD's regulations provided for the 
housing goal levels for 2008 to continue in effect in 2009 and each 
year thereafter until replaced by new annual housing goals established 
by HUD.\8\ In August 2009, FHFA issued a final rule that adopted many 
of the existing housing goals provisions in a new part 1282 of title 12 
of the Code of Federal Regulations. As authorized by section 1331(c) of 
the Safety and Soundness Act, the final rule also revised the levels of 
the existing affordable housing goals in light of current market 
conditions.\9\
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    \6\ See 12 U.S.C. 4561 et seq. (2008).
    \7\ See 24 CFR part 81 (2008).
    \8\ See 24 CFR 81.12 through 81.14 (2008).
    \9\ See 74 FR 39873 (Aug. 10, 2009).
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    The Safety and Soundness Act, as amended by HERA, requires the 
Director of FHFA to establish new affordable housing goals effective 
for 2010 and beyond. The new housing goals include four goals for 
single-family, owner-occupied housing, one multifamily special 
affordable housing goal, and one multifamily special affordable housing 
subgoal.\10\ The single-family housing goals target purchase money 
mortgages for low-income families, families that reside in low-income 
areas, and very low-income families, and refinancing mortgages for low-
income families.\11\ 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.\12\
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    \10\ See 12 U.S.C. 4561 and 4563(a)(2).
    \11\ See 12 U.S.C. 4562.
    \12\ See 12 U.S.C. 4563.
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C. Conservatorship

    On September 6, 2008, the Director of FHFA appointed FHFA as 
conservator of the Enterprises in accordance with the Safety and 
Soundness Act, as amended by HERA, to maintain the Enterprises in a 
safe and sound financial condition. The Enterprises remain under 
conservatorship at this time.

III. Prospective and Market-Based Goals

    Following passage of the Safety and Soundness Act, HUD established 
housing goals for Fannie Mae and Freddie Mac in October 1993,\13\ and 
revised and expanded those goals in 1995,\14\ 2000,\15\ and 2004.\16\ 
Multi-year goals were set in the 1993 housing goals rule for 1993-94 
(subsequently extended to 1995), in the 1994 housing goals rule for 
1996-99 (with the goal levels for 1999 continuing in effect for 2000), 
in the 2000 housing goals rule for 2001-03 (with the goal levels for 
2003 continuing in effect for 2004), and in the 2004 housing goals rule 
for 2005-08.
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    \13\ See 58 FR 53048 (Oct. 13, 1993) and 58 FR 53072 (Oct. 13, 
1993).
    \14\ See 60 FR 61846 (Dec. 1, 1995).
    \15\ See 65 FR 65044 (Oct. 31, 2000).
    \16\ See 69 FR 63580 (Nov. 2, 2004).
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    In each case, the numerical goals were established up to four years 
in advance. The goals were set as specific minimum goal-qualifying 
percentages of all dwelling units financed by mortgages acquired by 
each Enterprise in a given year, except for the special affordable 
multifamily subgoal, which was set as a minimum dollar volume of this 
type of business. In the 2004 final rule, HUD added three single-family 
home purchase subgoals, which were similarly set as specific minimum 
goal-qualifying percentages of all home purchase mortgages financed by 
the Enterprises on owner-occupied properties in metropolitan 
statistical areas (MSAs).
    HUD set the goals for 1993-2008 based on the six factors as 
specified in the Safety and Soundness Act. The most important such 
factors were past performance on the goals and, especially, for the 
home purchase subgoals, HUD's estimates of the goal-qualifying shares 
of home purchase mortgages in the primary mortgage market on properties 
in MSAs. For the overall goals, HUD's estimates of the goal-qualifying 
shares of all dwelling units financed in the primary market by the 
Enterprises in each year were also important. For example, HUD 
estimated that low- and moderate-income units would account for 50-55 
percent of all units financed in the primary mortgage market for 2003-
04, and 51-56 percent of all units financed in 2005-08. The low- and 
moderate-income goal was set at 50 percent for 2003-04, and was later 
established to increase in accordance with the market range over the 
2005-08 period--specifically, 52 percent for 2005, 53 percent for 2006, 
55 percent for 2007, and 56 percent for 2008. A similar approach was 
followed with regard to the overall underserved areas and special 
affordable goals for 2005-08.
    As recent market developments show, it can be difficult to forecast 
the goals-qualifying shares of the primary mortgage market several 
years in advance. The forecasts developed by HUD were based on the 
assumption of a ``home purchase market environment,'' a market 
environment in which purchase mortgages dominate over refinancing 
mortgages. However, when market conditions result in higher than 
average refinance activity, the actual market goals-qualifying shares 
can be significantly different from the forecast because the actual 
refinance share would dominate. A second reason for the divergence 
between forecasted and actual shares of goals-qualifying units in the 
primary mortgage market is the variation in the affordability of 
housing, such as measured by the National Association of Realtors (NAR) 
housing affordability index. If the price of a product or service 
declines, it is more affordable to the consumer. In this respect, 
housing is no different from any other product. A third reason for 
divergence is the variance in the size of the multifamily mortgage 
market over time. Under the previous goals counting regime, multifamily 
units played a significant role in whether an Enterprise met the goals. 
A fourth reason for the divergence is the change in the size of the 
share of the mortgage market accounted for by Federal Housing 
Administration (FHA) and Department of Veterans Affairs (VA) mortgages. 
As discussed below, the market share of mortgages insured by FHA 
increased dramatically in recent years, from a monthly low of 2.5 
percent in October 2005 to 32 percent in December 2008.
    As measured after the fact, HUD's market estimates often differed 
significantly from the actual goals-qualifying shares of the primary 
market. Specifically, the actual low- and moderate-income share of the 
primary market in 2003 was 53 percent, which was within HUD's 2001-2003 
forecasted range of 50-55 percent, but when the share increased to 58 
percent for 2004, it exceeded the upper end of the range. The low- and 
moderate-income share of the primary market remained high, at 57 
percent for 2005, above HUD's 2005-2008 forecasted range of 51-56 
percent, but then decreased to 55 percent for 2006 and 52 percent for 
2007. Thus, over the 2005-2007 period, the low- and moderate-income 
goals increased steadily, while the low- and moderate-income share of 
the primary mortgage market decreased steadily.
    While the Enterprises are in conservatorship, FHFA expects the 
Enterprises to continue to fulfill their core statutory purposes, 
including their support for affordable housing. The affordable housing 
goals are one set of measures of that support. FHFA does not intend for 
the Enterprises to undertake uneconomic or high-risk activities in 
support of the goals.

[[Page 9036]]

Further, the fact that the Enterprises are in conservatorship should 
not be a justification for withdrawing support from these market 
segments. While in conservatorship the Enterprises have tightened their 
underwriting standards to avoid poor quality mortgages that have 
contributed substantially to their losses. Maintaining sound 
underwriting discipline going forward is important for conserving the 
Enterprises' assets and for supporting their mission in a manner in 
which the achievement of housing goals directly relates to actual 
market conditions. In light of these circumstances and the difficulties 
in anticipating market deviations from the normal home purchase 
environment in the traditional approach to goal-setting, FHFA proposes 
in this rule to measure the Enterprises' single-family goal performance 
relative to benchmark levels for the goals-qualifying shares of the 
Enterprises' mortgage purchases, as well as relative to the actual 
goals-qualifying shares of the primary mortgage market. A dual approach 
prevents exclusive reliance on multi-year mortgage market forecasts. 
The primary disadvantage of this approach is that information on the 
goals-qualifying shares of the current single-family primary market is 
not available until the release of Home Mortgage Disclosure Act (HMDA) 
data in late summer of the following year, approximately nine months 
after the rating period. However, FHFA believes that the market-based 
approach proposed in this rule is an appropriate measure of mission 
achievement under the housing goals for the Enterprises, especially 
while they are operating in conservatorship, and that the overall 
advantages of this approach outweigh the disadvantages.
    In 2010, FHFA expects to begin to conduct a monthly survey of 
single-family mortgage originations pursuant to section 1324(c) of the 
Safety and Soundness Act, as amended by HERA, and make data collected 
under that survey available to the public.\17\ Release of that data is 
likely to provide detailed information on home mortgage lending 
activity more frequently and in a timelier manner than does the public 
release of the data collected under HMDA. FHFA will use the survey data 
in its monitoring of Enterprise affordable housing goals performance in 
2010 and subsequent years.
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    \17\ 12 U.S.C. 4544(c).
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    This proposed rule would establish single-family housing goals that 
include (1) an assessment of Enterprise performance as compared to the 
actual share of the market that meets the criteria for each goal, and 
(2) a benchmark level to measure Enterprise performance. The benchmark 
levels for performance are intended to provide greater certainty for 
the Enterprises in establishing strategies for meeting the affordable 
housing goals. An Enterprise would be found to have failed to meet a 
housing goal if its annual performance falls below both the benchmark 
level and the actual share of the market that meets the criteria for a 
particular housing goal for that year. An Enterprise would not be found 
to have failed to meet a goal if it achieves the benchmark level for 
that goal, even if the actual market size for the year is higher than 
the benchmark level, because for planning purposes the Enterprises need 
to be able to rely on the benchmarks that FHFA has set.\18\
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    \18\ See 12 U.S.C. 4561(b), acknowledging ``the need for the 
enterprises to reasonably and sufficiently plan their operations and 
activities in advance, including operations and activities necessary 
to meet such annual goals.''
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    The proposed approach to setting goals, involving both the setting 
of a prospective target and an assessment of actual market opportunity, 
is a departure from past practice at HUD, as well as in the 
transitional housing goals established by FHFA for 2009. FHFA has 
determined that this approach is appropriate in light of the 
difficulties of predicting the market, especially in light of recent 
market turmoil, but also in view of the difficulty in making those 
projections accurately even in more stable economic environments. FHFA 
views this approach as fully consistent with Congressional intent in 
granting goal-setting power to the regulator, in light of the many 
provisions that Congress inserted into the statute to enable the goals 
to be adjusted to reflect changing market conditions or otherwise 
suggesting that the goals should be set in light of market conditions. 
Those provisions include: The requirement that the agency calculate the 
preceding three-year average percentages of goal-eligible originations 
for each goal category, and take that information into account in 
setting the single-family goals; \19\ the authority to adjust goals, 
when they have been set for more than one year, based on market 
conditions; \20\ the discretionary authority to adjust a goal in 
response to a petition, partly in response to market conditions and the 
risk of ``over-investment''; \21\ and provisions for relief from 
enforcement if goals are determined not to have been feasible.\22\
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    \19\ 12 U.S.C. 4562(e)(2)(A).
    \20\ 12 U.S.C. 4562(e)(3).
    \21\ 12 U.S.C. 4564(b)(1), (2).
    \22\ 12 U.S.C. 4566(b).
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IV. Changes in Structure of Housing Goals for 2010-2011

    The proposed rule would modify the structure of the housing goals 
established by HUD for 2005-2008, and subsequently extended and 
modified for 2009 by FHFA, in a number of ways for 2010-2011. There 
would be no overall goals for 2010-2011 covering all of each 
Enterprise's mortgage purchases, as in the past. Rather, there would be 
four separate goals for purchases of single-family mortgages and two 
goals for purchases of multifamily mortgages. These changes, many of 
which are required by changes made by HERA in the governing statute, 
are described in more detail below.
    Enterprise goal performance under each of the single-family housing 
goals is measured using a fraction of qualifying mortgage purchases as 
a percent of total mortgage purchases. Neither the numerator nor the 
denominator includes Enterprise transactions or activities that are not 
mortgage purchases as defined by FHFA or that would be specifically 
excluded as ineligible under proposed Sec.  1282.16(b). The 2010-2011 
single-family goals, as proposed, would establish separate goals for 
home purchase mortgages and refinancing mortgages. This differs from 
past treatment, which combined such purchases for the overall goals.
    In addition, the proposed rule would count only conventional loans 
for purposes of the housing goals. This means that certain FHA loans 
that previously counted toward the goals, such as Home Equity 
Conversion Mortgages (HECMs), will no longer be counted. Second liens, 
which also counted toward the goals in the past, would be excluded from 
counting for purposes of the housing goals in the future. The 
Enterprises have purchased very few second liens in the past.
    Under the 2010-2011 goals, mortgages financing rental units in 
single-family properties, which were previously included in the goals, 
would no longer be counted. However, FHFA will continue to monitor the 
Enterprises' purchases of such mortgages with regard to rental units in 
both 2-4 unit owner-occupied housing and investor-owned 1-4 unit rental 
housing.
    The 2010-2011 multifamily goals would be based on the numbers of 
affordable dwelling units financed, rather than being specified in 
minimum dollar terms. The special affordable

[[Page 9037]]

multifamily subgoal in effect prior to 2010 applied to purchases of 
mortgages on housing for families with incomes below 60 percent of area 
median income (AMI) and for families with incomes between 60 percent 
and 80 percent of AMI living in low-income areas. The overall 
multifamily goal for 2010-2011 is somewhat broader in its coverage than 
the previous special affordable multifamily goal, applying to mortgages 
on housing for families with incomes no greater than 80 percent of AMI, 
regardless of location. However, the 2010-2011 very low-income 
multifamily subgoal would be targeted to households with slightly lower 
incomes. The qualifying household income for purposes of the 2010-2011 
multifamily subgoal would be at or below 50 percent of AMI.
    The 2010-2011 low-income home purchase and refinancing goals in the 
proposed rule would target households with lower incomes than the past 
low- and moderate-income goals. The past low- and moderate-income goals 
included families with incomes up to 100 percent of AMI. Under the 
proposed rule, the low-income home purchase and refinancing goals would 
include only families with incomes no greater than 80 percent of AMI.
    The 2010-2011 low-income areas home purchase goal would be somewhat 
more targeted than the past underserved areas home purchase subgoal. 
For example, the new low-income areas housing goal includes families in 
census tracts with incomes up to 80 percent of AMI, while the 
underserved areas home purchase subgoal included families in census 
tracts with incomes up to 90 percent of AMI. The narrower scope of the 
low-income areas housing goal may be seen by comparing performance on 
the underserved areas home purchase subgoal in 2008 (approximately 30 
percent for both Enterprises) with what their performance would have 
been on the low-income areas home purchase goal in 2008 (approximately 
15 percent for both Enterprises).

V. Analysis of Single-Family Housing Goals

    Section 1332(e)(2) of the Safety and Soundness Act, as amended by 
HERA, requires FHFA to consider the following seven factors in setting 
single-family housing goals:
    (1) National housing needs;
    (2) Economic, housing, and demographic conditions, including 
expected market developments;
    (3) The performance and effort of the Enterprises toward achieving 
the housing goals under this section in previous years;
    (4) The ability of the Enterprise to lead the industry in making 
mortgage credit available;
    (5) Such other reliable mortgage data as may be available;
    (6) The size of the purchase money conventional mortgage market, or 
refinance conventional mortgage market, as applicable, serving each of 
the types of families described, relative to the size of the overall 
purchase money mortgage market or the overall refinance mortgage 
market, respectively; and
    (7) The need to maintain the sound financial condition of the 
Enterprises.\23\
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    \23\ 12 U.S.C. 4562(e)(2).
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    FHFA's consideration of the size of the market for each housing 
goal includes consideration of the percentage of goals-qualifying 
mortgages under each housing goal, as calculated based on HMDA data for 
the three most recent years for which data is available.\24\
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    \24\ See 12 U.S.C. 4562(e)(2)(A).
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A. Analysis of Factors for Single-Family Housing Goals

    FHFA's analysis of each of the factors is set forth below.
1. National Housing Needs
    With the collapse of subprime and Alt-A lending, tighter credit 
conditions, and stricter underwriting standards, single-family mortgage 
originations fell 38 percent in 2008. The Enterprises' share of single-
family mortgage-backed securities (MBS) issuance rose to over 73 
percent in that year, however, and the credit risk characteristics of 
their purchases began to improve. Falling house prices caused equity in 
homes to decline sharply. The resetting of interest rates on poorly 
underwritten adjustable rate mortgages (ARMs) originated in recent 
years, deteriorating household balance sheets, rising unemployment, 
continued credit tightening, and the deepening recession contributed to 
increases in mortgage delinquency and home foreclosure rates as well as 
sharply lower housing starts and sales.
    The decline in home prices that began in 2007 accelerated sharply 
in 2008. Continued tightening in lender credit policies, large 
inventories of unsold homes, significant volumes of homes in 
foreclosure, rising unemployment, and increasing pessimism among 
potential homebuyers combined to drive home prices down further.
    Despite improving housing affordability, the U.S. homeownership 
rate declined since peaking at 69 percent in 2004. In the third quarter 
of 2009, the homeownership rate was 67.6 percent, down from the 67.9 
percent in the third quarter of 2008.\25\ The homeownership rate for 
married couples with children declined from 78.8 percent in the third 
quarter of 2008 to 77.9 percent in the third quarter of 2009.\26\ The 
homeownership rate for Black households declined markedly from 48.2 
percent in the third quarter of 2008 to 46.8 percent in the third 
quarter of 2009.\27\ Between 2000 and 2005, the homeowner vacancy 
rate--the proportion of the homeowner inventory that is vacant for 
sale--averaged about 1.7 percent. However, that rate increased 70 basis 
points in 2006 alone, to 2.7 percent in the fourth quarter, and has 
inched up generally every year since, reaching 2.9 percent in the first 
and fourth quarters of 2008. That was the highest rate since the Census 
Bureau began collecting that statistic in 1956. The persistently high 
rate reflects both the high level of foreclosures and declining home 
sales.
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    \25\ U.S. Housing Market Conditions, 3rd Quarter 2009. 
Department of Housing and Urban Development at 87.
    \26\ U.S. Housing Market Conditions, 3rd Quarter 2009. 
Department of Housing and Urban Development at 89.
    \27\ U.S. Housing Market Conditions, 3rd Quarter 2009. 
Department of Housing and Urban Development at 88.
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    A recent NAR study of homebuyers and sellers between July 2008 and 
June 2009 shows the number of first-time homebuyers rose to 47 percent 
of all homebuyers, from 41 percent in the prior year's study. The 
median age for first-time homebuyers was 30 years and the median income 
was $61,600. The typical first-time homebuyer purchased a home costing 
$156,000, down from $165,000 in the prior year's study. The study found 
that 55 percent of entry level buyers financed their purchase with an 
FHA loan, and another 8 percent used the VA loan program.\28\
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    \28\ ``NAR Survey Shows First-Time Home Buyers Set Record in 
Past Year.'' Press Release. National Association of Realtors. Nov. 
13, 2009.
    \29\ ``HMDA Data Show Huge Decline in 2008 Mortgage Activity--
Except at Government Insured Programs.'' Inside Mortgage Finance. 
Oct. 2, 2009 at 8.
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    According to FHFA's Monthly Interest Rate Survey (MIRS), the 
average loan-to-value ratio (LTV ratio) of single-family, conventional, 
purchase money mortgages, which increased rapidly from 73.6 percent in 
2003 to 79.3 percent in 2007, fell to 76.7 percent in 2008. The 
proportion of such loans with LTV ratios greater than 90 percent 
dropped sharply from 2007's level of 29 percent--the highest level 
recorded--to 18 percent in 2008.
    HMDA data for 2008 indicated that applications from Black borrowers 
fell by 48 percent, and applications from Hispanic borrowers fell by 55 
percent.\29\

[[Page 9038]]

Originations rose somewhat in the first two quarters of 2009 over the 
last two quarters of 2008, but the $410 billion in mortgage 
originations in the third quarter of 2009 showed a decline of more than 
25 percent over the second quarter's $550 billion.\30\
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    \30\ ``Mortgage Origination Volume Dropped Sharply in 3Q09, But 
2009 May End on a Rising Trend.'' Inside Mortgage Finance. Oct. 30, 
2009 at 3-4.
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    One of the key catalysts of the current economic crisis was falling 
housing prices after the substantial increase that began in 2000. From 
January 2000 through the May 2006 peak, the S&P/Case-Shiller housing 
price index rose by approximately 105 percent, only to fall by more 
than 30 percent since then. The less volatile FHFA housing price index, 
which reflects the book of business of the Enterprises, peaked later 
and has since declined about 11 percent.
    Changes in mortgage underwriting, particularly for affordable 
products, had a direct impact on the national housing market. During 
the boom, as house price appreciation reduced affordability, low 
documentation Alt-A loans, interest-only loans and ARMs proliferated. 
Subprime market share tripled to more than 20 percent of the market. 
Lenders accepted more loans with higher LTV ratios and lower borrower 
credit scores. The Joint Center for Housing Studies report, ``State of 
the Nation's Housing 2009,'' describes the effect of loosened mortgage 
underwriting standards on the housing market. In 2005, a household with 
median owner income of about $57,000 and spending 28 percent of income 
on mortgage principal and interest could qualify for a 30-year, fixed-
rate loan of $225,000. If the same borrower took out an ARM loan at a 
discounted interest rate, the maximum loan amount increased to 
$265,000. By adding an interest-only feature to that ARM and qualifying 
the household based on the initial interest-only payments, the 
potential loan size grew to $356,000. Allowing the borrower to spend 38 
percent of income on mortgage costs meant that the mortgage loan could 
total approximately $482,000. Interagency regulatory guidance on 
nontraditional and subprime loans issued in 2006 and 2007, including 
guidance to the Enterprises by OFHEO, contributed to limiting the 
numbers of such loans as underwriting standards were subsequently 
strengthened.\31\
---------------------------------------------------------------------------

