9034 Federal Register / Vol. 75, No. 38 / Friday, February 26, 2010 / Proposed Rules 

1See Division A, titled the ‘‘Federal Housing 

Finance Regulatory Reform Act of 2008,’’ Title I, 

§ 1101, Public Law 110–289, 122 Stat. 2654 (2008), 

codified at 12 U.S.C. 4501 et seq. 

2See 12 U.S.C. 4513. 

3See HERA at section 1302, 122 Stat. 2795. 

4See 12 U.S.C. 1716 et seq.; 12 U.S.C. 1451 et seq. 

5 Id. 

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. 

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 singlefamily 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: 

• 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. 

• 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. 

• E-mail: Comments to Alfred M. 

Pollard, General Counsel, may be sent 

by e-mail to RegComments@fhfa.gov. 

Please include ‘‘RIN 2590–AA26’’ in the 

subject line of the message. 

• 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 

RegComments@fhfa.gov 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

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

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 


sroberts on DSKD5P82C1PROD with PROPOSALS
Federal Register / Vol. 75, No. 38 / Friday, February 26, 2010 / Proposed Rules 9035 

6See 12 U.S.C. 4561 et seq. (2008). 

7See 24 CFR part 81 (2008). 

8See 24 CFR 81.12 through 81.14 (2008). 

9See 74 FR 39873 (Aug. 10, 2009). 

10See 12 U.S.C. 4561 and 4563(a)(2). 

11See 12 U.S.C. 4562. 

12See 12 U.S.C. 4563. 

13See 58 FR 53048 (Oct. 13, 1993) and 58 FR 

53072 (Oct. 13, 1993). 

14See 60 FR 61846 (Dec. 1, 1995). 

15See 65 FR 65044 (Oct. 31, 2000). 

16See 69 FR 63580 (Nov. 2, 2004). 

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

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 singlefamily, 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 lowincome 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 lowincome families, and the multifamily 

special affordable housing subgoal 

targets multifamily housing affordable 

to very low-income families.12

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. 

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 goalqualifying 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 goalqualifying 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 goalsqualifying 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 goalsqualifying 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 moderateincome 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. 


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9036 Federal Register / Vol. 75, No. 38 / Friday, February 26, 2010 / Proposed Rules 

17 12 U.S.C. 4544(c). 

18See 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.’’ 

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). 

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 goalsqualifying shares of the primary 

mortgage market. A dual approach 

prevents exclusive reliance on multiyear mortgage market forecasts. The 

primary disadvantage of this approach 

is that information on the goalsqualifying shares of the current singlefamily 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 singlefamily 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. 

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

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

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 singlefamily 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 

§ 1282.16(b). The 2010–2011 singlefamily 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 owneroccupied 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 


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23 12 U.S.C. 4562(e)(2). 

24See 12 U.S.C. 4562(e)(2)(A). 

25U.S. Housing Market Conditions, 3rd Quarter 

2009. Department of Housing and Urban 

Development at 87. 26U.S. Housing Market Conditions, 3rd Quarter 

2009. Department of Housing and Urban 

Development at 89. 27U.S. Housing Market Conditions, 3rd Quarter 

2009. Department of Housing and Urban 

Development at 88. 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. 

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 lowand 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

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

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. 

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

According to FHFA’s Monthly Interest 

Rate Survey (MIRS), the average loan-tovalue 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


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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. 

31See 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/Lockhartcommends

ENTERPRISEsreSubprime91007.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). 

32U.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. 

34Emile J. Brinkmann, Mortgage Bankers 

Association. Senate Banking, Housing and Urban 

Affairs Committee. Oct. 20, 2009 at 3. 

35 ‘‘House Clears Extension of Jobless Benefits, 

Homebuyer’s Tax Credit.’’ Congressional Quarterly 

Today Online News. Nov. 5, 2009. 

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. 

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

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, interestonly 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

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

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 nonrefundable 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

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 goalsqualifying 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-toincome 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 


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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. 

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. 

42On 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). 

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. 

for all of 2009, substantially fewer goalsqualifying 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. 

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 goalqualifying 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. 

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 mortgagebacked 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 goalqualifying 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 FHAinsured 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

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

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. 

NeighborWorks, a national network of 

community-based organizations actively 

involved in foreclosure mitigation 


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46NeighborWorks, National Foreclosure 

Mitigation Counseling Program Update, Jan. 23, 

2009. 

47 ‘‘State of the Nation’s Housing 2009.’’ Joint 

Center for Housing Studies of Harvard University. 48 12 U.S.C. 4502(14). 

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. 

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. 

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, singlefamily, 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 ‘‘lowincome 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. 

BILLING CODE P 


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

Very Low-Income Families Housing 

Goal. The Safety and Soundness Act, as 

revised by HERA, defines a ‘‘very lowincome’’ 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. 


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50 12 U.S.C. 4502(28). 

51 12 U.S.C. 4502(29). 

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

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 


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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. 


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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. 

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 fullVerDate Nov<24>2008 16:43 Feb 25, 2010 Jkt 220001 PO 00000 Frm 00012 Fmt 4701 Sfmt 4702 E:\FR\FM\26FEP2.SGM 26FEP2

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

53Address by Edward DeMarco, Acting Director 

of the Federal Housing Finance Agency, New 

England Mortgage Bankers 22nd Annual 

Conference, Oct. 1, 2009 at 5. 

54http://www.moodys.com/. 

55http://www.mbaa.org/. 

56http://www.imfpubs.com/. 

57http://www.realtor.org/. 

58http://www.nahb.org/. 

59http://www.cmsaglobal.org/CMSA_Resources/ 

Research/Market_Statistics/Market_Statistics/. 

60http://www.fhfa.gov/Default.aspx?Page=250. 