    \31\ See Office of Federal Housing Enterprise Oversight, ``OFHEO 
Director James B. Lockhart Commends Enterprises on Implementation of 
Subprime Mortgage Lending Guidance,'' News Release (Sept. 10, 2007), 
available at http://www.fhfa.gov/webfiles/1608/LockhartcommendsENTERPRISEsreSubprime91007.pdf. See also Office of 
the Comptroller of the Currency, Federal Reserve Board, Federal 
Deposit Insurance Corporation, Office of Thrift Supervision, 
National Credit Union Administration, Statement on Subprime Mortgage 
Lending, 72 FR 37569-37575 (July 10, 2007); and Office of the 
Comptroller of the Currency, Federal Reserve Board, Federal Deposit 
Insurance Corporation, Office of Thrift Supervision, National Credit 
Union Administration, Interagency Guidance on Nontraditional 
Mortgage Product Risks, 71 FR 58609-58618 (Oct. 4, 2006).
---------------------------------------------------------------------------

    A result of the crisis is that the mortgage market has returned to 
more traditional and prudent lending standards. Mortgage underwriting 
standards in the near term can be expected to continue to be more 
conservative than earlier in the decade.
    The decline in housing prices has made housing more affordable. A 
composite index of housing affordability for the third quarter of 2009 
showed that families earning the median income had 159.2 percent of the 
income needed to purchase a median-priced existing single-family home, 
a figure 24 percent higher than the 128.6 percent reported for the 
third quarter of 2008, although down from the 169.2 percent 
affordability level of the prior quarter.\32\ Housing price declines 
have brought standard affordability ratios closer to or even above 
historical levels. In one national survey of 122 metropolitan areas, 
the number of areas where the home price is less than three times the 
median household income has declined to the same level as in 2003.\33\ 
While the unemployment rate may decline in 2010 and 2011, or at a 
minimum the rate of unemployment may level off, there are concerns as 
to whether jobs will return in areas where excess single-family housing 
units are located.\34\
---------------------------------------------------------------------------

    \32\ U.S. Housing Market Conditions, 3rd Quarter 2009. 
Department of Housing and Urban Development at 17.
    \33\ ``State of the Nation's Housing 2009.'' Joint Center for 
Housing Studies of Harvard University at 9.
    \34\ Emile J. Brinkmann, Mortgage Bankers Association. Senate 
Banking, Housing and Urban Affairs Committee. Oct. 20, 2009 at 3.
---------------------------------------------------------------------------

    From April 2008 through December 2008, eligible first-time 
homebuyers received a $7,500 tax credit. From January 2009 through the 
end of November 2009, the tax credit was revised to include an $8,000 
non-refundable tax credit. On November 5, 2009, the Congress enacted 
H.R. 3548, the Unemployment Compensation Extension Act, which extended 
and expanded the $8,000 non-refundable homebuyer tax credit. Under the 
legislation, qualifying first-time homebuyers receive the $8,000 tax 
credit if they sign a contract by April 30, 2010, and close by June 30, 
2010. To encourage ``move up'' homebuyers, the legislation allows 
homebuyers who purchase a new primary residence to qualify for a $6,500 
tax credit, provided they owned their current home for at least five 
consecutive years in the previous eight years.\35\
---------------------------------------------------------------------------

    \35\ ``House Clears Extension of Jobless Benefits, Homebuyer's 
Tax Credit.'' Congressional Quarterly Today Online News. Nov. 5, 
2009.
---------------------------------------------------------------------------

2. Economic, Housing and Demographic Conditions
    The current turmoil in the housing and mortgage markets has created 
less than favorable conditions for expansions in credit to borrowers on 
the margins of homeownership. The adverse market conditions include: 
(1) Tightened credit underwriting practices; (2) sharply increased 
standards of private mortgage insurance (MI) companies; (3) increased 
role of FHA in the marketplace; (4) collapse of the private label 
mortgage-backed securities (PLS) market; and (5) increasing 
unemployment. These developments contribute to a decrease in the 
overall number of single-family loans likely to qualify for affordable 
housing goals credit.
    Tightened credit underwriting practices. In general, more 
conservative underwriting standards in the mortgage market will likely 
result in fewer goals-qualifying loans and a lower percentage of goal-
qualifying loans in the market. Underwriting standards in the mortgage 
market generally, and at Fannie Mae and Freddie Mac, tightened 
considerably in 2008 and 2009 in response to declining market 
conditions and early payment defaults, among other factors, and such 
standards can be expected to remain in place in the near future. In May 
2008, responding to changes in private MI underwriting, Fannie Mae 
revised its down payment policy to lower the maximum allowable LTV 
ratio for loans underwritten by Desktop Underwriter (DU) and for 
manually underwritten loans. The implementation of Fannie Mae's updated 
DU Version 8.0, effective in December 2009, generally reduces the 
allowable ``back-end'' borrower debt-to-income ratio--the portion of a 
borrower's income that goes toward paying debts--to 45 percent. In 
addition, it eliminates DU recommendations for Expanded Approval II and 
Expanded Approval III loans, loans which historically counted heavily 
toward the housing goals.\36\ If the DU 8.0 revisions had been in 
effect

[[Page 9039]]

for all of 2009, substantially fewer goals-qualifying loans would have 
been underwritten. The changes to DU will likely have a similar effect 
in 2010 and 2011. Freddie Mac has similarly tightened its underwriting 
standards.
---------------------------------------------------------------------------

    \36\ Desktop Originator/Desktop Underwriter Release Notes. DU 
Version 8.0. DODU 0909. Fannie Mae. Sept. 22, 2009. DU 8.0 will 
allow a back-end ratio of up to 50 percent for case files with 
strong compensating factors.
---------------------------------------------------------------------------

    Sharply increased standards of private mortgage insurers. Much like 
tighter credit underwriting standards generally, higher underwriting 
standards of private MI providers have resulted in fewer goal-
qualifying loans and a lower percentage of goal-qualifying loans in the 
market. As a result of stress in the mortgage markets, beginning in 
late 2007, MI providers implemented major changes in the types of risk 
they were able to insure. MI providers that had experienced substantial 
ratings downgrades acted to minimize losses by imposing stricter 
underwriting standards on loans with high LTVs. In October 2009, 
Standard and Poor's put five MI providers on credit watch for potential 
downgrades, citing economic developments that were having a negative 
effect on the MI providers' book of business.\37\ For the first nine 
months of 2009, private MI activity was down more than 60 percent from 
the previous year. MGIC, the largest mortgage insurer, reported a 
$517.8 million net loss for the third quarter of 2009, an amount equal 
to more than half of the MI industry's loss for the period.\38\ In 
addition, MI providers have implemented measures in ``declining 
markets'' that have sharply limited the insurability of certain higher-
LTV mortgage loans.
---------------------------------------------------------------------------

    \37\ ``FHA Ends 2009 Fiscal Year With a Bang, Topping $100 
Billion in Quarterly Originations for the First Time.'' Inside 
Mortgage Finance. Oct. 30, 2009 at 8.
    \38\ ``Private MIs Continue to Take a Beating as FHA Rockets to 
New Record Market Share.'' Inside Mortgage Finance. Nov. 13, 2009 at 
3-4.
---------------------------------------------------------------------------

    As a result of these conditions, the availability of MI for high-
LTV or low credit score loans is much reduced relative to what it was a 
few years ago. These developments limit the ability of MI providers to 
write new business and reduce the overall mortgage lending volume, 
particularly for higher-LTV mortgages, which historically have tended 
to be more likely to count for purposes of the housing goals.
    Increased role of FHA in the marketplace. Another factor that has 
had substantial marketplace impact is the increase in the share of 
mortgages insured by FHA and mortgages guaranteed by the VA. These 
loans generally are pooled into mortgage-backed securities guaranteed 
by the Government National Mortgage Association (GNMA). Purchases of 
mortgages insured by FHA and mortgages guaranteed by the VA ordinarily 
do not receive goals credit. In general, the impact of the FHA market 
on the percentage of loans in the conventional market that qualify for 
a particular goal depends on: (1) The goal-qualifying size of the 
overall market; (2) the share of the market accounted for by FHA 
mortgages; and (3) the extent to which FHA mortgages have goals 
qualifying characteristics.
    The market share of mortgages insured by FHA and mortgages 
guaranteed by the VA has risen dramatically. In the third quarter of 
2009, FHA endorsed a record $104.2 billion in mortgages, which brought 
the agency's total production to $360.7 billion for the government's 
fiscal year, or nearly a billion dollars a day.\39\ A key reason for 
this growth is that Fannie Mae and Freddie Mac generally cannot buy 
loans with original LTV ratios greater than 80 percent without some 
form of credit enhancement. With the stresses on private mortgage 
insurers, borrowers without substantial down payments are increasingly 
dependent on government insurance programs. Nearly 80 percent of FHA's 
purchase-loan borrowers in 2009 were first-time homebuyers, and in the 
second quarter of 2009, nearly half of all first-time buyers in the 
housing market used FHA-insured loans.\40\ To ensure long-term 
actuarial soundness, FHA announced several policy changes on January 
20, 2010 that could have the effect of limiting its role in the 
mortgage market, including: (1) Reducing the maximum permissible seller 
concession from the current 6 percent to 3 percent, which is in line 
with marketplace norms; (2) requiring a minimum credit score of 580 for 
new borrowers seeking to qualify for the 3.5 percent downpayment 
program; and (3) increasing the up-front mortgage insurance premium by 
50 basis points, to 2.25 percent. In addition, FHA asked for a change 
in the law to allow it the ability to increase the maximum annual 
mortgage insurance premium.\41\
---------------------------------------------------------------------------

    \39\ ``FHA Ends 2009 Fiscal Year With a Bang, Topping $100 
Billion in Quarterly Originations for the First Time.'' Inside 
Mortgage Finance. Oct. 30, 2009 at 8.
    \40\ ``HUD Secretary, FHA Commissioner Report on FHA's 
Finances.'' HUD Press Release No. 09-214. Nov. 12, 2009.
    \41\ ``FHA Announces Policy Changes to Address Risk and 
Strengthen Finances.'' HUD Press Release No. 10-001. Jan. 20, 2010.
---------------------------------------------------------------------------

    Collapse of private label securities market. In the middle part of 
the decade--the period covered by the prior HUD rule on affordable 
housing goals--Fannie Mae and Freddie Mac were major purchasers of the 
AAA-rated tranches of PLS that contained substantial amounts of 
subprime mortgages. While the size and nature of the Enterprises' 
subprime holdings differed, these purchases had an impact on the 
achievement of the housing goals for each Enterprise, particularly for 
the home purchase subgoals. Such loans were not a large factor in the 
mortgage marketplace in 2008 or 2009. OFHEO provided guidance to the 
Enterprises in 2007 incorporating interagency policy guidance from the 
Federal Deposit Insurance Corporation, the Office of the Comptroller of 
the Currency, the Federal Reserve Board and the National Credit Union 
Administration. The guidance restricted the purchase of such securities 
by the Enterprises when certain terms of mortgages backing those 
securities are harmful to the borrower.\42\
---------------------------------------------------------------------------

    \42\ On August 10, 2007, OFHEO issued letters directing the 
Enterprises to apply the principles and practices of the interagency 
Statement on Subprime Mortgage Lending to their purchases of 
subprime loans in the regular flow of business, including bulk 
purchases. OFHEO directed that, not later than September 13, 2007, 
nontraditional and subprime loans purchased by Fannie Mae and 
Freddie Mac as part of PLS transactions comply with the Interagency 
Guidance on Nontraditional Mortgage Product Risks and the Statement 
on Subprime Mortgage Lending. This application to PLS conformed to 
the underwriting provisions of the guidance. Further, OFHEO directed 
that the Enterprises adopt such business practices and take such 
quality control steps as necessary to ensure the orderly and 
effective implementation of the guidance with respect to the 
purchase of PLS. OFHEO News Release (Sept. 10, 2007).
---------------------------------------------------------------------------

    Increasing unemployment. Unemployment and underemployment have an 
effect on mortgage default rates, and on the number of borrowers 
seeking and obtaining a purchase money mortgage or a refinance. 
According to the Bureau of Labor Statistics of the U.S. Department of 
Labor, the unemployment rate rose from 9.8 percent to 10.1 percent in 
October 2009, as nonfarm payroll employment continued to decline. 
Construction employment decreased by 62,000 jobs in October.\43\ The 
unemployment rate declined to 10.0 percent in November 2009,\44\ and it 
remained at that level in December 2009.\45\ The average duration of 
unemployment has also increased significantly over the last year.
---------------------------------------------------------------------------

    \43\ ``The Employment Situation--October 2009.'' Economic News 
Release USDL-09-1331. Bureau of Labor Statistics. U.S. Department of 
Labor. Nov. 6, 2009.
    \44\ ``The Employment Situation--November 2009.'' Economic News 
Release USDL-09-1479. Bureau of Labor Statistics. U.S. Department of 
Labor. Dec. 4, 2009.
    \45\ ``The Employment Situation--December 2009.'' Economic News 
Release USDL-09-1583. Bureau of Labor Statistics. U.S. Department of 
Labor. Jan. 18, 2010.
---------------------------------------------------------------------------

    NeighborWorks, a national network of community-based organizations 
actively involved in foreclosure mitigation

[[Page 9040]]

counseling, has estimated that the two leading causes of mortgage 
default rates were a reduction in income (28 percent of defaults) and 
loss of income (17 percent of defaults).\46\ The high rates of 
unemployment and underemployment are likely to continue to have a 
significant impact on the size of the mortgage market going forward.
---------------------------------------------------------------------------

    \46\ NeighborWorks, National Foreclosure Mitigation Counseling 
Program Update, Jan. 23, 2009.
---------------------------------------------------------------------------

    Refinancings. In 2009, Fannie Mae and Freddie Mac refinanced 4 
million mortgage loans through November. Refinancing volumes are 
strongly influenced by mortgage interest rates and LTV ratios on 
existing mortgages.
    Under the umbrella of the Administration's Making Home Affordable 
program, the Home Affordable Refinance Program (HARP) is an effort by 
the Enterprises to enhance the opportunity for owners to refinance. 
Under this program, homeowners whose mortgages are owned or guaranteed 
by Fannie Mae or Freddie Mae who are current on their mortgages have 
the opportunity to reduce their monthly mortgage payments to take 
advantage of low monthly mortgage interest rates, which Freddie Mac's 
January 21, 2010 weekly report indicated had fallen to 4.99 percent for 
a 30-year, fixed-rate mortgage. For homeowners with a current LTV ratio 
between 80 and 125 percent, the Enterprises will refinance mortgages 
without requiring additional mortgage insurance.
    Demographic conditions. In establishing the 2010 goals, FHFA 
analyzed current demographic trends for their possible effect on 
housing demand. Analysis of current trends reveals that by 2008, 
household formation rates were already on the decline. In addition, the 
recession and unemployment have reduced immigration, which in the past 
has been a driver of housing demand. It is still too early to assess 
the impact of the current economic downturn on housing demand, 
particularly given regional variations in impact and mitigating 
factors, such as increased affordability of housing ownership. In the 
long-term, housing demand is likely to increase as a result of 
population growth, immigration, and future household formation by the 
generation born between 1981 and 2000.\47\ However, the impact of long-
term demographic conditions on short-term goals performance would be 
minimal.
---------------------------------------------------------------------------

    \47\ ``State of the Nation's Housing 2009.'' Joint Center for 
Housing Studies of Harvard University.
---------------------------------------------------------------------------

3. The Performance and Effort of the Enterprises Toward Achieving the 
Housing Goals in Previous Years
    Section 1332(a) of the Safety and Soundness Act, as amended by 
section 1128 of HERA, requires FHFA to establish three single-family 
home purchase mortgage goals for the Enterprises: A goal for low-income 
families; a goal for families that reside in low-income areas; and a 
goal for very low-income families. Revised section 1332(a) also 
requires FHFA to establish a goal for single-family refinancing 
mortgages for low-income families. The following section reviews what 
performance would have been on these four single-family goals if they 
had been in effect over the 2001-08 period.
    Low-Income Families Housing Goal. The affordable housing goals in 
the Safety and Soundness Act, as amended, apply to the Enterprises' 
acquisitions of ``conventional, conforming, single-family, purchase 
money mortgages financing owner-occupied housing'' for the targeted 
groups. Accordingly, they are similar in structure to the home purchase 
subgoals established by HUD for Fannie Mae and Freddie Mac for 2005-08, 
and subsequently extended and modified for 2009 by FHFA. One difference 
is that the subgoals established by HUD applied only to mortgages on 
properties in metropolitan areas, while the new goals apply to 
mortgages on properties in all locations.
    The low-income families housing goal applies to mortgages made to 
``low-income families,'' defined as families with incomes no greater 
than 80 percent of AMI.\48\ Past performance on this goal, if it had 
been in effect in previous years, is shown in Table 1. As indicated, 
Fannie Mae's performance would have risen markedly between 2001 and 
2003, and then, with the exception of 2006, would have fallen steadily 
between 2003 and 2008. Its performance last year, at 23.2 percent, 
would have been the lowest of the period. Freddie Mac's performance 
generally would have risen between 2001 and 2005, and then declined 
between 2005 and 2008. Its performance last year would have been 24.5 
percent, also the lowest of the period.
---------------------------------------------------------------------------

    \48\ 12 U.S.C. 4502(14).
---------------------------------------------------------------------------

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[[Page 9041]]

[GRAPHIC] [TIFF OMITTED] TP26FE10.000

    Very Low-Income Families Housing Goal. The Safety and Soundness 
Act, as revised by HERA, defines a ``very low-income'' owner-occupied 
property as one occupied by a family with income no greater than 50 
percent of AMI.\49\ Past performance on this goal, if it had been in 
effect in previous years, is shown in Table 2. As indicated, Fannie 
Mae's performance would have risen from 6.8 percent in 2001 to 9.0 
percent in 2003 and 2004, and then, with the exception of 2006, 
generally decreased, to 5.6 percent in 2008, the lowest in the period. 
Freddie Mac's performance on this goal would have changed little over 
the 2001-08 period, remaining in the range of 6.2 percent to 7.0 
percent.
---------------------------------------------------------------------------

    \49\ 12 U.S.C. 4502(24).

---------------------------------------------------------------------------

[[Page 9042]]

[GRAPHIC] [TIFF OMITTED] TP26FE10.001

    Low-Income Areas Housing Goal. The low-income areas housing goal 
targets the Enterprises' purchases of mortgages in specified geographic 
areas, in a manner similar to the previous underserved areas goal. The 
Safety and Soundness Act, as revised by HERA, now defines a ``low-
income area'' as a census tract or block numbering area in which the 
median income does not exceed 80 percent of AMI, including families 
with incomes not greater than 100 percent of AMI who reside in minority 
census tracts and in designated disaster areas.\50\ It defines a 
``minority census tract'' as 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.\51\
---------------------------------------------------------------------------

    \50\ 12 U.S.C. 4502(28).
    \51\ 12 U.S.C. 4502(29).
---------------------------------------------------------------------------

    According to the 2000 census, of the 66,144 unique census tracts, 
there were 18,613 low-income tracts. There were 25,254 tracts with a 
minority population of at least 30 percent, of which 5,711 had a tract 
income greater than 80 percent of AMI but less than or equal to 100 
percent of AMI. Accordingly, based on the 2000 census, there were 
24,324 tracts that would be targeted by this goal, excluding tracts in 
designated disaster areas, but only families with incomes no greater 
than AMI would be included in the 5,711 high-minority, moderate-income 
tracts.
    Past performance on the low-income areas housing goal, if it had 
been in effect in previous years, excluding designated disaster areas, 
is shown in Table 3. As indicated, Fannie Mae's

[[Page 9043]]

performance would have varied over time. It would have reached its 
highest level, 19.3 percent, in 2002, and its lowest level, 15.1 
percent, in 2008. Freddie Mac's performance would have peaked at 19.3 
percent in 2002, then fallen sharply to 13.3 percent in 2003, and would 
have been 15.2 percent in 2008.
[GRAPHIC] [TIFF OMITTED] TP26FE10.002


[[Page 9044]]


    Refinancing Housing Goal. Under the Safety and Soundness Act, as 
revised by HERA, the refinancing housing goal is targeted to low-income 
families, i.e., families with incomes no greater than 80 percent of 
AMI. It applies to mortgages that are ``given to pay off or prepay an 
existing loan secured by the same property.'' Thus, the goal would not 
apply to home equity loans.
    Past performance on this goal, if it had been in effect in previous 
years, is shown in Table 4. As indicated, Fannie Mae's performance 
would have peaked in 2004, following the 2001-03 refinance boom, and 
declined thereafter, to a low of 23.1 percent last year. Freddie Mac's 
performance would have peaked in 2005, and then also declined, to 23.9 
percent in 2008.
[GRAPHIC] [TIFF OMITTED] TP26FE10.003

BILLING CODE C
    Interpreting Past Goal Performance Data. Past performance is not 
necessarily a good indicator of future goal performance, due to changes 
in mortgage interest rates, home prices, credit availability, and other 
factors. This subsection briefly discusses the role of the purchase of 
PLS in achieving past performance, and the possible effects of changes 
in underwriting guidelines recently adopted by the Enterprises. Also, 
FHFA has partial-year data which allow calculation of each Enterprise's 
performance in the first three quarters of 2009 relative to the 
proposed 2010-2011 goals. Such data are proprietary, but preliminary 
full-

[[Page 9045]]

year data will be included in the final rule for the 2010-2011 goals.
    The Enterprises purchased PLS in recent years primarily due to 
anticipated profitability, to maintain market share, and because some 
PLS, especially those containing subprime mortgages, helped achieve the 
housing goals. The performance data in Tables 1-4 include the effects 
of these PLS purchases. Elsewhere in the proposed rule is a discussion 
regarding counting mortgages included in PLS toward the affordable 
housing goals in 2010-2011.
    In response to the housing crisis and their financial difficulties, 
including the performance of PLS, the Enterprises have adopted more 
conservative underwriting guidelines. As previously discussed, those 
changes will affect goal performance.
4. The Ability of the Enterprises To Lead the Industry in Making 
Mortgage Credit Available
    As background for the statutory requirement to consider the 
Enterprises' ``ability * * * to lead the industry in making mortgage 
credit available,'' a Senate committee report on legislation leading to 
the enactment of the Safety and Soundness Act in 1992 expressed concern 
that Enterprise purchases had not kept pace with market originations of 
mortgages to low- and moderate-income borrowers.\52\ FHFA shares that 
concern and has defined the proposed Enterprise housing goals in part 
against that history. FHFA believes that, in fact, the Enterprises have 
played a leading role in sustaining the mortgage market during the 
recent crisis.
---------------------------------------------------------------------------

    \52\ S. Rep. No. 102-282, at 10-11 (1992).
---------------------------------------------------------------------------

    Leading the industry in making mortgage credit available includes 
making mortgage credit available to primary market borrowers at 
differing income levels. It also includes the ability of the 
Enterprises to respond to pressing mortgage needs in the current 
market, such as the threat of a loss of a home by the borrower, for 
example, by implementing the loan modification and refinance programs 
under the Administration's Making Home Affordable Program, and by 
supporting State and local housing finance agencies. The Enterprises' 
ability to respond is reflected through the introduction of safe and 
sound innovative products, technology and process improvements.
    In the current market environment, the Enterprises, along with FHA 
and VA, now lead the market. From 1997-2003, the Enterprises' share of 
mortgage originations grew to almost 55 percent. From 2004-2006, the 
private mortgage market predominated, and the Enterprises' market share 
dropped to below 35 percent. After the private mortgage market began to 
deteriorate in 2007, the Enterprises' share of the single-family 
mortgage market grew to about 75 percent, with FHA and VA accounting 
for the bulk of the balance.\53\
---------------------------------------------------------------------------

    \53\ Address by Edward DeMarco, Acting Director of the Federal 
Housing Finance Agency, New England Mortgage Bankers 22nd Annual 
Conference, Oct. 1, 2009 at 5.
---------------------------------------------------------------------------

    At the same time, the Enterprises have been severely stressed by 
the financial crisis. As described below, they have suffered losses 
that have depleted their capital and resulted in their being sustained 
only by multi-billion-dollar infusions of capital from the U.S. 
Treasury under the Senior Preferred Stock Purchase Agreements. In this 
environment, in which FHFA as conservator is also exercising a 
statutory mandate to conserve and preserve the Enterprises' assets, it 
is especially important that the Enterprises not take on undue 
additional credit risk by purchasing mortgages in any defined segment 
in quantities beyond what market originations reasonably provide.
    FHFA has taken into account all of the foregoing considerations in 
assessing the Enterprises' ability to lead the industry.
5. Other Mortgage Data
    The primary source of reliable mortgage data for establishing the 
affordable housing goals is the HMDA data reported by originators. 
Enterprise mortgage purchase data are compared to HMDA data to evaluate 
the Enterprises' performance with respect to leading or lagging the 
housing market under specific goals.
    FHFA also uses other reliable data sources including the American 
Housing Survey (AHS), Census demographics, commercial sources such as 
Moody's,\54\ and other industry and trade research sources, e.g., 
Mortgage Bankers Association (MBA),\55\ Inside Mortgage Finance 
Publications,\56\ NAR,\57\ National Association of Home Builders 
(NAHB),\58\ and the Commercial Mortgage Securities Association.\59\ The 
FHFA MIRS,\60\ previously administered by the Federal Housing Finance 
Board, a predecessor agency to FHFA, is used to complement forecast 
models for home purchase loan originations by making intra-annual 
adjustments prior to the public release of HMDA mortgage data. In the 
development of economic forecasts, FHFA uses data and information from 
Wells Fargo, PNC, Fannie Mae, Freddie Mac, The Wall Street Journal 
Survey and Forcast.org. In addition, FHFA uses market and economic data 
from the Bureau of Labor Statistics, the Federal Reserve Board, the 
Department of Commerce Bureau of Economic Analysis, and FedStats.\61\
---------------------------------------------------------------------------

    \54\ http://www.moodys.com/.
    \55\ http://www.mbaa.org/.
    \56\ http://www.imfpubs.com/.
    \57\ http://www.realtor.org/.
    \58\ http://www.nahb.org/.
    \59\ http://www.cmsaglobal.org/CMSA_Resources/Research/Market_Statistics/Market_Statistics/.
    \60\ http://www.fhfa.gov/Default.aspx?Page=250.
    \61\ http://www.fedstats.gov/other.html.
---------------------------------------------------------------------------

6. Market Size
    In general, the single-family mortgage market environment of 2009 
is expected to extend to 2010, with modest improvements in 2011. Much 
of FHFA's estimates of the mortgage market rely on the Federal Reserve 
continuing to support low interest rates.\62\ Other quantifiable 
factors influencing FHFA's outlook for the mortgage market include 
general growth in the economy, employment and inflation. Other factors 
that are less easily quantified include the effect of the extension and 
expansion of the homebuyer tax credit on the mortgage market. Activity 
in the subprime market is expected to be minimal through 2011.
---------------------------------------------------------------------------

    \62\ ``The [Federal Open Market] Committee will maintain the 
target range for the Federal funds rate at 0 to \1/4\ percent and 
continues to anticipate that economic conditions, including low 
rates of resource utilization, subdued inflation trends, and stable 
inflation expectations, are likely to warrant exceptionally low 
levels of the Federal funds rate for an extended period.'' Board of 
Governors of the Federal Reserve System, Press Release, Nov. 4, 
2009.
---------------------------------------------------------------------------

    The composition of the mortgage market will be influenced by FHA's 
market share, which rose significantly in 2008-2009 and continues to be 
high, and by the rate of refinancing. Given that underwriting standards 
are expected to be tight in 2010 and 2011, FHA will most likely 
continue to have a much larger presence in the mortgage market. In 
addition, rising interest rates or a combination of depressed housing 
prices and high LTV ratios could push down the number of homeowners 
refinancing their mortgages, lowering the refinance rate.
    The outlook for the housing and mortgage markets over the 2010-2011 
period remains guarded. Both of these markets will be heavily 
influenced by general economic factors as well as internal market 
forces. In developing its Economic and Mortgage Outlook (see Table 5, 
below) FHFA uses an average of forecasted values for key economic 
indicators drawn from several industry

[[Page 9046]]

sources.\63\ On average, industry forecasters project the economy to 
rebound in 2010 and 2011, with real Gross Domestic Product (GDP) 
growing at a rate of 2.6 and 2.8 percent, respectively. Industry 
assessments on housing markets are generally reserved. If unemployment 
remains high, at approximately 10 percent, it would have a negative 
impact on the housing market. There are also concerns over the impact 
of the overall economy on housing markets. According to the MBA, 
``[h]ousing markets are beginning to slowly recover from the worst 
recession in decades, but are vulnerable to additional macroeconomic 
shocks.'' \64\ Industry forecasters expect that inflation will remain 
low, and the minutes of the November 2009 meeting of the Federal Open 
Market Committee (FOMC) indicate that the FOMC expects core inflation 
to slow somewhat further over the next two years and inflation to be 
subdued for some time. The FOMC has also concluded that ``economic 
conditions were likely to warrant exceptionally low [Federal funds 
rates] for an extended period.'' \65\ Mortgage interest rates are 
currently dependent on Federal policies and somewhat independent of the 
Federal funds rate, but for the period between 2010 and 2011, FHFA is 
not assuming a substantial increase in mortgage interest rates.
---------------------------------------------------------------------------

    \63\ These forecasts include those by the Mortgage Bankers 
Association, Fannie Mae, Freddie Mac, the National Association of 
Realtors, Wells Fargo, Wall Street Journal Forecast Survey, PNC 
Financial and forecast.org.
    \64\ Mortgage Bankers Association, Mortgage Finance Commentary, 
Nov. 10, 2009.
    \65\ See Federal Open Market Committee of the Federal Reserve 
System, Minutes of the Federal Open Market Committee, Nov. 3-4, 
2009. Accessed at http://www.federalreserve.gov/monetarypolicy/fomcminutes20091104.htm.
---------------------------------------------------------------------------

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[[Page 9047]]

[GRAPHIC] [TIFF OMITTED] TP26FE10.004

    Mortgages insured by FHA are likely to continue to represent a 
significant share of the mortgage market in 2010 and 2011. These loans 
generally are pooled into mortgage-backed securities guaranteed by 
GNMA. Purchases of

[[Page 9048]]

mortgages insured by FHA and VA ordinarily do not receive affordable 
housing goals credit.
    As shown in Figure 1, the market share of all mortgages insured by 
FHA increased dramatically, from a low of 2.5 percent in 2005 to a high 
of 32 percent in December 2008. A key reason for this growth is that 
Fannie Mae and Freddie Mac generally cannot buy loans with original LTV 
ratios greater than 80 percent without some form of credit enhancement. 
With the stresses on private mortgage insurers, borrowers without 
substantial down payments are increasingly dependent on government 
insurance programs. Since FHA's market share increase appears to 
coincide with the demise of the subprime market, it would be easy to 
conclude that for high-risk borrowers, FHA loans are replacing loans 
from subprime lenders. However, FHA's internal data indicate that the 
average riskiness of the loans they insure has actually decreased, 
i.e., credit risk scores increased, since late 2007.\66\
---------------------------------------------------------------------------

    \66\ See FHA Outlook, a monthly statistical summary of 
application insurance endorsement, delinquency and claim information 
on FHA single family programs. Available at http://www.hud.gov/offices/hsg/comp/rpts/ooe/olmenu.cfm.

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[[Page 9049]]

[GRAPHIC] [TIFF OMITTED] TP26FE10.005

    With the increase in the FHA loan limit in 2008, FHA is able to 
endorse larger mortgages. These mortgages would otherwise have been 
originated as conventional mortgages. In 2008, nearly 80 percent of 
FHA's

[[Page 9050]]

endorsements of refinancing mortgages came from mortgages that were 
previously conventional mortgages, and this share increased throughout 
the year.\67\ FHA's market share for home purchase mortgages increased 
from 3.8 percent in January 2007 to 32 percent in December 2008. The 
share of FHA endorsed refinancing loans increased from 4 percent in 
2007 to 15 percent of the conforming market in 2008. As expected, these 
additional mortgages reduced the share of FHA mortgages that were for 
low- and very low-income borrowers. While the share of FHA loans for 
lower-income borrowers decreased, the share of lower-income borrower 
loans increased in the conventional conforming market between 2007 and 
2008 (see Table 6).
---------------------------------------------------------------------------

    \67\ Id. 2008 was the first year FHA reported refinance 
endorsements by whether they were a refinance of a conventional 
mortgage or an FHA mortgage.
[GRAPHIC] [TIFF OMITTED] TP26FE10.006

BILLING CODE C
    The experience for the low-income areas goal is different. While 
FHA endorsed more loans on properties located in low-income areas, it 
endorsed an even larger number of loans in higher-income areas. As a 
result, the low-income areas share of FHA's mortgages decreased. 
However, unlike the borrower-income based goals, the low-income area 
share of the conventional market also decreased. While the volume of 
conventional conforming mortgages in 2008 was 50 percent of that in 
2007, the volume of conventional conforming mortgages from low-income 
areas in 2008 was only 40 percent of the level in 2007. The low-income 
area share of the conventional conforming market fell by 240 basis 
points between 2007 and 2008. As shown in Table 5, FHA market share is 
expected to be 30 percent in 2009, 2010 and 2011.
    The impact from the first-time homebuyer tax credit is unclear. 
Additional first-time homebuyers taking advantage of the $8,000 tax 
credit will likely have a positive impact on the housing goals. The 
additional repeat homebuyers who qualify for the $6,500 tax credit 
(there is a five-year occupancy requirement) will likely have a 
negative impact on the housing goals. For the proposed rule, FHFA has 
assumed that the homebuyer tax credit will have no significant impact 
on the share of conventional loans to low- and moderate-income 
borrowers or on the share of conventional loans that support housing 
purchases in lower-income areas.
    FHFA's estimates of the market performance for the three single-
family owner-occupied property purchase money mortgage housing goals 
and the refinancing mortgage housing goal are provided in Table 6. FHFA 
estimates that the low-income and very low-income borrower mortgage 
shares of the home purchase mortgage market will be 24 percent to 30 
percent and 6 percent to 9 percent, respectively, in 2010 and 2011. The 
share of goal-qualifying mortgages in low-income areas in the home 
purchase mortgage market is estimated to be 11 percent to 15 percent in 
2010 and 2011. With a projected refinance rate of 46 percent in 2010 
(down from 67 percent in 2009), FHFA estimates that 19 percent to 30 
percent of refinance mortgages will be made to low-income borrowers. 
The refinance rate is expected to fall to 37 percent in 2011, resulting 
in an estimate that the low-income borrower mortgage share of the 
refinance mortgage market will be 19 percent to 33 percent in that 
year. To arrive at these estimates, FHFA used econometric methods to 
extend the trends of the market performance for each goal, based on a 
monthly time series database provided by the Federal Financial 
Institutions Examination Council (FFIEC) and the Federal Reserve Board.
    A detailed description of FHFA's analysis of the mortgage market 
for 2010 and 2011 market model methodology, is contained in a document 
entitled ``Market Estimates for the 2010 and 2011 Enterprise Single-
Family Housing Goals,'' which is available at http://www.fhfa.gov.

[[Page 9051]]

Sustainable Mortgages
    An alternative to defining the market for determining whether a 
mortgage is eligible to count toward the housing goals would be to 
focus on the sustainability of the mortgage. Under this approach, the 
housing goals would be defined in such a way that only mortgages that 
support sustainable home ownership would count toward the goals. This 
would require a standard to differentiate between mortgages that are 
sustainable and mortgages that are likely not to be sustainable.
    One approach would be to use historical data on the cumulative 
default rates (CDRs) of mortgages acquired by the Enterprises and make 
a determination, based on statistical models that predict CDR, whether 
mortgages with specific characteristics promote sustainable 
homeownership. The higher the predicted CDR of a mortgage with specific 
characteristics, the higher the probability the mortgage will default 
sometime within its life. FHFA would determine that mortgages with 
expected CDRs above some point did not promote sustainable 
homeownership. It might also be possible to establish a statistical 
correlation between a mortgage's expected CDR and the spread between 
the yield on the loan and some benchmark interest rate. If so, it might 
be possible to use that spread as a basis for determining whether 
mortgages promoted sustainable homeownership.
    Both Enterprises use statistical models to calculate expected CDR 
as part of their business decision strategy. FHFA could rely on 
Enterprise statistical models or develop its own models to estimate 
CDRs for the purpose of determining whether mortgages acquired by the 
Enterprises had estimated CDRs above a specified threshold. FHFA would 
also have to develop estimates of the share of single-family mortgages 
originated each year that had estimated CDRs above and below that 
threshold. To develop its own statistical models, FHFA could use loan-
level mortgage data obtained from the Enterprises and leased from 
private vendors. Data obtained through the mortgage market survey 
required by section 1324(c) of the Safety and Soundness Act, as amended 
by HERA, might also be useful.
    FHFA invites comments on this alternative to estimating the market 
and counting single-family mortgages toward the housing goals.
7. Financial Condition of the Enterprises
    In the first two full years of the current housing crisis--from 
July 2007 through the first half of 2009--combined losses at the 
Enterprises totaled $165 billion. In the first half of 2009, the 
Enterprises reported combined losses of $47 billion. The financial 
performance of both Enterprises is dominated by credit-related expenses 
and losses that stem principally from purchases of PLS and purchases 
and guarantees of mortgages originated in 2006 and 2007. Since the 
establishment of the conservatorship for the Enterprises in September 
2008, the combined losses of the two Enterprises depleted their capital 
and required them to draw from the U.S. Treasury under the Senior 
Preferred Stock Purchase Agreements.
    FHFA's duties as conservator require the conservation and 
preservation of the assets of the two Enterprises. Given the importance 
of the Enterprises to the housing market, any goal-setting must be 
closely linked to putting the Enterprises in sound and solvent 
condition. Over the long term, such actions will assist homeowners and 
neighborhoods while saving the Enterprises money. In 2009, FHFA 
attempted to align the Enterprises' affordable housing goals with safe 
and sound practices and market reality, and the housing goals 
requirements for 2010 and 2011 must be similarly aligned.

B. Single-Family Housing Goal Levels

    Based on the factors described above, proposed Sec.  1282.12 would 
establish the benchmark levels for the single-family housing goals for 
2010 and 2011 as follows:
    Housing goals for low-income families. The benchmark level of the 
annual goal for each Enterprise's purchases of purchase money mortgages 
on owner-occupied single-family housing for low-income families would 
be 27 percent of the total number of such mortgages purchased by that 
Enterprise.
    Housing goals for families in low-income areas. The benchmark level 
of the annual goal for each Enterprise's purchases of purchase money 
mortgages on owner-occupied single-family housing for families in low-
income areas would be 13 percent of the total number of such mortgages 
purchased by that Enterprise.
    Housing goals for very low-income families. The benchmark level of 
the annual goal for each Enterprise's purchases of purchase money 
mortgages on owner-occupied single-family housing for very low-income 
families would be 8 percent of the total number of such mortgages 
purchased by that Enterprise.
    Housing goals for refinancing mortgages. The benchmark level of the 
annual goal for each Enterprise's purchases of refinancing mortgages on 
owner-occupied single-family housing for low-income families would be 
25 percent of the total number of such mortgages purchased by that 
Enterprise.

VI. Analysis of Multifamily Housing Goals

    Section 1333(a)(4) of the Safety and Soundness Act, as amended by 
HERA, requires FHFA to consider the following six factors in setting 
multifamily special affordable housing goals:
    (1) National multifamily mortgage credit needs and the ability of 
the Enterprise to provide additional liquidity and stability for the 
multifamily mortgage market;
    (2) The performance and effort of the Enterprise in making mortgage 
credit available for multifamily housing in previous years;
    (3) The size of the multifamily mortgage market for housing 
affordable to low-income and very low-income families, including the 
size of the multifamily markets for housing of a smaller or limited 
size;
    (4) The ability of the Enterprise to lead the market in making 
multifamily mortgage credit available, especially for multifamily 
housing affordable to low-income and very low-income families;
    (5) The availability of public subsidies;
    (6) The need to maintain the sound financial condition of the 
Enterprise.\68\
---------------------------------------------------------------------------

    \68\ 12 U.S.C. 4563(a)(4).
---------------------------------------------------------------------------

A. Analysis of Factors for Multifamily Housing Goals

    FHFA's analysis of each of the factors is set forth below.
1. National Multifamily Mortgage Credit Needs
    Due to the credit crisis, traditional sources of multifamily 
credit, primarily commercial mortgage-backed securities (CMBS), life 
insurance companies, commercial banks, and thrifts, have significantly 
reduced lending or stopped lending completely. This has left Freddie 
Mac and Fannie Mae as the principal sources of financing for most 
multifamily mortgages. FHA, another active source of multifamily 
credit, has capacity constraints that limit its ability to 
significantly expand lending through its insured programs.
    With multifamily property prices having fallen by almost 34 percent 
from the third quarter of 2008 to the third quarter of 2009,\69\ many 
properties that

[[Page 9052]]

would have been eligible for refinance through Enterprise programs lack 
enough equity to meet Enterprise loan underwriting standards. Declining 
multifamily property prices will adversely affect owners who financed 
with interest-only loans over the past decade. As these loans become 
due, properties with non-amortizing loans will not have accumulated 
sufficient additional equity over the term of the loan to counter the 
effects of declining property values.
---------------------------------------------------------------------------

    \69\ Moody's/Real CPPI Report, Jan. 2010.
---------------------------------------------------------------------------

    While obtaining multifamily credit is difficult for most owners, 
demand for new multifamily housing credit has also waned. According to 
the U.S. Census Bureau, multifamily housing starts plummeted by 47 
percent from September 2008 to December 2009.\70\ Sales of multifamily 
properties are far below normal levels in part because property owners 
are waiting for property values to stabilize. Many other multifamily 
property owners, unable to refinance, have been granted extensions by 
lenders, or in the case of loans securitized through CMBS, by the 
servicer. On the positive side, the maturations of multifamily loans 
acquired by the Enterprises and backing CMBS issuances are unlikely to 
begin to increase significantly until after 2010.
---------------------------------------------------------------------------

    \70\ ``New Residential Construction in December 2009.'' U.S. 
Census Bureau, Joint Release, U.S. Department of Housing and Urban 
Development, Jan. 20, 2009.
---------------------------------------------------------------------------

    While the Enterprises have primarily purchased the highest-rated 
CMBS tranches, they may be indirectly affected by increasing CMBS 
delinquency rates. According to a March 2009 report by Deutsche Bank, 
delinquencies on CMBS issuances began to accelerate in late 2008, and 
should peak at 6 to 7 percent in late 2010.\71\ According to December 
2009 data released by the MBA,\72\ delinquencies on CMBS issuances rose 
slightly from 3.89 percent to 4.06 percent in the third quarter of 
2009. The CMBS delinquency rate in the third quarter of 2008 was 0.63 
percent. As properties collateralizing CMBS issuances become 
delinquent, foreclosures and workouts will increase, further depressing 
prices of all commercial properties, including multifamily properties. 
This will make refinancing maturing multifamily loans more challenging 
for the Enterprises.
---------------------------------------------------------------------------

    \71\ Commercial Real Estate Outlook Q1 2009, Deutsche Bank, Mar. 
2009.
    \72\ MBA Commercial/Multifamily Mortgage Delinquency Report, 
Dec. 7, 2009.
---------------------------------------------------------------------------

    While multifamily delinquencies remain relatively low for both 
Fannie Mae\73\ and Freddie Mac,\74\ 0.062 percent and 0.014 percent 
respectively, there is growing concern among multifamily property 
owners and investors about properties that are overleveraged or 
generating negative cashflows. Depending on the magnitude of distressed 
properties requiring restructuring, both Fannie Mae's and Freddie Mac's 
multifamily activity could exceed FHFA forecasts.
---------------------------------------------------------------------------

    \73\ Fannie Mae: Monthly Summary, November 2009, Table 9.
    \74\ Freddie Mac: Monthly Volume Summary: November 2009, Table 
6.
---------------------------------------------------------------------------

2. Past Performance
    HUD established dollar-based multifamily subgoals for the 
Enterprises for the years 1996 through 2008. HERA extended the 2008 
subgoals through 2009, subject to review by FHFA, and in its August 10, 
2009 final rule on the housing goals, FHFA increased these 2009 
subgoals modestly, from $5.49 billion to $6.56 billion for Fannie Mae, 
and from $3.92 billion to $4.60 billion for Freddie Mac.
    HERA changed the structure of the multifamily housing goal for 2010 
and beyond. The multifamily housing goal for 2009 is set in terms of 
units for very low-income families and low-income families in low-
income areas. The scope of the goal is broader for 2010-2011, covering 
units affordable to all low-income families (those with incomes no 
greater than 80 percent of AMI) regardless of property location.
    Section 1333(a)(2) of the Safety and Soundness Act, as revised by 
HERA, requires the Director to establish ``additional requirements for 
the purchase by each enterprise of mortgages on multifamily housing 
that finance dwelling units affordable to very low-income families,'' 
with ``very low-income'' families defined as those with incomes no 
greater than 50 percent of AMI.\75\ To implement this provision, FHFA 
is proposing to establish a multifamily housing subgoal for very low-
income families. FHFA invites comment on this proposed requirement.
---------------------------------------------------------------------------

    \75\ 12 U.S.C. 4563(a)(2).
---------------------------------------------------------------------------

    Section 1333(a)(3) of the Safety and Soundness Act, as revised by 
HERA, provides that the Director shall require each Enterprise to 
report on its purchases of mortgages on multifamily housing ``of a 
smaller or limited size that is affordable to low-income families.'' 
The provision defines small multifamily projects as those containing 5 
to 50 units or as those with mortgages of up to $5,000,000. The 
Director may adjust the definition to include projects containing 
different numbers of units or with mortgages of different amounts. The 
provision further states that the Director may establish additional 
requirements related to such units by regulation.\76\
---------------------------------------------------------------------------

    \76\ 12 U.S.C. 4563(a)(3).
---------------------------------------------------------------------------

    FHFA proposes to define such small multifamily properties as those 
containing 5 to 50 units, which is consistent with industry standards. 
FHFA already requires reporting by the Enterprises for purchases of 
mortgages secured by such properties. FHFA invites comments on whether 
additional requirements for small multifamily properties should be 
considered.
    Multifamily special affordable housing goal. Both Enterprises 
played major roles in funding multifamily units for low-income families 
between 2001 and 2008, as shown in Table 7. Fannie Mae financed an 
average of 417,000 such units over this period, peaking at 538,000 
units in 2003, while Freddie Mac financed an average of 364,000 units, 
peaking at 492,000 units in 2007. However, as discussed elsewhere in 
the proposed rule, the Enterprises followed different approaches to the 
multifamily market, with Freddie Mac relying to a significant extent on 
the purchase of CMBS, while Fannie Mae depended to a greater extent on 
the direct purchase of multifamily loans originated by its Delegated 
Underwriting and Servicing (DUS) lenders.
    As indicated in Table 7, Fannie Mae's financing of low-income 
multifamily units fell by 16 percent, from 532,000 units in 2007 to 
448,000 in 2008 units. Financing fell more sharply at Freddie Mac, by 
44 percent, from 492,000 units in 2007 to 276,000 units in 2008. This 
difference reflects the drop in CMBS purchases by Freddie Mac. As a 
result, Freddie Mac's financing of such units was 62 percent of Fannie 
Mae's financing, the lowest ratio of the 2001-08 period.
BILLING CODE P

[[Page 9053]]

[GRAPHIC] [TIFF OMITTED] TP26FE10.007

    Very low-income multifamily subgoal. HERA revised the definition of 
``very low-income'' families as it pertains to the Enterprises' housing 
goals. Under the housing goals established by HUD for 1993-2008, ``very 
low-income'' referred to borrowers with incomes no greater than 60 
percent of AMI, or for rental units, to units affordable to families 
with incomes in this range, with adjustments for family size. This 
definition was changed by HERA to refer to borrowers with incomes no 
greater than 50 percent of AMI, or for rental units, to units 
affordable to families with incomes in this range, with adjustments for 
family size.\77\ The new definition of ``very low-income'' families is 
consistent with that used in some other housing programs.
---------------------------------------------------------------------------

    \77\ 12 U.S.C. 4502(24).
---------------------------------------------------------------------------

    Enterprise financing of rental units for very low-income families 
over the 2001-08 period is reported in Table 8. On average, Fannie Mae 
funded 94,000 such units each year, and Freddie Mae funded 86,000 such 
units. The same general pattern prevailed over time as that shown in 
Table 7, with a modest drop in funding by Fannie Mae and a substantial 
drop (55 percent) by Freddie Mac. As a result, the number of such units 
financed by Freddie Mac in 2008 was 49 percent of the number financed 
by Fannie Mae, the lowest ratio of this period.

[[Page 9054]]

[GRAPHIC] [TIFF OMITTED] TP26FE10.008

    Financing of low-income units in small multifamily properties. As 
discussed above, HERA recognizes the important role played by small 
multifamily housing as a source of affordable rental housing. According 
to the 2007 AHS, multifamily properties containing 5-49 units (a 
slightly different definition than the 5-50 unit definition in HERA) 
constituted 77 percent of all multifamily units and 74 percent of 
multifamily units constructed in the previous 4 years. Table 9 reports 
additional information on small multifamily properties affordable to 
low-income families.
    Both Enterprises increased their financing of low-income 
multifamily units between 2001 and 2003, from 24,000 units to 155,000 
units for Fannie Mae, and from 44,000 units to 138,000 units for 
Freddie Mac. This increase was motivated at least in part by the 
favorable counting treatment that HUD allowed for financing goal-
qualifying units in small multifamily properties over the 2001-03 
period. Under this counting treatment, each goal-qualifying unit 
counted twice in the numerator and once in the denominator in 
calculating goal performance.
    As indicated in Table 9, both Enterprises decreased their roles in 
the small multifamily market after the expiration of the favorable HUD 
counting treatment--for Fannie Mae, an average of 49,000 units for 
2004-07, and for Freddie Mac, an average of 24,000 such units. Fannie 
Mae financed 44,000 low-income small multifamily units in 2008, 
approximately equal to the average for 2004-07, while Freddie Mac 
financed only 2,078 such units in 2008, a decrease of 91 percent from 
its 2004-07 average. FHFA is concerned about Freddie Mac's virtual exit 
from this business and seeks comment on whether small multifamily low-
income housing subgoals should be established for future years.

[[Page 9055]]

[GRAPHIC] [TIFF OMITTED] TP26FE10.009

BILLING CODE C
3. Market Size
    The multifamily mortgage market is likely to remain relatively 
unchanged in 2010 as compared to 2009, and the dollar amount of 
multifamily loans financed in 2010 will likely be similar to that of 
2009, approximately $40-45 billion. Poor property fundamentals, 
especially declines in property value, will affect the type of 
properties and owners that can access multifamily credit. If the 
multifamily market begins to recover in 2011, multifamily originations 
may increase. Projections of such activity, however, are uncertain. 
Accordingly, for purposes of this rulemaking, the multifamily goals for 
both 2010 and 2011 are based on the overall multifamily market for 2009 
and Enterprise multifamily performance in the years 2004-2008, taking 
into account the average percent of very low-income and low-income 
purchases by the Enterprises in those years. As in prior years, the 
multifamily goals are set separately for each Enterprise. Unlike prior 
years, the multifamily goals are measured in units rather than dollar 
volume.
    The proportion of multifamily affordable units available for 
financing in 2010 and 2011 will likely be below historical levels due 
to weakness in the multifamily housing market. Steep declines in 
multifamily property prices since mid-2007 have caused a significant 
loss of equity for owners, many of whom can no longer qualify for 
Enterprise financing without placing substantial cash into the 
property. The loss of equity for most owners has meant that only 
financially strong properties and borrowers will qualify for Enterprise 
financing. These properties often have a much lower proportion of 
affordable units.
    Another factor that will likely constrain Enterprise multifamily 
loan production in 2010 and 2011 will be the relatively small dollar 
amount of loans maturing in the Enterprise portfolios in 2010 and 2011. 
The MBA expects only $26 billion in total maturing multifamily 
mortgages in 2010. However, the volume of maturing loans is expected to 
increase from 2011 onward.\78\
---------------------------------------------------------------------------

    \78\ Multifamily Housing News: MBA Says Large Amounts of 
Multifamily Loans Will Mature in 2011 and After, Feb. 11, 2009.
---------------------------------------------------------------------------

    For well over a decade, Freddie Mac relied upon purchases of CMBS 
and structured deals involving large portfolios of affordable 
multifamily loans to meet applicable affordable housing goals. 
Beginning in 2006 and 2007, CMBS made up a significant portion of 
Fannie Mae's affordable multifamily purchases. These sources of 
affordable units are now either

[[Page 9056]]

unavailable or do not meet Enterprise standards. Therefore, based on 
the factors discussed above, multifamily affordable purchases in the 
very low-income category are likely to be near historical lows in 2009 
overall. The effect, though, will be more pronounced at Freddie Mac. 
The percentage of very low-income multifamily purchases in 2010 for 
Freddie Mac will be below its average for 2004 to 2008. Fannie Mae is 
expected to have a very low-income purchase volume near its average for 
the past several years.
4. Ability of the Enterprise To Lead the Market in Making Multifamily 
Mortgage Credit Available
    As described above in the context of the single-family goals, 
Congress in enacting the Safety and Soundness Act was concerned that 
the Enterprises were lagging behind market originations of mortgages 
for the benefit of low- and moderate-income households. FHFA has been 
cognizant of that concern in setting goals for the Enterprises.
    With the current credit crisis negatively affecting the commercial 
real estate market, the Enterprises have become market leaders by 
default. The disciplined underwriting and credit standards they bring 
to the industry have contributed to relatively low delinquency rates. 
Compared to the industry, the Enterprises have relatively conservative 
multifamily underwriting parameters. With the fundamentals of 
multifamily real estate very weak (e.g., high vacancy rates, stagnant 
rents and falling property values), the Enterprises have enhanced their 
credit standards to reduce risk exposure, which has meant that owners 
of the strongest performing properties are more likely to obtain credit 
from lenders selling to the Enterprises. As noted previously, Fannie 
Mae and Freddie Mac comprise a large portion of the multifamily market. 
As a result, in 2009 they not only led the multifamily market, they 
effectively were the market.
5. Availability of Public Subsidies
    Public subsidies for multifamily housing have been affected by the 
mortgage credit crisis. Low-income housing tax credits (LIHTCs), an 
important source of equity for new low-income housing, have fallen in 
value. However, on October 19, 2009, FHFA announced, in conjunction 
with the Treasury Department and HUD, an initiative to support State 
and local housing finance agencies (HFAs) through a new bond purchase 
program that will support new lending by HFAs, and a temporary credit 
and liquidity program that will improve the access of HFAs to liquidity 
for outstanding HFA bonds. Fannie Mae and Freddie Mac each played 
critical roles in this program, which helped support low mortgage rates 
and expand resources for low- and middle-income borrowers who want to 
purchase or rent homes that are affordable over the long term. On 
January 13, 2010, the Treasury Department, FHFA and HUD announced the 
completion of all transactions under the initiative, which involved 
more than 90 HFAs.
    The Enterprises actively purchase mortgages on properties with HUD 
Housing Assistance Plan (HAP) contracts. Newly constructed or 
rehabilitated properties usually receive forward commitments from the 
Enterprises with part of the new equity coming from LIHTCs. The 
remaining Section 8 properties are refinancings where the property 
owners sign long-term use agreements with HUD and receive a HAP 
contract in return. The Enterprises can also assist State and local 
HFAs by credit enhancing HFA bonds, and by offering permanent financing 
for properties rehabilitated through the Neighborhood Stabilization 
Program and other HUD grants.
6. Financial Condition of Enterprises
    As previously discussed, in the first two full years of the current 
housing crisis--from July 2007 through the first half of 2009--combined 
losses at the Enterprises totaled $165 billion. In the first half of 
2009, the Enterprises reported combined losses of $47 billion. The 
financial performance of both Enterprises is dominated by credit-
related expenses and losses stemming principally from purchases of PLS 
and purchases and guarantees of mortgages originated in 2006 and 2007. 
Since the establishment of the conservatorship for the Enterprises in 
September 2008, the combined losses of the two Enterprises depleted 
their capital and required them to draw from the U.S. Treasury under 
the Senior Preferred Stock Purchase Agreements.
    FHFA's duties as conservator require the conservation and 
preservation of the assets of the two Enterprises. Given the importance 
of the Enterprises to the housing market, any goal setting must be 
closely linked to putting the Enterprises in sound and solvent 
condition. Over the long term, such actions will assist homeowners and 
neighborhoods while saving the Enterprises money. In 2009, FHFA 
attempted to align the Enterprises' affordable housing goals with safe 
and sound practices and market reality, and the housing goals 
requirements for 2010 and 2011 must be similarly aligned.

B. Multifamily Housing Goal Levels

    As a result of the changes in HERA, the proposed rule would 
establish the multifamily affordable housing goals for each Enterprise 
separately from the single-family housing goals beginning in 2010. 
Qualifying multifamily units previously had been included with single-
family affordable purchases in the overall goals. Additional 
requirements for multifamily housing were imposed under a multifamily 
special affordable subgoal. The multifamily affordable goals for each 
Enterprise in 2010 and 2011 would be established in terms of low-income 
and very low-income units financed annually.
    Estimates of Enterprise multifamily purchase volume in 2009 were 
used by FHFA as a proxy for 2010 volumes. With uncertainty as to the 
path of the economy's recovery, FHFA's estimation for 2011 origination 
volume is unchanged from 2010.
    The proposed rule would set the multifamily goal levels using the 
average percentage of very low-income and low-income purchases in 2008 
for both Enterprises. The year 2008 was chosen, rather than the average 
for 2004-2008, because 2008 performance more closely reflects current 
market conditions. Multifamily loan purchase volumes for 2010 were 
estimated using 2009 part-year volumes. The average low- and very low-
income origination rates were multiplied by the expected origination 
volumes for 2010 and 2011 to derive low- and very low-income unit 
volumes for the Enterprises.
    Freddie Mac multifamily volume has not kept pace with Fannie Mae's 
volume since the beginning of the credit crisis in 2008, especially for 
very low-income units, due in part to Freddie Mac's reliance on CMBS 
and structured purchases from banks and thrifts. Those sources of 
mortgages are not now readily available and are likely to reappear in 
only limited volumes in the near term.
    Fannie Mae, on the other hand, is better positioned than Freddie 
Mac to purchase affordable units through its flow business. For 
example, Fannie Mae has a group dedicated to purchasing mortgages on 
small multifamily properties (5 to 50 units). Smaller properties, in 
general, have higher percentages of affordable units than larger 
properties. Furthermore, Fannie Mae's DUS program allows it to share 
credit losses with lenders. Mortgages on small multifamily properties, 
however, are often more at risk of delinquency and default than other 
multifamily mortgage property types. Perhaps more

[[Page 9057]]

importantly, mortgages on small properties are usually more expensive 
to originate and underwrite than mortgages on large properties because 
the costs, mostly fixed, are spread over fewer units.\79\ The DUS 
program helps Fannie Mae mitigate some of that credit risk of 
purchasing affordable multifamily units.
---------------------------------------------------------------------------

    \79\ ``Why do Small Multifamily Properties Bedevil Us?'' Shekar 
Narasimhan, The Brookings Institution, Nov. 2001, http://www.brookings.edu/articles/2001/11metropolitanpolicy_narasihan.aspx.
---------------------------------------------------------------------------

    Since Fannie Mae will likely purchase significantly more 
multifamily units in 2010 than Freddie Mac, based on 2009 data, the 
proposed rule would set different goals for each of the Enterprises, as 
was done in previous years. Based on 2008 Enterprise affordable housing 
performance, FHFA anticipates that for low-income units and very low-
income units, multifamily mortgages acquired by Freddie Mac will 
finance fewer units than multifamily mortgages acquired by Fannie Mae 
in 2010 and 2011. The disparity will be even greater for very low-
income units. Freddie Mac will likely purchase multifamily loans that 
finance about half as many very low-income units as will be financed by 
multifamily loans acquired by Fannie Mae in 2010 and 2011. While in 
conservatorship, FHFA expects Freddie Mac's board of directors and new 
senior management team to assess Freddie Mac's business model with 
respect to multifamily housing.
    Proposed Sec.  1282.13 would establish the multifamily special 
affordable housing goals and subgoals as follows. Unlike with the 
single-family goals described above, FHFA has not defined these goals 
as prospective targets, with compliance to be assessed by reference to 
actual market data. Rather, because the availability of the necessary 
market data is less certain for the multifamily market, FHFA has set 
goals in the traditional prospective manner, but these goals remain 
subject to the statutory provisions enabling them to be adjusted, or 
providing relief from enforcement, if market conditions so require.
    Multifamily low-income housing goals. The annual goal for Fannie 
Mae's purchases of mortgages on multifamily residential housing 
affordable to low-income families would be at least 237,000 dwelling 
units for each of 2010 and 2011. The annual goal for Freddie Mac's 
purchases of mortgages on multifamily residential housing affordable to 
low-income families would be at least 215,000 such dwelling units for 
each of 2010 and 2011.
    Multifamily very low-income housing subgoals. The annual subgoal 
for Fannie Mae's purchases of mortgages on multifamily residential 
housing affordable to very low-income families would be at least 57,000 
dwelling units for each of 2010 and 2011. The annual subgoal for 
Freddie Mac's purchases of mortgages on multifamily residential housing 
affordable to very low-income families would be at least 28,000 such 
dwelling units for each of 2010 and 2011.
    These proposed multifamily goals reflect the financial and 
operational condition of the Enterprises in conservatorship.

VII. Section-by-Section Analysis

A. Definitions--Proposed Sec.  1282.1

    Proposed Sec.  1282.1 would set forth definitions applicable to the 
housing goals provisions. The proposed rule includes a number of 
technical amendments to conform the definitions to the statutory 
definitions in the Safety and Soundness Act, as amended by HERA.
    The proposed rule would remove a number of definitions that were 
used in regulatory provisions that have been revised or eliminated 
based on HERA's amendments of the Safety and Soundness Act. Proposed 
Sec.  1282.1 would no longer include definitions for ``central city,'' 
``ECOA,'' ``government-sponsored enterprise, or GSE,'' ``home purchase 
mortgage,'' ``New England,'' ``ongoing program,'' ``other underserved 
area,'' ``owner-occupied unit,'' ``portfolio of loans,'' ``real estate 
mortgage investment conduit (REMIC),'' ``rural area,'' ``underserved 
area,'' and ``wholesale exchange.''
    Proposed Sec.  1282.1 would add new definitions of ``extremely low-
income,'' ``low-income,'' and ``moderate-income,'' and it would revise 
the income levels in the definition of ``very low-income.'' The 
proposed rule would also replace the definition of ``low-income area'' 
with a new definition for ``families in low-income areas.'' Each of 
these definitions is revised to be substantially the same as the 
corresponding definition in section 1303 of the Safety and Soundness 
Act, as amended by HERA.\80\
---------------------------------------------------------------------------

    \80\ 12 U.S.C. 4502.
---------------------------------------------------------------------------

    Proposed Sec.  1282.1 would add new definitions for ``borrower 
income,'' ``FEMA,'' ``HMDA,'' ``minority census tract,'' ``mortgage 
revenue bond,'' ``non-metropolitan area,'' ``owner-occupied housing,'' 
``private label security,'' and ``purchase money mortgage.'' The new 
definitions are intended to reflect common usage and provide certainty 
in interpreting the terms as used in new and existing regulatory 
provisions.
    Proposed Sec.  1282.1 would also make minor conforming revisions to 
several definitions. The definition of ``contract rent'' would be 
revised to make clear that the market rent for similar units in the 
neighborhood, as used by the lender or appraiser in underwriting a 
property, may be used as the anticipated rent for unoccupied units. The 
proposed rule would add language to the definition of ``utilities'' 
clarifying that charges for cable or telephone service shall not be 
included. Proposed Sec.  1282.1 would clarify that Metropolitan 
Divisions are included in the definition of ``metropolitan area'' to 
facilitate comparisons with census and HMDA information. Unnecessary 
references to the form of payment would be eliminated from the 
definition of ``mortgage purchase.'' Proposed Sec.  1282.1 would remove 
the definition of ``refinancing'' and incorporate those provisions in a 
new definition of ``refinancing mortgage.'' In order to avoid confusion 
about whether a transaction should be treated as a loan modification or 
a refinancing, proposed Sec.  1282.1 would exclude workout agreements 
from the definition. The definition of ``mortgage'' in proposed Sec.  
1282.1 would not include references to personal property manufactured 
housing loans pending further review of the appropriate treatment of 
such loans under the Enterprise and Bank housing goals.
    The definitions for ``mortgages contrary to good lending 
practices'' and ``mortgages with unacceptable terms or conditions or 
resulting from unacceptable practices'' would be deleted, with their 
substantive provisions revised and consolidated into a single new 
definition of ``mortgage with unacceptable terms or conditions.'' The 
definition of ``HOEPA mortgage'' would be revised to conform FHFA's 
definition to the coverage in HOEPA itself. The definition of 
``mortgage with unacceptable terms or conditions'' in proposed Sec.  
1282.1 would include a new provision regarding mortgages with annual 
percentage rates (APRs) above a certain level. The new provision is 
intended to cover mortgages that were formerly included in the 
definition of ``HOEPA mortgage.'' The provision in the definition of 
``mortgage with unacceptable terms or conditions'' relating to a 
borrower's ability to pay would be replaced with a provision 
incorporating interagency guidance on nontraditional and subprime 
mortgages. This change is intended to cover similar types of mortgages 
while providing greater consistency between the

[[Page 9058]]

provisions of the housing goals and other regulatory provisions.
    Designated disaster areas. The new definition of ``families in low-
income areas'' includes families with incomes at or below 100 percent 
of AMI who reside in ``designated disaster areas.'' The proposed rule 
would define ``designated disaster areas'' as areas at the census tract 
level and include only census tracts in counties approved for 
individual assistance within the declared major disaster area where the 
average real property damage severity, as reported by the Federal 
Emergency Management Agency (FEMA), exceeds $1,000 per household for 
that 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.'' \81\ Housing needs include repair, 
replacement and construction of homeowner residences. The proposed rule 
would limit the definition of ``designated disaster areas'' to those 
counties eligible for individual assistance, and it would establish a 
minimum average real property damage severity.
---------------------------------------------------------------------------

    \81\ 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.
---------------------------------------------------------------------------

    For purposes of complying with the Community Reinvestment Act 
(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.'' \82\ To 
accommodate the Enterprises' business planning requirements, for 
purposes of the low-income areas housing goal, the proposed rule would 
treat a designated disaster area as effective beginning no later than 
January 1 of the year following the FEMA designation and continuing 
through December 31 of the third full calendar year following the FEMA 
designation. If data is available in a particular case to support 
treatment as a designated disaster area from an earlier date, FHFA may 
provide for such treatment.
---------------------------------------------------------------------------

    \82\ 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 509 (Jan. 6, 2009).
---------------------------------------------------------------------------

    FHFA welcomes comments on the proposed changes to the definitions 
under Sec.  1282.1.

B. Housing Goals--Proposed Sec. Sec.  1282.11 Through 1282.13

    As required by sections 1331(a) and 1333(a)(2) of the Safety and 
Soundness Act, as amended by HERA, this subpart establishes four 
single-family housing goals and one multifamily special affordable 
housing goal for 2010 and 2011. The subpart would also establish one 
multifamily special affordable housing subgoal for 2010 and 2011. The 
single-family housing goals would be based both on the proposed 
benchmark levels and on an evaluation of the Enterprise's performance 
relative to the market for each housing goal in each year. Proposed 
Sec.  1282.11(b) would require the Director to establish housing goals 
for a particular year by December 1 of the previous year.\83\ Although 
the initial final rule establishing the new housing goals under the 
Safety and Soundness Act, as amended by HERA, will not be published for 
effect until early 2010, FHFA will evaluate performance under the 
housing goals established for 2010 on a calendar year basis.
---------------------------------------------------------------------------

    \83\ See 12 U.S.C. 4561(b).
---------------------------------------------------------------------------

    Proposed Sec.  1282.12(b) would establish criteria for determining 
the size of the market based on HMDA data. The criteria for 
establishing the size of the market reflect the types of mortgages that 
would be counted for purposes of the housing goals and that would 
typically be eligible for purchase by an Enterprise. Additional details 
regarding the housing goals are discussed above, along with the factors 
considered by FHFA in establishing the proposed housing goals.

C. Discretionary Adjustment of Housing Goals--Proposed Sec.  1282.14

    Consistent with the requirements of section 1334 of the Safety and 
Soundness Act, as amended by HERA, proposed Sec.  1282.14 would provide 
for an Enterprise to petition the Director to reduce the level of any 
goal or subgoal.\84\ Proposed Sec.  1282.14 would set forth the 
standards and procedures for consideration by the Director in 
determining whether to reduce a goal or subgoal level.
---------------------------------------------------------------------------

    \84\ 12 U.S.C. 4564.
---------------------------------------------------------------------------

D. General Counting Requirements--Proposed Sec.  1282.15

    Proposed Sec.  1282.15 would set forth general requirements for the 
counting of Enterprise mortgage purchases toward the achievement of the 
housing goals. Performance under the single-family housing goals would 
be evaluated based on the percentage of all single-family, owner-
occupied mortgages purchased by an Enterprise that meet a particular 
goal. Performance under the multifamily housing goals would be 
evaluated based on the total number of units that meet a particular 
goal and are financed by mortgages purchased by an Enterprise.
    The data estimation methodologies in this section would be revised 
to reflect changes in the affordable housing goals for 2010. The 
methodology for estimating affordability for single-family rental 
properties would be eliminated as unnecessary because the single-family 
housing goals are measured in terms of mortgages rather than units. The 
option to exclude single-family owner-occupied units with missing data 
up to one percent of the total number of single-family owner-occupied 
units backing mortgages purchased by an Enterprise would also be 
removed because it is no longer in use by either Enterprise. The option 
to request approval of alternative methodologies would also be removed. 
In light of the shorter time period for which the affordable housing 
goals are being established, it should not be necessary to make changes 
to the rules for missing data prior to FHFA's proposal of new housing 
goals for later years.

E. Special Counting Requirements--Proposed Sec.  1282.16

    Proposed Sec.  1282.16 would set 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 
clarifying and conforming changes would be made to this section to 
ensure consistent application of the counting rules among the 
Enterprises. Proposed Sec.  1282.16(b) would make clear that where a 
mortgage falls within one of the categories excluded from consideration 
under the housing goals, the mortgage should be excluded even if it 
otherwise would fall within one of the special counting rules in 
proposed Sec.  1282.16(c). For example, a non-conventional mortgage 
that would

[[Page 9059]]

be excluded from consideration pursuant to proposed Sec.  1282.16(b)(3) 
could not be counted even if it otherwise would be counted as a 
seasoned mortgage under proposed Sec.  1282.16(c)(6). Proposed Sec.  
1282.16(c) would also make clear that where a transaction falls under 
more than one of the special counting rules in Sec.  1282.16(c), all of 
the applicable requirements must be satisfied in order for the loan to 
be counted for purposes of the affordable housing goals.
    Proposed Sec.  1282.16(b) would eliminate the current exclusion of 
jumbo conforming loans from consideration for purposes of the 
affordable housing goals.\85\ These loans had been excluded from 
consideration in the past because the goals had been established based 
on market estimates that preceded the increases in the conforming loan 
limits. Because the higher loan limits have been considered in the 
evaluation of the market for this proposed rule, it is no longer 
necessary to exclude such loans from consideration for purposes of the 
affordable housing goals.
---------------------------------------------------------------------------

    \85\ See 12 CFR 1282.16(b)(10).
---------------------------------------------------------------------------

    Proposed Sec.  1282.16(b)(1) would be revised to refer more 
specifically to equity investments in low-income housing tax credits, 
which are consistent with the Charter Acts of the Enterprises. Proposed 
Sec.  1282.16(b)(11) would make explicit the existing prohibition on 
counting mortgages toward performance under the affordable housing 
goals if the mortgage has previously been counted for purposes of the 
performance of either Enterprise under the housing goals. In order to 
limit excessively burdensome recordkeeping that could result, the rule 
would make clear that this limitation only extends back for five years.
    Proposed Sec.  1282.16(b)(12) would exclude purchases of mortgages 
secured by properties that have not been certified as ready for 
occupancy from consideration for purposes of the affordable housing 
goals. Proposed Sec.  1282.16(b)(14) would reflect the statutory 
limitation on housing goals credit for mortgages receiving assistance 
under the Housing Trust Fund and the Capital Magnet Fund established by 
HERA.\86\
---------------------------------------------------------------------------

    \86\ See 12 U.S.C. 4568, 4569.
---------------------------------------------------------------------------

    Proposed Sec.  1282.16(c) would no longer include real estate 
mortgage investment conduits (REMICs) as mortgage purchases for 
purposes of the housing goals, consistent with the general exclusion of 
PLS under proposed Sec.  1282.16(b)(13). Proposed Sec.  1282.16(c) 
would also eliminate consideration of expiring assistance contracts, 
reflecting the changes under HERA to the former special affordable 
housing goal. Proposed Sec.  1282.16(c)(5) would amend the provisions 
regarding cooperative housing and condominiums to reflect HERA's 
treatment of single-family housing and multifamily housing under 
separate goals. Proposed Sec.  1282.16(c)(8) would remove current 
limitations on counting mortgage revenue bonds related to the source of 
funds for repayment and the presence of additional credit enhancements. 
The proposed rule would require that an Enterprise have sufficient 
information available to determine the eligibility of any underlying 
mortgages before counting such mortgages or units for purposes of the 
housing goals. Proposed Sec.  1282.16(c)(10) would reflect the accepted 
terminology for the Administration's Making Home Affordable program.
    Proposed Sec.  1282.16(d) would relocate existing provisions 
regarding HOEPA mortgages and mortgages with unacceptable terms or 
conditions from current Sec.  1282.16(c). Placing these provisions in a 
separate paragraph reflects the fact that unlike other types of 
mortgage purchases, HOEPA mortgages and mortgages with unacceptable 
terms and conditions must be counted in the denominator as mortgage 
purchases but can never be counted in the numerator, regardless of 
whether the mortgages would otherwise qualify based on the 
affordability and other counting criteria. The proposed treatment is 
consistent with past practice 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.'' \87\
---------------------------------------------------------------------------

    \87\ 12 U.S.C. 4562(i).
---------------------------------------------------------------------------

    Proposed Sec.  1282.16(e) would clarify that FHFA may provide 
guidance on the treatment of any transactions under the affordable 
housing goals. Such guidance may be provided in response to a request 
from one or both Enterprises, or it may be provided at the initiation 
of FHFA.
    Private Label Securities. Proposed Sec.  1282.16(b)(13) would 
exclude PLS from counting for purposes of the affordable housing goals. 
Historically, the Enterprises--particularly Freddie Mac--relied on PLS 
purchases to help them achieve certain affordable housing goals. 
Freddie Mac met the 2005 and 2006 affordable housing goals and subgoals 
in part through its purchases of AAA-rated tranches of PLS backed by 
subprime mortgages that were targeted to satisfy goals and subgoals. As 
house price appreciation and rising interest rates reduced housing 
affordability, PLS proliferated as the subprime share of the market 
grew to more than 20 percent. Fannie Mae and Freddie Mac began to 
follow suit in response to declining market share and in pursuit of 
higher profits. The Enterprises not only modified their own 
underwriting standards, but they also bought hundreds of billions of 
dollars' worth of AAA-rated tranches of subprime and Alt-A PLS for the 
yield and, in certain instances, to satisfy specific housing goals and 
subgoals.
    The results of providing large-scale funding for such loans were 
adverse for borrowers who entered into mortgages that did not sustain 
homeownership and for the Enterprises themselves. Although Fannie Mae 
and Freddie Mac have a combined 57 percent share of mortgages 
outstanding in their guaranteed portfolio, the mortgages in that 
portfolio account for only 25 percent of serious delinquencies. 
However, while PLS account for 12 percent of all mortgages outstanding, 
PLS account for 34 percent of serious delinquencies. As delinquencies 
in PLS portfolios triggered downgrades, 90 percent of the PLS holdings 
of the Enterprises experienced a downgrade. In light of that record, 
FHFA proposes to exclude PLS from consideration under the housing 
goals.
    In addition to the recent dismal performance of PLS, it is 
reasonable to separate any future growth of the PLS market from the 
Enterprises' housing goals. The housing goals reflect Congress' concern 
that the Enterprises' charter mission to support the stability, 
liquidity and affordability of the secondary market not be managed to 
the detriment or neglect of goal-eligible mortgages. In this way the 
goals may be seen as a mechanism to ensure that each Enterprise serves 
all segments of the mortgage market available to it. Even to the extent 
that a non-GSE secondary mortgage market returns, loans backing new or 
seasoned PLS would not count in either the numerator or the denominator 
for purposes of assessing housing goals.
    FHFA invites comment on the proposed exclusion of PLS and on 
alternatives to not counting PLS mortgages in meeting the housing 
goals. For example, mortgages backing such securities could be counted 
if an appropriate senior Enterprise officer certified that the 
mortgages are compliant with all existing regulations regarding good 
mortgage practices, and with the interagency guidance on subprime 
lending and non-traditional

[[Page 9060]]

loans. Such certification, for example, could be required to include a 
description of the methods used to determine that loans included in 
such PLS met those conditions. The certification could also require 
regular and ongoing review of PLS purchases to ensure that they meet 
existing requirements regarding good mortgage practices and recent 
interagency regulatory guidance on non-traditional and subprime loans.
    Commercial Mortgage Backed Securities (CMBS) would also be excluded 
from counting toward the affordable housing goals under the proposed 
rule. FHFA invites comment on whether CMBS should be treated 
differently than other PLS for purposes of the affordable housing 
goals.
    Home Equity Conversion Mortgages and Subordinate Liens. Proposed 
Sec.  1282.16(b)(3) would exclude the purchases of all non-conventional 
single-family mortgages, including HECMs, from counting towards the 
Enterprises' housing goals. Certain non-conventional mortgages, 
including HECMs, have been counted toward the goals in the past. HERA, 
however, amended section 1332(a) of the Safety and Soundness Act to 
restrict the single-family housing goals to include only conventional 
mortgages.\88\ This restriction does not preclude the Enterprises' 
purchase of Charter-compliant non-conventional single-family mortgages, 
including HECMs, but such purchases would not count toward the housing 
goals--that is, such purchases would be excluded from both the 
numerator and denominator in calculating goal performance.
---------------------------------------------------------------------------

    \88\ 12 U.S.C. 4562(a).
---------------------------------------------------------------------------

    Proposed Sec.  1282.16(b)(10) would also exclude the purchases of 
subordinate lien mortgages (second mortgages) from counting towards the 
Enterprises' housing goals. This exclusion would reflect the fact that, 
under section 1331 of the Safety and Soundness Act, as amended, the 
single-family housing goals are limited to purchase money or 
refinancing mortgages. This would exclude ``piggy-back'' liens that may 
be acquired by an Enterprise along with the corresponding first lien 
mortgage and subordinate lien mortgages, such as home equity loans, 
acquired separately by an Enterprise where the Enterprise does not also 
acquire the corresponding first lien mortgage. This provision would not 
preclude the Enterprises' purchase of Charter-compliant subordinate 
lien mortgages, but as with HECMs, such purchases would not count 
toward the housing goals. FHFA seeks comments on this provision.

F. Affordability Definitions--Proposed Sec. Sec.  1282.17 Through 
1282.19

    Proposed Sec.  1282.17 would set forth definitions and establish 
cutoff points or boundaries for the statutory and traditionally defined 
levels of affordability based on area median income for owners and 
tenants of rental units where the family size and income are known to 
the Enterprise. In addition to the levels of affordability that 
currently appear at Sec.  1282.17, this section would include an 
additional paragraph (e) for extremely low-income borrowers and tenants 
with income at or below 30 percent of AMI with adjustments for family 
size. Although the Enterprise housing goals do not specifically target 
extremely low-income borrowers or tenants, the proposed rule would 
establish cutoffs for determining such affordability to facilitate any 
reporting or analysis of such data that is required.
    Proposed Sec.  1282.18 would set forth definitions and establish 
cutoff points or boundaries for the statutory and traditionally defined 
levels of affordability based on AMI for tenants of rental units where 
the family size is not known to the Enterprise. In addition to the 
levels of affordability that currently appear at Sec.  1282.18, this 
section would include an additional paragraph (e) for extremely low-
income tenants with income at or below 30 percent of AMI with 
adjustments for unit size.
    Proposed Sec.  1282.19 would set forth definitions and establish 
cutoff points or boundaries for the statutory and traditionally defined 
levels of affordability based on AMI for tenants of rental units where 
tenant income is not known to the Enterprise. In addition to the levels 
of affordability that currently appear at Sec.  1282.19, this section 
would include an additional paragraph (e) for extremely low-income 
tenants with income at or below 30 percent of AMI with adjustments for 
unit size.

G. Housing Goals Enforcement--Proposed Sec. Sec.  1282.20 and 1282.21

    Proposed Sec.  1282.20 would provide that the Director shall 
determine whether an Enterprise has met the affordable housing goals, 
in accordance with the standards established under the Safety and 
Soundness Act, as amended by HERA. If the Director determines that an 
Enterprise has failed to meet any housing goal, the Director shall 
provide notice to the Enterprise in accordance with 12 U.S.C. 4566(b). 
The determination of compliance with the single-family housing goals 
would be based both on the size of the market for that year and the 
benchmark levels established in this subpart. The provision formerly 
found at Sec.  1282.20 referenced the obligation of the Enterprises 
under the Safety and Soundness Act to engage in certain kinds of 
activities in meeting the affordable housing goals. The regulatory 
provision did not add to or expand the requirements of the statute and 
would be removed as unnecessary, but the statutory obligation remains 
in effect.\89\
---------------------------------------------------------------------------

    \89\ See 12 U.S.C. 4565(b).
---------------------------------------------------------------------------

    Proposed Sec.  1282.21 would include requirements for submission of 
a housing plan by an Enterprise for failure or substantial probability 
of failure to meet any housing goal that was or is feasible. The 
requirement to submit a housing plan would be at the discretion of the 
Director.

H. Reporting Requirements--Proposed Subpart D

    Proposed subpart D would relocate existing reporting requirements 
from part 81, subpart E of title 24 of the Code of Federal Regulations. 
Proposed Sec.  1282.65 would relocate an existing regulatory provision 
on data certification from 24 CFR 81.102. These provisions have 
continued in effect pursuant to section 1302 of HERA. Upon the 
effective date of the final housing goals rule, the reporting 
requirement and Enterprise data integrity provisions in 24 CFR part 81 
will no longer be in effect.
    The proposed rule would make various conforming changes throughout 
subpart D. Proposed Sec.  1282.62(b) would require the Enterprises to 
submit loan-level mortgage data on a quarterly basis. Previously such 
submissions were required only semi-annually. Advances in technology 
limit the burden of more frequent submissions, and the additional data 
provided will facilitate FHFA's monitoring of performance under the 
housing goals. Proposed Sec. Sec.  1282.62(c) and 1282.63 would revise 
the time periods for submission to FHFA of the required Mortgage 
Reports and Annual Housing Activities Reports (AHARs), respectively. 
The shorter time periods will permit FHFA to evaluate the performance 
of the Enterprises on a more timely basis. Proposed Sec.  1282.63 would 
also require that the Enterprises make their AHARs available to the 
public online. FHFA does not expect that the requirement to make 
available online information that is already publicly available will be 
burdensome to the Enterprises. Proposed Sec.  1282.64 would eliminate 
the requirement for the Enterprises to submit information that is 
typically made publicly available by each Enterprise. The Director may

[[Page 9061]]

continue to request such reports, information and data as the Director 
deems necessary. Proposed subpart D would not include the provisions 
regarding submission of additional data or reports and the addresses 
for submission of information that were formerly found at 24 CFR 81.65 
and 81.66. Proposed Sec.  1282.64 is sufficiently broad to encompass 
any requests for additional data or reports that the Director deems 
necessary.
    Proposed Sec.  1282.65 would simplify the detailed procedures laid 
out in the previous data integrity provision found at 24 CFR 81.102. 
FHFA will implement the data integrity process pursuant to its general 
regulatory authority over the Enterprises. FHFA expects that the 
Enterprises will continue to work cooperatively with FHFA to identify 
and resolve any discrepancies or errors in the housing goals data 
reported to FHFA. The proposed provision would maintain the most 
important aspects of the data integrity process in the regulation, 
including the requirement that the Enterprises certify the accuracy of 
their submissions.

I. Book-Entry Procedures--Proposed Part 1249

    Proposed part 1249 would relocate existing regulatory provisions on 
book-entry procedures from part 81, subpart H of title 24 of the Code 
of Federal Regulations. These provisions have continued in effect 
pursuant to section 1302 of HERA. Upon the effective date of the final 
housing goals rule, the book-entry procedures in 24 CFR part 81 will no 
longer be in effect. The proposed rule would also relocate definitions 
that are currently found in Sec.  1282.2 and that are applicable only 
to the book-entry procedures in proposed part 1249 to a new section 
1249.10 in that part. The proposed rule would make conforming changes 
throughout the part, including a clarification that the waiver 
provision in proposed Sec.  1249.17 applies only to the book-entry 
provisions in part 1249. Section 1249.15 would be amended to reflect 
the transfer of authority from the Secretary of HUD to the Director. 
The proposed rule would not make any changes to the substance of the 
book-entry provisions.

VIII. Paperwork Reduction Act

    The proposed 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.).

IX. 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 
proposed rule under the Regulatory Flexibility Act. The General Counsel 
of FHFA certifies that the proposed rule, if adopted as a 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 Enterprises, which are not small entities for purposes of 
the Regulatory Flexibility Act.

List of Subjects

12 CFR Part 1249

    Federal Reserve System, Securities.

12 CFR Part 1282

    Mortgages, Reporting and recordkeeping requirements.

    Accordingly, for the reasons stated in the preamble, under the 
authority of 12 U.S.C. 4511, 4513, 4526, FHFA proposes to amend chapter 
XII of title 12 of the Code of Federal Regulations by adding part 1249 
and revising part 1282 to read as follows:

CHAPTER XII--FEDERAL HOUSING FINANCE AGENCY

SUBCHAPTER C--ENTERPRISES

PART 1249--BOOK-ENTRY PROCEDURES

Sec.
1249.10 Definitions.
1249.11 Maintenance of Enterprise Securities.
1249.12 Law governing rights and obligations of United States, 
Federal Reserve Banks, and Enterprises; rights of any person against 
United States, Federal Reserve Banks, and Enterprises; law governing 
other interests.
1249.13 Creation of Participant's Security Entitlement; security 
interests.
1249.14 Obligations of Enterprises; no adverse claims.
1249.15 Authority of Federal Reserve Banks.
1249.16 Withdrawal of Eligible Book-entry Enterprise Securities for 
conversion to definitive form.
1249.17 Waiver of regulations.
1249.18 Liability of Enterprises and Federal Reserve Banks.
1249.19 Additional provisions.

    Authority: 12 U.S.C. 4501, 4502, 4511, 4513, 4526.


Sec.  1249.10  Definitions.

    (a) General. Unless the context requires otherwise, terms used in 
this part that are not defined in this part, have the meanings as set 
forth in 31 CFR 357.2. Definitions and terms used in 31 CFR part 357 
should read as though modified to effectuate their application to the 
Enterprises.
    (b) Other terms. As used in this part, the term:
    Book-entry Enterprise Security means an Enterprise Security issued 
or maintained in the Book-entry System. Book-entry Enterprise Security 
also means the separate interest and principal components of a Book-
entry Enterprise Security if such security has been designated by the 
Enterprise as eligible for division into such components and the 
components are maintained separately on the books of one or more 
Federal Reserve Banks.
    Book-entry System means the automated book-entry system operated by 
the Federal Reserve Banks acting as the fiscal agent for the 
Enterprises, on which Book-entry Enterprise Securities are issued, 
recorded, transferred and maintained in book-entry form.
    Definitive Enterprise Security means an Enterprise Security in 
engraved or printed form, or that is otherwise represented by a 
certificate.
    Eligible Book-entry Enterprise Security means a Book-entry 
Enterprise Security issued or maintained in the Book-entry System which 
by the terms of its Security Documentation is eligible to be converted 
from book-entry form into definitive form.
    Enterprise Security means any security or obligation of Fannie Mae 
or Freddie Mac issued under its respective Charter Act in the form of a 
Definitive Enterprise Security or a Book-entry Enterprise Security.
    Entitlement Holder means a Person or an Enterprise to whose account 
an interest in a Book-entry Enterprise Security is credited on the 
records of a Securities Intermediary.
    Federal Reserve Bank Operating Circular means the publication 
issued by each Federal Reserve Bank that sets forth the terms and 
conditions under which the Reserve Bank maintains book-entry Securities 
accounts (including Book-entry Enterprise Securities) and transfers 
book-entry Securities (including Book-entry Enterprise Securities).

[[Page 9062]]

    Participant means a Person or Enterprise that maintains a 
Participant's Securities Account with a Federal Reserve Bank.
    Person, as used in this part, means and includes an individual, 
corporation, company, governmental entity, association, firm, 
partnership, trust, estate, representative, and any other similar 
organization, but does not mean or include the United States, an 
Enterprise, or a Federal Reserve Bank.
    Revised Article 8 has the same meaning as in 31 CFR 357.2.
    Securities Documentation means the applicable statement of terms, 
trust indenture, securities agreement or other documents establishing 
the terms of a Book-entry Enterprise Security.
    Security means any mortgage participation certificate, note, bond, 
debenture, evidence of indebtedness, collateral-trust certificate, 
transferable share, certificate of deposit for a security, or, in 
general, any interest or instrument commonly known as a ``security''.
    Transfer message means an instruction of a Participant to a Federal 
Reserve Bank to effect a transfer of a Book-entry Security (including a 
Book-entry Enterprise Security) maintained in the Book-entry System, as 
set forth in Federal Reserve Bank Operating Circulars.


Sec.  1249.11  Maintenance of Enterprise Securities.

    An Enterprise Security may be maintained in the form of a 
Definitive Enterprise Security or a Book-entry Enterprise Security. A 
Book-entry Enterprise Security shall be maintained in the Book-entry 
System.


Sec.  1249.12  Law governing rights and obligations of United States, 
Federal Reserve Banks, and Enterprises; rights of any person against 
United States, Federal Reserve Banks, and Enterprises; law governing 
other interests.

    (a) Except as provided in paragraph (b) of this section, the 
following rights and obligations are governed solely by the book-entry 
regulations contained in this part, the Securities Documentation, and 
Federal Reserve Bank Operating Circulars (but not including any choice 
of law provisions in the Securities Documentation to the extent such 
provisions conflict with the Book-entry regulations contained in this 
part):
    (1) The rights and obligations of an Enterprise and the Federal 
Reserve Banks with respect to:
    (i) A Book-entry Enterprise Security or Security Entitlement; and
    (ii) The operation of the Book-entry System as it applies to 
Enterprise Securities; and
    (2) The rights of any Person, including a Participant, against an 
Enterprise and the Federal Reserve Banks with respect to:
    (i) A Book-entry Enterprise Security or Security Entitlement; and
    (ii) The operation of the Book-entry System as it applies to 
Enterprise Securities;
    (b) A security interest in a Security Entitlement that is in favor 
of a Federal Reserve Bank from a Participant and that is not recorded 
on the books of a Federal Reserve Bank pursuant to Sec.  1249.13(c)(1), 
is governed by the law (not including the conflict-of-law rules) of the 
jurisdiction where the head office of the Federal Reserve Bank 
maintaining the Participant's Securities Account is located. A security 
interest in a Security Entitlement that is in favor of a Federal 
Reserve Bank from a Person that is not a Participant, and that is not 
recorded on the books of a Federal Reserve Bank pursuant to Sec.  
1249.13(c)(1), is governed by the law determined in the manner 
specified in paragraph (d) of this section.
    (c) If the jurisdiction specified in the first sentence of 
paragraph (b) of this section is a State that has not adopted Revised 
Article 8, then the law specified in paragraph (b) of this section 
shall be the law of that State as though Revised Article 8 had been 
adopted by that State.
    (d) To the extent not otherwise inconsistent with this part, and 
notwithstanding any provision in the Securities Documentation setting 
forth a choice of law, the provisions set forth in 31 CFR 357.11 
regarding law governing other interests apply and shall be read as 
though modified to effectuate the application of 31 CFR 357.11 to the 
Enterprises.


Sec.  1249.13  Creation of Participant's Security Entitlement; security 
interests.

    (a) A Participant's Security Entitlement is created when a Federal 
Reserve Bank indicates by book-entry that a Book-entry Enterprise 
Security has been credited to a Participant's Securities Account.
    (b) A security interest in a Security Entitlement of a Participant 
in favor of the United States to secure deposits of public money, 
including without limitation deposits to the Treasury tax and loan 
accounts, or other security interest in favor of the United States that 
is required by Federal statute, regulation, or agreement, and that is 
marked on the books of a Federal Reserve Bank is thereby effected and 
perfected, and has priority over any other interest in the securities. 
Where a security interest in favor of the United States in a Security 
Entitlement of a Participant is marked on the books of a Federal 
Reserve Bank, such Federal Reserve Bank may rely, and is protected in 
relying, exclusively on the order of an authorized representative of 
the United States directing the transfer of the security. For purposes 
of this paragraph, an ``authorized representative of the United 
States'' is the official designated in the applicable regulations or 
agreement to which a Federal Reserve Bank is a party, governing the 
security interest.
    (c)(1) An Enterprise and the Federal Reserve Banks have no 
obligation to agree to act on behalf of any Person or to recognize the 
interest of any transferee of a security interest or other limited 
interest in favor of any Person except to the extent of any specific 
requirement of Federal law or regulation or to the extent set forth in 
any specific agreement with the Federal Reserve Bank on whose books the 
interest of the Participant is recorded. To the extent required by such 
law or regulation or set forth in an agreement with a Federal Reserve 
Bank, or the Federal Reserve Bank Operating Circular, a security 
interest in a Security Entitlement that is in favor of a Federal 
Reserve Bank, an Enterprise, or a Person may be created and perfected 
by a Federal Reserve Bank marking its books to record the security 
interest. Except as provided in paragraph (b) of this section, a 
security interest in a Security Entitlement marked on the books of a 
Federal Reserve Bank shall have priority over any other interest in the 
securities.
    (2) In addition to the method provided in paragraph (c)(1) of this 
section, a security interest, including a security interest in favor of 
a Federal Reserve Bank, may be perfected by any method by which a 
security interest may be perfected under applicable law as described in 
Sec.  1249.12(b) or (d). The perfection, effect of perfection or non-
perfection and priority of a security interest are governed by such 
applicable law. A security interest in favor of a Federal Reserve Bank 
shall be treated as a security interest in favor of a clearing 
corporation in all respects under such law, including with respect to 
the effect of perfection and priority of such security interest. A 
Federal Reserve Bank Operating Circular shall be treated as a rule 
adopted by a clearing corporation for such purposes.


Sec.  1249.14  Obligations of Enterprises; no adverse claims.

    (a) Except in the case of a security interest in favor of the 
United States or a Federal Reserve Bank or otherwise as provided in 
Sec.  1249.13(c)(1), for the

[[Page 9063]]

purposes of this part, the Enterprise and the Federal Reserve Banks 
shall treat the Participant to whose Securities Account an interest in 
a Book-entry Enterprise Security has been credited as the person 
exclusively entitled to issue a Transfer Message, to receive interest 
and other payments with respect thereof and otherwise to exercise all 
the rights and powers with respect to such Security, notwithstanding 
any information or notice to the contrary. Neither the Federal Reserve 
Banks nor an Enterprise is liable to a Person asserting or having an 
adverse claim to a Security Entitlement or to a Book-entry Enterprise 
Security in a Participant's Securities Account, including any such 
claim arising as a result of the transfer or disposition of a Book-
entry Enterprise Security by a Federal Reserve Bank pursuant to a 
Transfer Message that the Federal Reserve Bank reasonably believes to 
be genuine.
    (b) The obligation of the Enterprise to make payments (including 
payments of interest and principal) with respect to Book-entry 
Enterprise Securities is discharged at the time payment in the 
appropriate amount is made as follows:
    (1) Interest or other payments on Book-entry Enterprise Securities 
is either credited by a Federal Reserve Bank to a Funds Account 
maintained at such Federal Reserve Bank or otherwise paid as directed 
by the Participant.
    (2) Book-entry Enterprise Securities are redeemed in accordance 
with their terms by a Federal Reserve Bank withdrawing the securities 
from the Participant's Securities Account in which they are maintained 
and by either crediting the amount of the redemption proceeds, 
including both redemption proceeds, where applicable, to a Funds 
Account at such Federal Reserve Bank or otherwise paying such 
redemption proceeds as directed by the Participant. No action by the 
Participant ordinarily is required in connection with the redemption of 
a Book-entry Enterprise Security.


Sec.  1249.15  Authority of Federal Reserve Banks.

    (a) Each Federal Reserve Bank is hereby authorized as fiscal agent 
of the Enterprises to perform the following functions with respect to 
the issuance of Book-entry Enterprise Securities offered and sold by an 
Enterprise to which this part applies, in accordance with the 
Securities Documentation, Federal Reserve Bank Operating Circulars, 
this part, and any procedures established by the Director consistent 
with these authorities:
    (1) To service and maintain Book-entry Enterprise Securities in 
accounts established for such purposes;
    (2) To make payments with respect to such securities, as directed 
by the Enterprise;
    (3) To effect transfer of Book-entry Enterprise Securities between 
Participants' Securities Accounts as directed by the Participants;
    (4) To effect conversions between Book-entry Enterprise Securities 
and Definitive Enterprise Securities with respect to those securities 
as to which conversion rights are available pursuant to the applicable 
Securities Documentation; and
    (5) To perform such other duties as fiscal agent as may be 
requested by the Enterprise.
    (b) Each Federal Reserve Bank may issue Federal Reserve Bank 
Operating Circulars not inconsistent with this part, governing the 
details of its handling of Book-entry Enterprise Securities, Security 
Entitlements, and the operation of the Book-entry System under this 
part.


Sec.  1249.16  Withdrawal of Eligible Book-entry Enterprise Securities 
for conversion to definitive form.

    (a) Eligible Book-entry Enterprise Securities may be withdrawn from 
the Book-entry System by requesting delivery of like Definitive 
Enterprise Securities.
    (b) A Federal Reserve Bank shall, upon receipt of appropriate 
instructions to withdraw Eligible Book-entry Enterprise Securities from 
book-entry in the Book-entry System, convert such securities into 
Definitive Enterprise Securities and deliver them in accordance with 
such instructions. No such conversion shall affect existing interests 
in such Enterprise Securities.
    (c) All requests for withdrawal of Eligible Book-entry Enterprise 
Securities must be made prior to the maturity or date of call of the 
securities.
    (d) Enterprise Securities which are to be delivered upon withdrawal 
may be issued in either registered or bearer form, to the extent 
permitted by the applicable Securities Documentation.


Sec.  1249.17  Waiver of regulations.

    The Director reserves the right, in the Director's discretion, to 
waive any provision(s) of this part in any case or class of cases for 
the convenience of an Enterprise, the United States, or in order to 
relieve any person(s) of unnecessary hardship, if such action is not 
inconsistent with law, does not adversely affect any substantial 
existing rights, and the Director is satisfied that such action will 
not subject an Enterprise or the United States to any substantial 
expense or liability.


Sec.  1249.18  Liability of Enterprises and Federal Reserve Banks.

    An Enterprise and the Federal Reserve Banks may rely on the 
information provided in a Transfer Message, and are not required to 
verify the information. An Enterprise and the Federal Reserve Banks 
shall not be liable for any action taken in accordance with the 
information set out in a Transfer Message, or evidence submitted in 
support thereof.


Sec.  1249.19  Additional provisions.

    (a) Additional requirements. In any case or any class of cases 
arising under these regulations, an Enterprise may require such 
additional evidence and a bond of indemnity, with or without surety, as 
may in the judgment of the Enterprise be necessary for the protection 
of the interests of the Enterprise.
    (b) Notice of attachment for Enterprise Securities in Book-entry 
System. The interest of a debtor in a Security Entitlement may be 
reached by a creditor only by legal process upon the Securities 
Intermediary with whom the debtor's securities account is maintained, 
except where a Security Entitlement is maintained in the name of a 
secured party, in which case the debtor's interest may be reached by 
legal process upon the secured party. These regulations do not purport 
to establish whether a Federal Reserve Bank is required to honor an 
order or other notice of attachment in any particular case or class of 
cases.
* * * * *

SUBCHAPTER E--HOUSING GOALS AND MISSION

PART 1282--ENTERPRISE HOUSING GOALS AND MISSION

Sec.
Subpart A--General
1282.1 Definitions.
Subpart B--Housing Goals
1282.11 General.
1282.12 Single-family housing goals.
1282.13 Multifamily special affordable housing goal and subgoal.
1282.14 Discretionary adjustment of housing goals.
1282.15 General counting requirements.
1282.16 Special counting requirements.
1282.17 Affordability--Income level definitions--family size and 
income known (owner-occupied units, actual tenants, and prospective 
tenants).
1282.18 Affordability--Income level definitions--family size not 
known (actual or prospective tenants).

[[Page 9064]]

1282.19 Affordability--Rent level definitions--tenant income is not 
known.
1282.20 Determination of compliance with housing goals; notice of 
determination.
1282.21 Housing plans.
Subpart C--[Reserved]
Subpart D--Reporting Requirements
1282.61 General.
1282.62 Mortgage reports.
1282.63 Annual Housing Activities Report.
1282.64 Periodic reports.
1282.65 Enterprise data integrity.

    Authority: 12 U.S.C. 4501, 4502, 4511, 4513, 4526, 4561-4566, 
4603.

Subpart A--General


Sec.  1282.1  Definitions.

    (a) Statutory terms. All terms defined in the Safety and Soundness 
Act are used in accordance with their statutory meaning unless 
otherwise defined in paragraph (b) of this section.
    (b) Other terms. As used in this part, the term:
    AHAR means the Annual Housing Activities Report that an Enterprise 
submits to the Director under section 309(n) of the Fannie Mae Charter 
Act or section 307(f) of the Freddie Mac Act.
    AHAR information means data or information contained in the AHAR.
    AHS means the American Housing Survey published by HUD and the 
Department of Commerce.
    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 specified period (but before the mortgage would 
fully amortize) and pays off or satisfies the outstanding balance of 
the mortgage.
    Borrower income means the total gross income relied on in making 
the credit decision.
    Charter Act means the Fannie Mae Charter Act, as amended, or the 
Freddie Mac Act, as amended.
    Contract rent means the total rent that is, or is anticipated to 
be, specified in the rental contract as payable by the tenant to the 
owner for rental of a dwelling unit, including fees or charges for 
management and maintenance services and those utility charges that are 
included in the rental contract. In determining contract rent, rent 
concessions shall not be considered, i.e., contract rent is not 
decreased by any rent concessions. Contract rent is rent net of rental 
subsidies. Anticipated rent for unoccupied units may be the market rent 
for similar units in the neighborhood as determined by the lender or 
appraiser for underwriting purposes.
    Conventional mortgage means a mortgage other than a mortgage as to 
which an Enterprise has the benefit of any guaranty, insurance or other 
obligation by the United States or any of its agencies or 
instrumentalities.
    Day means a calendar day.
    Designated disaster area means any census tract (1) that is located 
in a county designated by FEMA as adversely affected by a declared 
major disaster, (2) where individual assistance payments were 
authorized by FEMA, and (3) where average damage severity, as reported 
by FEMA, exceeds $1,000 per household in the census tract. 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.
    Director means the Director of FHFA or his or her designee.
    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.
    Enterprise means Fannie Mae or Freddie Mac (Enterprises means, 
collectively, Fannie Mae and Freddie Mac).
    Extremely low-income means:
    (i) In the case of owner-occupied units, income not in excess of 30 
percent of area median income; and
    (ii) In the case of rental units, income not in excess of 30 
percent of area median income, with adjustments for smaller and larger 
families in accordance with this part.
    Families in low-income areas means:
    (i) 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;
    (ii) Any family with an income that does not exceed area median 
income that resides in a minority census tract; and
    (iii) 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.
    Fannie Mae means the Federal National Mortgage Association and any 
affiliate thereof.
    Fannie Mae Charter Act means the Federal National Mortgage 
Association Charter Act, as amended (12 U.S.C. 1715 et seq.).
    FEMA means the Federal Emergency Management Agency.
    FHFA means the Federal Housing Finance Agency.
    FOIA means the Freedom of Information Act, as amended (5 U.S.C. 
552).
    Freddie Mac means the Federal Home Loan Mortgage Corporation and 
any affiliate thereof.
    Freddie Mac Act means the Federal Home Loan Mortgage Corporation 
Act, as amended (12 U.S.C. 1451 et seq.).
    Ginnie Mae means the Government National Mortgage Association.
    HMDA means the Home Mortgage Disclosure Act (12 U.S.C. 2801 et 
seq.).
    HOEPA mortgage means a mortgage covered by section 103(aa) of the 
Home Ownership Equity Protection Act (HOEPA) (15 U.S.C. 1602(aa)), as 
implemented by the Board of Governors of the Federal Reserve System.
    HUD means the United States Department of Housing and Urban 
Development.
    Lender means any entity that makes, originates, sells, or services 
mortgages, and includes the secured creditors named in the debt 
obligation and document creating the mortgage.
    Low-income means:
    (i) In the case of owner-occupied units, income not in excess of 80 
percent of area median income; and
    (ii) In the case of rental units, income not in excess of 80 
percent of area median income, with adjustments for smaller and larger 
families in accordance with this part.
    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 Enterprises 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.
    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:
    (i) American Indian or Alaskan Native--a person having origins in 
any of the original peoples of North and

[[Page 9065]]

South America (including Central America), and who maintains Tribal 
affiliation or community attachment;
    (ii) 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;
    (iii) Black or African American--a person having origins in any of 
the black racial groups of Africa;
    (iv) Hispanic or Latino--a person of Cuban, Mexican, Puerto Rican, 
South or Central American, or other Spanish culture or origin, 
regardless of race; and
    (v) 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:
    (i) In the case of owner-occupied units, income not in excess of 
area median income; and
    (ii) In the case of rental units, income not in excess of area 
median income, with adjustments for smaller and larger families in 
accordance with this part.
    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 
Enterprises under section 309(m) of the Fannie Mae Charter Act and 
section 307(e) of the Freddie Mac Act.
    Mortgage purchase means a transaction in which an Enterprise bought 
or otherwise acquired a mortgage or an interest in a mortgage for 
portfolio, resale, or securitization.
    Mortgage revenue bond means a tax-exempt bond or taxable bond 
issued by a State or local government or agency where the proceeds from 
the bond issue are used to finance residential housing.
    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:
    (i) 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 
an Enterprise and determined by the Director as appropriate for small 
mortgages.
    (A) For purposes of this definition, points and fees include:
    (1) Origination fees;
    (2) Underwriting fees;
    (3) Broker fees;
    (4) Finder's fees; and
    (5) Charges that the lender imposes as a condition of making the 
loan, whether they are paid to the lender or a third party;
    (B) For purposes of this definition, points and fees do not 
include:
    (1) Bona fide discount points;
    (2) 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;
    (3) The cost of mortgage insurance or credit-risk price 
adjustments;
    (4) The costs of title, hazard, and flood insurance policies;
    (5) State and local transfer taxes or fees;
    (6) Escrow deposits for the future payment of taxes and insurance 
premiums; and
    (7) Other miscellaneous fees and charges that, in total, do not 
exceed 0.25 percent of the loan amount;
    (ii) 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;
    (iii) Prepayment penalties, except where:
    (A) The mortgage provides some benefit to the borrower (e.g., a 
rate or fee reduction for accepting the prepayment premium);
    (B) The borrower is offered the choice of another mortgage that 
does not contain payment of such a premium;
    (C) The terms of the mortgage provision containing the prepayment 
penalty are adequately disclosed to the borrower; and
    (D) 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;
    (iv) The sale or financing of prepaid single-premium credit life 
insurance products in connection with the origination of the mortgage;
    (v) Underwriting practices 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;
    (vi) Failure to comply with fair lending requirements; or
    (vii) Other terms or conditions that are determined by the Director 
to be an unacceptable term or condition of a mortgage.
    Multifamily housing means a residence consisting of more than four 
dwelling units. The term includes cooperative buildings and condominium 
projects.
    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.
    Participation means a fractional interest in the principal amount 
of a mortgage.
    Private label security means any mortgage-backed security that is 
neither issued nor guaranteed by Fannie Mae, Freddie Mac, Ginnie Mae, 
or any other government agency.
    Proprietary information means all mortgage data and all AHAR 
information that the Enterprises submit to the Director in the AHARs 
that contain trade secrets or privileged or confidential, commercial, 
or financial information that, if released, would be likely to cause 
substantial competitive harm.
    Public data means all mortgage data and all AHAR information that 
the Enterprises submit to the Director in the AHARs that the Director 
determines are not proprietary and may appropriately be disclosed 
consistent with other applicable laws and regulations.
    Purchase money mortgage means a mortgage given to secure a loan 
used for

[[Page 9066]]

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:
    (i) A renewal of a single payment obligation with no change in the 
original terms;
    (ii) A reduction in the annual percentage rate of the mortgage as 
computed under the Truth in Lending Act (15 U.S.C. 1601 et seq.), with 
a corresponding change in the payment schedule;
    (iii) An agreement involving a court proceeding;
    (iv) The renewal of optional insurance purchased by the mortgagor 
and added to an existing mortgage;
    (v) A renegotiated balloon mortgage on a multifamily property where 
the balloon payment was due within 1 year after the date of the closing 
of the renegotiated mortgage; and
    (vi) A conversion of a balloon mortgage note on a single-family 
property to a fully amortizing mortgage note where the Enterprise 
already owns or has an interest in the balloon note at the time of the 
conversion.
    Rent means, for a dwelling unit:
    (i) When the contract rent includes all utilities, the contract 
rent; or
    (ii) When the contract rent does not include all utilities, the 
contract rent plus:
    (A) The actual cost of utilities not included in the contract rent; 
or
    (B) A utility allowance.
    Rental housing means dwelling units in multifamily housing and 
dwelling units that are not owner-occupied in single-family housing.
    Rental unit means a dwelling unit that is not owner-occupied and is 
rented or available to rent.
    Residence means a property where one or more families reside.
    Residential mortgage means a mortgage on single-family or 
multifamily housing.
    Safety and Soundness Act means the Federal Housing Enterprises 
Financial Safety and Soundness Act of 1992, as amended (12 U.S.C. 4501 
et seq.).
    Seasoned mortgage means a mortgage on which the date of the 
mortgage note is more than 1 year before the Enterprise 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.
    Utilities means charges for electricity, piped or bottled gas, 
water, sewage disposal, fuel (oil, coal, kerosene, wood, solar energy, 
or other), and garbage and trash collection. Utilities do not include 
charges for cable or telephone service.
    Utility allowance means either:
    (i) The amount to be added to contract rent when utilities are not 
included in contract rent (also referred to as the ``AHS-derived 
utility allowance''), as issued periodically by FHFA; or
    (ii) The utility allowance established under the HUD Section 8 
Program (42 U.S.C. 1437f) for the area where the property is located.
    Very low-income means:
    (i) In the case of owner-occupied units, income not in excess of 50 
percent of area median income; and
    (ii) In the case of rental units, income not in excess of 50 
percent of area median income, with adjustments for smaller and larger 
families in accordance with this part.
    Working day means a day when FHFA is officially open for business.

Subpart B--Housing Goals


Sec.  1282.11  General.

    (a) General. Pursuant to the requirements of the Safety and 
Soundness Act (12 U.S.C. 4561 through 4566), this subpart establishes:
    (1) Three single-family owner-occupied purchase money mortgage 
housing goals, a single-family refinancing mortgage housing goal, a 
multifamily special affordable housing goal and a multifamily special 
affordable housing subgoal;
    (2) Requirements for measuring performance under the goals; and
    (3) Procedures for monitoring and enforcing the goals.
    (b) Annual goals. Each housing goal shall be established by 
regulation no later than December 1 of the preceding year, except that 
any housing goal may be adjusted by regulation to reflect subsequent 
available data and market developments.


Sec.  1282.12  Single-family housing goals.

    (a) Single-family housing goals. An Enterprise shall be in 
compliance with a single-family housing goal if its performance under 
the housing goal meets or exceeds either:
    (1) The share of the market that qualifies for the goal, or
    (2) The benchmark level for the goal.
    (b) Size of market. The size of the market for each goal shall be 
established annually by FHFA 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 shall be determined based on 
the following criteria:
    (1) Only owner-occupied, conventional loans shall be considered;
    (2) Purchase money mortgages and refinancing mortgages shall only 
be counted for the applicable 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 300 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. The percentage share of each 
Enterprise's total purchases of purchase money mortgages on owner-
occupied single-family housing that consists of mortgages for low-
income families shall meet or exceed either:
    (1) The share of such mortgages in the market as defined in 
paragraph (b) of this section in each year; or
    (2) The benchmark level, which for 2010 and 2011 shall be 27 
percent of the total number of purchase money mortgages purchased by 
that Enterprise in each year that finance owner-occupied single-family 
properties.
    (d) Very Low-income Families Housing Goal. The percentage share of 
each Enterprise's total purchases of purchase money mortgages on owner-
occupied single-family housing that consists of mortgages for very low-
income families shall meet or exceed either:
    (1) The share of such mortgages in the market as defined in 
paragraph (b) of this section in each year; or
    (2) The benchmark level, which for 2010 and 2011 shall be 8 percent 
of the total number of purchase money mortgages purchased by that 
Enterprise in each year that finance owner-occupied single-family 
properties.
    (e) Low-income Areas Housing Goal. The percentage share of each 
Enterprise's total purchases of purchase money mortgages on owner-
occupied

[[Page 9067]]

single-family housing that consists of mortgages for families in low-
income areas shall meet or exceed either:
    (1) The share of such mortgages in the market as defined in 
paragraph (b) of this section in each year; or
    (2) The benchmark level, which for 2010 and 2011 shall be 13 
percent of the total number of purchase money mortgages purchased by 
that Enterprise in each year that finance owner-occupied single-family 
properties.
    (f) Refinancing Housing Goal. The percentage share of each 
Enterprise's total purchases of refinancing mortgages on owner-occupied 
single-family housing that consists of refinancing mortgages for low-
income families shall meet or exceed either:
    (1) The share of such mortgages in the market as defined in 
paragraph (b) of this section in each year; or
    (2) The benchmark level, which for 2010 and 2011 shall be 25 
percent of the total number of refinancing mortgages purchased by that 
Enterprise in each year that finance owner-occupied single-family 
properties.


Sec.  1282.13  Multifamily special affordable housing goal and subgoal.

    (a) Multifamily housing goal and subgoal. An Enterprise shall be in 
compliance with a multifamily housing goal or subgoal if its 
performance under the housing goal or subgoal meets or exceeds the 
benchmark level for the goal.
    (b) Multifamily Low-income Housing Goal. For the years 2010 and 
2011, the goal for each Enterprise's purchases of mortgages on 
multifamily residential housing affordable to low-income families shall 
be, for Fannie Mae, at least 237,000 dwelling units affordable to low-
income families in multifamily residential housing financed by 
mortgages purchased by that Enterprise in each year, and for Freddie 
Mac, at least 215,000 such dwelling units in each year.
    (c) Multifamily Very low-income Housing Subgoal. For the years 2010 
and 2011, the subgoal for each Enterprise's purchases of mortgages on 
multifamily residential housing affordable to very low-income families 
shall be, for Fannie Mae, at least 57,000 dwelling units affordable to 
very low-income families in multifamily residential housing financed by 
mortgages purchased by that Enterprise in each year, and for Freddie 
Mac, at least 28,000 such dwelling units in each year.


Sec.  1282.14  Discretionary adjustment of housing goals.

    (a) An Enterprise may petition the Director in writing during any 
year to reduce any goal or subgoal for that year.
    (b) The Director shall seek public comment on any such petition for 
a period of 30 days.
    (c) The Director shall make a determination regarding the petition 
within 30 days after the end of the public comment period. If the 
Director requests additional information from the Enterprise after the 
end of the public comment period, the Director may extend the period 
for a final determination for a single additional 15-day period.
    (d) The Director may reduce a goal or subgoal pursuant to a 
petition for reduction only if:
    (1) Market and economic conditions or the financial condition of 
the Enterprise require such a reduction; or
    (2) Efforts to meet the goal or subgoal would result in the 
constraint of liquidity, over-investment in certain market segments, or 
other consequences contrary to the intent of the Safety and Soundness 
Act or the purposes of the Charter Acts (12 U.S.C. 1716; 12 U.S.C. 1451 
note).


Sec.  1282.15  General counting requirements.

    (a) Calculating the numerator and denominator for single-family 
housing goals. 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 
Enterprise transactions or activities that are not mortgage purchases 
as defined by FHFA or that are specifically excluded as ineligible 
under Sec.  1282.16(b).
    (1) The numerator. The numerator of each fraction is the number of 
mortgage purchases of an Enterprise in a particular year that finance 
owner-occupied single-family properties that count toward achievement 
of a particular single-family housing goal.
    (2) The denominator. The denominator of each fraction is the total 
number of mortgage purchases of an Enterprise 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 single-family housing goals. 
When an Enterprise lacks sufficient data or information to determine 
whether the purchase of a mortgage originated after 1992 counts toward 
achievement of a particular single-family housing goal, that mortgage 
purchase shall be included in the denominator for that housing goal, 
except under the circumstances described in this paragraph (b).
    (1) 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.  1282.17.
    (2) When the income of the mortgagor(s) is not available to 
determine whether a mortgage purchase counts toward achievement of a 
particular single-family housing goal, an Enterprise's performance with 
respect to such mortgage purchase may be evaluated using estimated 
affordability information by multiplying the number of mortgage 
purchases with missing borrower income information in each census tract 
by the percentage of all single-family owner-occupied mortgage 
originations in the respective tracts that would count toward 
achievement of each goal, as determined by FHFA based on the most 
recent Home Mortgage Disclosure Act data available.
    (3) The estimation methodology in paragraph (b)(2) of this section 
may be used up to a nationwide maximum that shall be calculated by 
multiplying, for each census tract, the percentage of all single-family 
owner-occupied mortgage originations with missing borrower incomes (as 
determined by FHFA based on the most recent Home Mortgage Disclosure 
Act data available for home purchase and refinance mortgages, 
respectively) by the number of Enterprise mortgage purchases secured by 
single-family owner-occupied properties for each census tract, summed 
up over all census tracts. Separate nationwide maximums shall be 
calculated for purchase money mortgages and for refinancing mortgages. 
If the nationwide maximum is exceeded, then the estimated number of 
goal-qualifying mortgages will be adjusted by the ratio of the 
applicable nationwide maximum to the total number of mortgage purchases 
secured by single-family owner-occupied properties for the Enterprise 
in that year. Mortgage purchases in excess of the nationwide maximum, 
and any units for which estimation information is not available, shall 
remain in the

[[Page 9068]]

denominator of the respective goal calculation.
    (c) Counting dwelling units for multifamily housing goal and 
subgoal. Performance under the multifamily housing goal and subgoal 
shall be measured by counting the number of dwelling units that count 
toward achievement of a particular housing goal or subgoal in all 
multifamily properties financed by mortgages purchased by an Enterprise 
in a particular year. Only dwelling units that are financed by mortgage 
purchases, as defined by FHFA, and that are not specifically excluded 
as ineligible under Sec.  1282.16(b), may be counted for purposes of 
the multifamily housing goal and subgoal.
    (d) Counting rental units. For purposes of counting rental units 
toward achievement of the multifamily housing goal and subgoal, 
mortgage purchases financing such units shall be evaluated based on the 
income of actual or prospective tenants where such data is available, 
i.e., known to a lender.
    (1) Use of income. Each Enterprise shall require lenders to provide 
to the Enterprise tenant income information, but only when such 
information is known to the lender. When the income of actual tenants 
is available, the income of the tenant shall be compared to the median 
income for the area, adjusted for family size as provided in Sec.  
1282.17, or as provided in Sec.  1282.18 if family size is not known.
    (i) When such tenant income information is available for all 
occupied units, the Enterprise's performance shall be based on the 
income of the tenants in the occupied units. For unoccupied units that 
are vacant and available for rent and for unoccupied units that are 
under repair or renovation and not available for rent, the Enterprise 
shall use rent levels for comparable units in the property to determine 
affordability, except as provided in paragraph (d)(1)(ii) of this 
section.
    (ii) When income for tenants is available to a lender because a 
project is subject to a Federal housing program that establishes the 
maximum income for a tenant or a prospective tenant in rental units, 
the income of prospective tenants may be counted at the maximum income 
level established under such housing program for that unit. In 
determining the income of prospective tenants, the income shall be 
projected based on the types of units and market area involved. Where 
the income of prospective tenants is projected, each Enterprise must 
determine that the income figures are reasonable considering the rents 
(if any) on the same units in the past and considering current rents on 
comparable units in the same market area.
    (2) Use of rent. When the income of the prospective or actual 
tenants of a dwelling unit is not available, performance under the 
multifamily housing goal and subgoal will be evaluated based on rent 
and whether the rent is affordable to the income group targeted by the 
housing goal and subgoal. A rent is affordable if the rent does not 
exceed the maximum income levels as provided in Sec.  1282.19. In 
determining contract rent for a dwelling unit, the actual rent or 
average rent by unit type shall be used.
    (3) Model units and rental offices. A model unit or rental office 
in a multifamily property may be counted for purposes of the 
multifamily housing goal and subgoal only if an Enterprise determines 
that the number of such units is reasonable and minimal considering the 
size of the multifamily property.
    (4) Timeliness of information. In evaluating affordability under 
the multifamily housing goal and subgoal, each Enterprise shall use 
tenant and rental information as of the time of mortgage acquisition.
    (e) Missing data or information for multifamily housing goal and 
subgoal. (1) When an Enterprise lacks sufficient information to 
determine whether a rental unit in a property securing a multifamily 
mortgage purchased by an Enterprise counts toward achievement of the 
multifamily housing goal or subgoal because neither the income of 
prospective or actual tenants, nor the actual or average rental data, 
are available, an Enterprise's performance with respect to such unit 
may be evaluated using estimated affordability information by 
multiplying the number of rental units with missing affordability 
information in properties securing multifamily mortgages purchased by 
the Enterprise in each census tract by the percentage of all rental 
dwelling units in the respective tracts that would count toward 
achievement of each goal and subgoal, as determined by FHFA based on 
the most recent decennial census.
    (2) The estimation methodology in paragraph (e)(1) of this section 
may be used up to a nationwide maximum of ten percent of the total 
number of rental units in properties securing multifamily mortgages 
purchased by the Enterprise in the current year. Multifamily rental 
units in excess of this maximum, and any units for which estimation 
information is not available, shall not be counted for purposes of the 
multifamily housing goal and subgoal.
    (f) Credit toward multiple goals. A mortgage purchase (or dwelling 
unit financed by such purchase) by an Enterprise in a particular year 
shall count toward the achievement of each housing goal for which such 
purchase (or dwelling unit) qualifies in that year.
    (g) Application of median income. (1) For purposes of determining 
an area's median income under Sec. Sec.  1282.17 through 1282.19 and 
the definitions in Sec.  1282.1, the area is:
    (i) The metropolitan area, if the property which is the subject of 
the mortgage is in a metropolitan area; and
    (ii) In all other areas, the county in which the property is 
located, except that where the State non-metropolitan median income is 
higher than the county's median income, the area is the State non-
metropolitan area.
    (2) When an Enterprise cannot precisely determine whether a 
mortgage is on dwelling unit(s) located in one area, the Enterprise 
shall determine the median income for the split area in the manner 
prescribed by the Federal Financial Institutions Examination Council 
for reporting under the Home Mortgage Disclosure Act, if the Enterprise 
can determine that the mortgage is on dwelling unit(s) located in:
    (i) A census tract;
    (ii) A census place code;
    (iii) A block-group enumeration district;
    (iv) A nine-digit zip code; or
    (v) Another appropriate geographic segment that is partially 
located in more than one area (``split area'').
    (h) Sampling not permitted. Performance under the housing goals for 
each year shall be based on a complete tabulation of mortgage purchases 
(or dwelling units) for that year; a sampling of such purchases (or 
dwelling units) is not acceptable.
    (i) Newly available data. When an Enterprise uses data to determine 
whether a mortgage purchase (or dwelling unit) counts toward 
achievement of any goal and new data is released after the start of a 
calendar quarter, the Enterprise need not use the new data until the 
start of the following quarter.


Sec.  1282.16  Special counting requirements.

    (a) General. FHFA shall determine whether an Enterprise shall 
receive full, partial, or no credit toward achievement of any of the 
housing goals for a transaction that otherwise qualifies under this 
part. In this determination, FHFA will consider whether a transaction 
or activity of the Enterprise is substantially equivalent to a mortgage 
purchase and either creates a new market or adds liquidity to an 
existing market, provided however that such

[[Page 9069]]

mortgage purchase actually fulfills the Enterprise's purposes and is in 
accordance with its Charter Act.
    (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 either Enterprise's 
performance under the housing goals, even if the transaction or 
activity would otherwise be counted pursuant to paragraph (c) of this 
section:
    (1) Equity investments in low-income housing tax credits;
    (2) Purchases of State and local government housing bonds except as 
provided in paragraph (c)(8) of this section;
    (3) Purchases of non-conventional single-family mortgages;
    (4) Commitments to buy mortgages at a later date or time;
    (5) Options to acquire mortgages;
    (6) Rights of first refusal to acquire mortgages;
    (7) Any interests in mortgages that the Director determines, in 
writing, shall not be treated as interests in mortgages;
    (8) Mortgage purchases to the extent they finance any dwelling 
units that are secondary residences;
    (9) Single-family refinancing mortgages that result from conversion 
of balloon notes to fully amortizing notes, if the Enterprise already 
owns or has an interest in the balloon note at the time conversion 
occurs;
    (10) Purchases of subordinate lien mortgages (second mortgages);
    (11) Purchases of mortgages or interests in mortgages that were 
previously counted by either Enterprise under any current or previous 
housing goal within the five years immediately preceding the current 
performance year;
    (12) Purchases of mortgages where the property has not been 
approved for occupancy;
    (13) Purchases of private label securities;
    (14) Enterprise contributions to the Housing Trust Fund (12 U.S.C. 
4568) and the Capital Magnet Fund (12 U.S.C. 4569), and mortgage 
purchases funded with such grant amounts; and
    (15) Any combination of factors in paragraphs (b)(1) through 
(b)(14) of this section.
    (c) Other special rules. Subject to FHFA's determination of whether 
an Enterprise 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 (or dwelling units, for the multifamily 
housing goals) from each such transaction or activity shall be included 
in the denominator in calculating the Enterprise's performance under 
the housing goals, and shall be included in the numerator, as 
appropriate.
    (1) Credit enhancements. (i) Mortgages (or dwelling units) financed 
under a credit enhancement entered into by an Enterprise shall be 
treated as mortgage purchases for purposes of the housing goals only 
when:
    (A) The Enterprise provides a specific contractual obligation to 
ensure timely payment of amounts due under a mortgage or mortgages 
financed by the issuance of housing bonds (such bonds may be issued by 
any entity, including a State or local housing finance agency); and
    (B) The Enterprise assumes a credit risk in the transaction 
substantially equivalent to the risk that would have been assumed by 
the Enterprise if it had securitized the mortgages financed by such 
bonds.
    (ii) When an Enterprise provides a specific contractual obligation 
to ensure timely payment of amounts due under any mortgage originally 
insured by a public purpose mortgage insurance entity or fund, the 
Enterprise may, on a case-by-case basis, seek approval from the 
Director for such activities to count toward achievement of the housing 
goals.
    (2) [Reserved.]
    (3) Risk-sharing. Mortgages purchased under risk-sharing 
arrangements between an Enterprise and any Federal agency under which 
the Enterprise is responsible for a substantial amount (50 percent or 
more) of the risk shall be treated as mortgage purchases for purposes 
of the housing goals.
    (4) Participations. Participations purchased by an Enterprise shall 
be treated as mortgage purchases for purposes of the housing goals only 
when the Enterprise's participation in the mortgage is 50 percent or 
more.
    (5) Cooperative housing and condominiums. (i) The purchase 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. Such a purchase shall be counted in the 
same manner as a mortgage purchase of single-family owner-occupied 
units.
    (ii) The purchase of a mortgage on a cooperative building (``a 
blanket loan'') or a mortgage on a condominium project shall be treated 
as a mortgage purchase for purposes of the housing goals. The purchase 
of a blanket loan or a condominium project mortgage shall be counted in 
the same manner as a mortgage purchase of a multifamily rental 
property.
    (iii) Where an Enterprise purchases both a blanket loan on a 
cooperative building and share loans for units in the same building, 
both the blanket loan and the share loan(s) shall be treated as 
mortgage purchases for purposes of the housing goals. Where an 
Enterprise purchases both a condominium project mortgage and mortgages 
on condominium dwelling units in the same project, both the condominium 
project mortgages and the mortgages on condominium dwelling units shall 
be treated as mortgage purchases for purposes of the housing goals.
    (6) Seasoned mortgages. An Enterprise's purchase of a seasoned 
mortgage shall be treated as a mortgage purchase for purposes of the 
housing goals, except where the Enterprise has already counted the 
mortgage under any current or previous housing goal within the five 
years immediately preceding the current performance year.
    (7) Purchase of refinancing mortgages. The purchase of a 
refinancing mortgage by an Enterprise 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.
    (8) Mortgage revenue bonds. The purchase or guarantee by an 
Enterprise of a mortgage revenue bond issued by a State or local 
housing finance agency shall be treated as a purchase of the underlying 
mortgages for purposes of the housing goals only to the extent the 
Enterprise has sufficient information to determine whether the 
underlying mortgages or mortgage-backed securities qualify for 
inclusion in the numerator for one or more housing goal.
    (9) [Reserved.]
    (10) Loan modifications. An Enterprise's modification of a loan in 
accordance with the Making Home Affordable program announced on March 
4, 2009, that is held in the Enterprise's portfolio or that is in a 
pool backing a security guaranteed by the Enterprise, shall be treated 
as a mortgage purchase for purposes of the housing goals.
    (11) [Reserved.]
    (12) [Reserved.]
    (13) [Reserved.]
    (14) Seller dissolution option. (i) Mortgages acquired through 
transactions involving seller dissolution options shall be treated as 
mortgage purchases for purposes of the housing goals, only when:

[[Page 9070]]

    (A) The terms of the transaction provide for a lockout period that 
prohibits the exercise of the dissolution option for at least one year 
from the date on which the transaction was entered into by the 
Enterprise and the seller of the mortgages; and
    (B) The transaction is not dissolved during the one-year minimum 
lockout period.
    (ii) The Director may grant an exception to the one-year minimum 
lockout period described in paragraphs (c)(14)(i)(A) and (B) of this 
section, in response to a written request from an Enterprise, if the 
Director determines that the transaction furthers the purposes of the 
Safety and Soundness Act and the Enterprise's Charter Act;
    (iii) For purposes of this paragraph (c)(14), ``seller dissolution 
option'' means an option for a seller of mortgages to the Enterprises 
to dissolve or otherwise cancel a mortgage purchase agreement or loan 
sale.
    (d) HOEPA mortgages and mortgages with unacceptable terms or 
conditions. HOEPA mortgages and mortgages with unacceptable terms or 
conditions, as defined in Sec.  1282.1, shall be treated as mortgage 
purchases for purposes of the housing goals and shall be included in 
the denominator for each applicable single-family 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, including treatment of missing data. FHFA will 
notify each Enterprise in writing of any determination regarding the 
treatment of any transaction or class of transactions under the housing 
goals.


Sec.  1282.17  Affordability--Income level definitions--family size and 
income known (owner-occupied units, actual tenants, and prospective 
tenants).

    In determining whether a dwelling unit is affordable where income 
information (and family size, for rental housing) is known to the 
Enterprise, the affordability of the unit shall be determined as 
follows:
    (a) Moderate-income means:
    (1) In the case of owner-occupied units, income not in excess of 
100 percent of area median income; and
    (2) In the case of rental units, where the income of actual or 
prospective tenants is available, income not in excess of the following 
percentages of area median income corresponding to the following family 
sizes:

------------------------------------------------------------------------
                                                          Percentage of
              Number of persons in family                  area median
                                                              income
------------------------------------------------------------------------
1......................................................               70
2......................................................               80
3......................................................               90
4......................................................              100
5 or more..............................................                *
------------------------------------------------------------------------
* 100% plus (8% multiplied by the number of persons in excess of 4).

    (b) Low-income (80%) means:
    (1) In the case of owner-occupied units, income not in excess of 80 
percent of area median income; and
    (2) In the case of rental units, where the income of actual or 
prospective tenants is available, income not in excess of the following 
percentages of area median income corresponding to the following family 
sizes:

------------------------------------------------------------------------
                                                          Percentage of
              Number of persons in family                  area median
                                                              income
------------------------------------------------------------------------
1......................................................               56
2......................................................               64
3......................................................               72
4......................................................               80
5 or more..............................................                *
------------------------------------------------------------------------
* 80% plus (6.4% multiplied by the number of persons in excess of 4).

    (c) Low-income (60%) means:
    (1) In the case of owner-occupied units, income not in excess of 60 
percent of area median income; and
    (2) In the case of rental units, where the income of actual or 
prospective tenants is available, income not in excess of the following 
percentages of area median income corresponding to the following family 
sizes:

------------------------------------------------------------------------
                                                          Percentage of
              Number of persons in family                  area median
                                                              income
------------------------------------------------------------------------
1......................................................               42
2......................................................               48
3......................................................               54
4......................................................               60
5 or more..............................................                *
------------------------------------------------------------------------
* 60% plus (4.8% multiplied by the number of persons in excess of 4).

    (d) Very low-income means:
    (1) In the case of owner-occupied units, income not in excess of 50 
percent of area median income; and
    (2) In the case of rental units, where the income of actual or 
prospective tenants is available, income not in excess of the following 
percentages of area median income corresponding to the following family 
sizes:

------------------------------------------------------------------------
                                                          Percentage of
              Number of persons in family                  area median
                                                              income
------------------------------------------------------------------------
1......................................................               35
2......................................................               40
3......................................................               45
4......................................................               50
5 or more..............................................                *
------------------------------------------------------------------------
* 50% plus (4% multiplied by the number of persons in excess of 4).

    (e) Extremely low-income means:
    (1) In the case of owner-occupied units, income not in excess of 30 
percent of area median income; and
    (2) In the case of rental units, where the income of actual or 
prospective tenants is available, income not in excess of the following 
percentages of area median income corresponding to the following family 
sizes:

------------------------------------------------------------------------
                                                          Percentage of
              Number of persons in family                  area median
                                                              income
------------------------------------------------------------------------
1......................................................               21
2......................................................               24
3......................................................               27
4......................................................               30
5 or more..............................................                *
------------------------------------------------------------------------
* 30% plus (2.4% multiplied by the number of persons in excess of 4).

Sec.  1282.18  Affordability--Income level definitions--family size not 
known (actual or prospective tenants).

    In determining whether a rental unit is affordable where family 
size is not known to the Enterprise, income will be adjusted using unit 
size, and affordability determined as follows:
    (a) For moderate-income, the income of prospective tenants shall 
not exceed the following percentages of area median income with 
adjustments, depending on unit size:

------------------------------------------------------------------------
                                                          Percentage of
                       Unit size                           area median
                                                              income
------------------------------------------------------------------------
Efficiency.............................................               70
1 bedroom..............................................               75
2 bedrooms.............................................               90
3 bedrooms or more.....................................                *
------------------------------------------------------------------------
* 104% plus (12% multiplied by the number of bedrooms in excess of 3).

    (b) For low-income (80%), income of prospective tenants shall not 
exceed the following percentages of area median income with 
adjustments, depending on unit size:

------------------------------------------------------------------------
                                                          Percentage of
                       Unit size                           area median
                                                              income
------------------------------------------------------------------------
Efficiency.............................................               56
1 bedroom..............................................               60
2 bedrooms.............................................               72

[[Page 9071]]

 
3 bedrooms or more.....................................                *
------------------------------------------------------------------------
* 83.2% plus (9.6% multiplied by the number of bedrooms in excess of 3).

    (c) For low-income (60%), income of prospective tenants shall not 
exceed the following percentages of area median income with 
adjustments, depending on unit size:

------------------------------------------------------------------------
                                                          Percentage of
                       Unit size                           area median
                                                              income
------------------------------------------------------------------------
Efficiency.............................................               42
1 bedroom..............................................               45
2 bedrooms.............................................               54
3 bedrooms or more.....................................                *
------------------------------------------------------------------------
* 62.4% plus (7.2% multiplied by the number of bedrooms in excess of 3).

    (d) For very low-income, income of prospective tenants shall not 
exceed the following percentages of area median income with 
adjustments, depending on unit size:

------------------------------------------------------------------------
                                                          Percentage of
                       Unit size                           area median
                                                              income
------------------------------------------------------------------------
Efficiency.............................................               35
1 bedroom..............................................             37.5
2 bedrooms.............................................               45
3 bedrooms or more.....................................                *
------------------------------------------------------------------------
* 52% plus (6.0% multiplied by the number of bedrooms in excess of 3).

    (e) For extremely low-income, income of prospective tenants shall 
not exceed the following percentages of area median income with 
adjustments, depending on unit size:

------------------------------------------------------------------------
                                                          Percentage of
                       Unit size                           area median
                                                              income
------------------------------------------------------------------------
Efficiency.............................................               21
1 bedroom..............................................             22.5
2 bedrooms.............................................               27
3 bedrooms or more.....................................                *
------------------------------------------------------------------------
* 31.2% plus (3.6% multiplied by the number of bedrooms in excess of 3).

Sec.  1282.19  Affordability--Rent level definitions--tenant income is 
not known.

    For purposes of determining whether a rental unit is affordable 
where the income of the family in the dwelling unit is not known to the 
Enterprise, the affordability of the unit is determined based on unit 
size as follows:
    (a) For moderate-income, maximum affordable rents to count as 
housing for moderate-income families shall not exceed the following 
percentages of area median income with adjustments, depending on unit 
size:

------------------------------------------------------------------------
                                                          Percentage of
                       Unit size                           area median
                                                              income
------------------------------------------------------------------------
Efficiency.............................................               21
1 bedroom..............................................             22.5
2 bedrooms.............................................               27
3 bedrooms or more.....................................                *
------------------------------------------------------------------------
* 31.2% plus (3.6% multiplied by the number of bedrooms in excess of 3).

    (b) For low-income (80%), maximum affordable rents to count as 
housing for low-income (80%) families shall not exceed the following 
percentages of area median income with adjustments, depending on unit 
size:

------------------------------------------------------------------------
                                                          Percentage of
                       Unit size                           area median
                                                              income
------------------------------------------------------------------------
Efficiency.............................................             16.8
1 bedroom..............................................               18
2 bedrooms.............................................             21.6
3 bedrooms or more.....................................                *
------------------------------------------------------------------------
* 24.96% plus (2.88% multiplied by the number of bedrooms in excess of
  3).

    (c) For low-income (60%), maximum affordable rents to count as 
housing for low-income (60%) families shall not exceed the following 
percentages of area median income with adjustments, depending on unit 
size:

------------------------------------------------------------------------
                                                          Percentage of
                       Unit size                           area median
                                                              income
------------------------------------------------------------------------
Efficiency.............................................             12.6
1 bedroom..............................................             13.5
2 bedrooms.............................................             16.2
3 bedrooms or more.....................................                *
------------------------------------------------------------------------
* 18.72% plus (2.16% multiplied by the number of bedrooms in excess of
  3).

    (d) For very low-income, maximum affordable rents to count as 
housing for very low-income families shall not exceed the following 
percentages of area median income with adjustments, depending on unit 
size:

------------------------------------------------------------------------
                                                          Percentage of
                       Unit size                           area median
                                                              income
------------------------------------------------------------------------
Efficiency.............................................             10.5
1 bedroom..............................................            11.25
2 bedrooms.............................................             13.5
3 bedrooms or more.....................................                *
------------------------------------------------------------------------
* 15.6% plus (1.8% multiplied by the number of bedrooms in excess of 3).

    (e) For extremely low-income, maximum affordable rents to count as 
housing for extremely low-income families shall not exceed the 
following percentages of area median income with adjustments, depending 
on unit size:

------------------------------------------------------------------------
                                                          Percentage of
                       Unit size                           area median
                                                              income
------------------------------------------------------------------------
Efficiency.............................................              6.3
1 bedroom..............................................             6.75
2 bedrooms.............................................              8.1
3 bedrooms or more.....................................                *
------------------------------------------------------------------------
* 9.36% plus (1.08% multiplied by the number of bedrooms in excess of
  3).

    (f) Missing Information. Each Enterprise shall make every effort to 
obtain the information necessary to make the calculations in this 
section. If an Enterprise makes such efforts but cannot obtain data on 
the number of bedrooms in particular units, in making the calculations 
on such units, the units shall be assumed to be efficiencies except as 
provided in Sec.  1282.15(e)(1).


Sec.  1282.20  Determination of compliance with housing goals; notice 
of determination.

    (a) Single-family housing goals. The Director shall evaluate each 
Enterprise's performance under the Low-income Families Housing Goal, 
the Very Low-income Families Housing Goal, the Low-income Areas Housing 
Goal, and the Refinancing Mortgages Housing Goal on an annual basis. If 
the Director determines that an Enterprise has failed, or there is a 
substantial probability that an Enterprise will fail to meet a single-
family housing goal established by this subpart, the Director shall 
notify the Enterprise in writing of such preliminary determination.
    (b) Multifamily housing goal and subgoal. The Director shall 
evaluate each Enterprise's performance under the Multifamily Low-income 
Housing Goal and the Multifamily Very Low-income Housing Subgoal on an 
annual basis. If the Director determines that an Enterprise has failed, 
or there is a substantial probability that an Enterprise will fail to 
meet a multifamily housing goal or subgoal established by this subpart, 
the Director shall notify the Enterprise in writing of such preliminary 
determination.
    (c) Any notification to an Enterprise of a preliminary 
determination under this section shall provide the Enterprise with an 
opportunity to respond in writing in accordance with the procedures at 
12 U.S.C. 4566(b).


Sec.  1282.21  Housing plans.

    (a) General. If the Director determines that an Enterprise has 
failed, or there is a substantial probability that an Enterprise will 
fail, to meet any housing goal and that the achievement of the housing 
goal was or is feasible, the Director may require the Enterprise to 
submit a housing plan for approval by the Director.

[[Page 9072]]

    (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 Enterprise will take:
    (i) To achieve the goal for the next calendar year; and
    (ii) If the Director determines that there is a substantial 
probability that the Enterprise will fail to meet a housing goal in the 
current year, to make such improvements and changes in its operations 
as are reasonable in the remainder of the year; and
    (4) Address any additional matters relevant to the plan as 
required, in writing, by the Director.
    (c) Deadline for submission. The Enterprise shall submit the 
housing plan to the Director within 45 days after issuance of a notice 
requiring the Enterprise 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 plans. The Director shall review and approve 
or disapprove housing plans in accordance with 12 U.S.C. 4566(c)(4) and 
(c)(5).
    (e) Resubmission. If the Director disapproves an initial housing 
plan submitted by an Enterprise, the Enterprise 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 Enterprise 15 days to submit a new plan.

Subpart C--[Reserved]

Subpart D--Reporting Requirements


Sec.  1282.61  General.

    This subpart establishes data submission and reporting requirements 
to carry out the requirements of the Enterprises' Charter Acts and the 
Safety and Soundness Act.


Sec.  1282.62  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 Enterprises' housing goal activities, each Enterprise 
shall collect and compile computerized loan-level data on each mortgage 
purchased in accordance with 12 U.S.C. 1456(e) and 1723a(m). The 
Director may, from time to time, issue a list entitled ``Required Loan-
level Data Elements'' specifying the loan-level data elements to be 
collected and maintained by the Enterprises and provided to the 
Director. The Director may revise the list by written notice to the 
Enterprises.
    (b) Quarterly Mortgage Reports. Each Enterprise shall submit to the 
Director a quarterly Mortgage Report. The fourth quarter Mortgage 
Report 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 the 
Enterprise under paragraph (a) of this section for year-to-date 
mortgage purchases, in the format specified in writing by the Director;
    (2) Year-to-date dollar volume, number of units, and number of 
mortgages on owner-occupied and rental properties purchased by the 
Enterprise 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. The Enterprises shall submit the Mortgage 
Report for each of the first 3 quarters of each year within 45 days of 
the end of the quarter. Each Enterprise 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, an Enterprise may revise any of its quarterly 
reports for that year.
    (e) Format. The Enterprises shall submit to the Director 
computerized loan-level data with the Mortgage Report, in the format 
specified in writing by the Director.


Sec.  1282.63  Annual Housing Activities Report.

    To comply with the requirements in sections 309(n) of the Fannie 
Mae Charter Act and 307(f) of the Freddie Mac Act and assist the 
Director in preparing the Director's Annual Report to Congress, each 
Enterprise shall submit to the Director an AHAR including the 
information listed in those sections of the Charter Acts. Each 
Enterprise shall submit such report within 60 days after the end of 
each calendar year, to the Director, the Committee on Financial 
Services of the House of Representatives, and the Committee on Banking, 
Housing, and Urban Affairs of the Senate. Each Enterprise shall make 
its AHAR available to the public online and at its principal and 
regional offices. Before making any such report available to the 
public, the Enterprise may exclude from the report any information that 
the Director has deemed proprietary.


Sec.  1282.64  Periodic reports.

    Each Enterprise shall provide to the Director such reports, 
information and data as the Director may request from time to time.


Sec.  1282.65  Enterprise data integrity.

    (a) Certification. (1) The senior officer of each Enterprise who is 
responsible for submitting the fourth quarter Annual Mortgage Report 
and the AHAR under sections 309(m) and (n) of the Fannie Mae Charter 
Act or sections 307(e) and (f) of the Freddie Mac Act, as applicable, 
or for submitting any other report(s), data or 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 in 
AHAR data. FHFA shall determine the official housing goal performance 
figure for each Enterprise under the housing goals on an annual basis. 
FHFA may resolve any error, omission or discrepancy by adjusting the 
Enterprise's official housing goal performance figure. If the Director 
determines that the year-end data reported by an Enterprise 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 (or dwelling units) 
that the Director determines were overstated in the prior year's goal 
performance.

    Dated: February 16, 2010.
Edward J. DeMarco,
Acting Director, Federal Housing Finance Agency.
[FR Doc. 2010-3310 Filed 2-25-10; 8:45 am]
BILLING CODE P


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