61http://www.fedstats.gov/other.html. 

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. 

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 moderateincome 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. 

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

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

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. 

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 


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63These 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. 

64Mortgage Bankers Association, Mortgage 

Finance Commentary, Nov. 10, 2009. 

65See 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. 

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. 

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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 


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66See 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. 

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


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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 


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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. 

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). 

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 lowincome 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 lowincome 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. 


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

69Moody’s/Real CPPI Report, Jan. 2010. 

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 singlefamily 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 § 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 lowincome 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 lowincome and very low-income families; 

(5) The availability of public 

subsidies; 

(6) The need to maintain the sound 

financial condition of the Enterprise.68

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 


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70 ‘‘New Residential Construction in December 

2009.’’ U.S. Census Bureau, Joint Release, U.S. 

Department of Housing and Urban Development, 

Jan. 20, 2009. 

71Commercial Real Estate Outlook Q1 2009, 

Deutsche Bank, Mar. 2009. 

72 MBA Commercial/Multifamily Mortgage 

Delinquency Report, Dec. 7, 2009. 

73Fannie Mae: Monthly Summary, November 

2009, Table 9. 

74Freddie Mac: Monthly Volume Summary: 

November 2009, Table 6. 

75 12 U.S.C. 4563(a)(2). 76 12 U.S.C. 4563(a)(3). 

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. 

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. 

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. 

While multifamily delinquencies 

remain relatively low for both Fannie 

Mae73 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. 

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 lowincome 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 lowincome’’ 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. 

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

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. 

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

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. 

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. 


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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. 


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78 Multifamily Housing News: MBA Says Large 

Amounts of Multifamily Loans Will Mature in 2011 

and After, Feb. 11, 2009. 

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 lowincome 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

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 


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unavailable or do not meet Enterprise 

standards. Therefore, based on the 

factors discussed above, multifamily 

affordable purchases in the very lowincome 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 lowincome 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 longterm 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 creditrelated 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 


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79 ‘‘Why do Small Multifamily Properties Bedevil 

Us?’’ Shekar Narasimhan, The Brookings Institution, 

Nov. 2001, http://www.brookings.edu/articles/2001/ 

11metropolitanpolicy_narasihan.aspx. 80 12 U.S.C. 4502. 

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. 

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 § 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 lowincome 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 § 1282.1 

Proposed § 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 § 1282.1 

would no longer include definitions for 

‘‘central city,’’ ‘‘ECOA,’’ ‘‘governmentsponsored 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 § 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 lowincome 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

Proposed § 1282.1 would add new 

definitions for ‘‘borrower income,’’ 

‘‘FEMA,’’ ‘‘HMDA,’’ ‘‘minority census 

tract,’’ ‘‘mortgage revenue bond,’’ ‘‘nonmetropolitan 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 § 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 § 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 § 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 

§ 1282.1 would exclude workout 

agreements from the definition. The 

definition of ‘‘mortgage’’ in proposed 

§ 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 § 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 


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81Federally declared disaster areas are managed 

by FEMA and can be tracked at FEMA’s Web site. 

See http://www.fema.gov/news/disasters.fema. 

82The 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). 83See 12 U.S.C. 4561(b). 84 12 U.S.C. 4564. 

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. 

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 lowincome 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. 

FHFA welcomes comments on the 

proposed changes to the definitions 

under § 1282.1. 

B. Housing Goals—Proposed §§ 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 § 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. 

Proposed § 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 § 1282.14 

Consistent with the requirements of 

section 1334 of the Safety and 

Soundness Act, as amended by HERA, 

proposed § 1282.14 would provide for 

an Enterprise to petition the Director to 

reduce the level of any goal or 

subgoal.84 Proposed § 1282.14 would set 

forth the standards and procedures for 

consideration by the Director in 

determining whether to reduce a goal or 

subgoal level. 

D. General Counting Requirements— 

Proposed § 1282.15 

Proposed § 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 owneroccupied 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 § 1282.16 

Proposed § 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 § 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 § 1282.16(c). For example, 

a non-conventional mortgage that would 


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

86See 12 U.S.C. 4568, 4569. 87 12 U.S.C. 4562(i). 

be excluded from consideration 

pursuant to proposed § 1282.16(b)(3) 

could not be counted even if it 

otherwise would be counted as a 

seasoned mortgage under proposed 

§ 1282.16(c)(6). Proposed § 1282.16(c) 

would also make clear that where a 

transaction falls under more than one of 

the special counting rules in 

§ 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 § 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. 

Proposed § 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 § 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 § 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 

§ 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

Proposed § 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 § 1282.16(b)(13). Proposed 

§ 1282.16(c) would also eliminate 

consideration of expiring assistance 

contracts, reflecting the changes under 

HERA to the former special affordable 

housing goal. Proposed § 1282.16(c)(5) 

would amend the provisions regarding 

cooperative housing and condominiums 

to reflect HERA’s treatment of singlefamily housing and multifamily housing 

under separate goals. Proposed 

§ 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 

§ 1282.16(c)(10) would reflect the 

accepted terminology for the 

Administration’s Making Home 

Affordable program. 

Proposed § 1282.16(d) would relocate 

existing provisions regarding HOEPA 

mortgages and mortgages with 

unacceptable terms or conditions from 

current § 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

Proposed § 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 

§ 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 


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88 12 U.S.C. 4562(a). 89See 12 U.S.C. 4565(b). 

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 

§ 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 nonconventional 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 singlefamily housing goals to include only 

conventional mortgages.88 This 

restriction does not preclude the 

Enterprises’ purchase of Chartercompliant non-conventional singlefamily 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. 

Proposed § 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 

§§ 1282.17 Through 1282.19 

Proposed § 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 § 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 § 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 § 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 § 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 § 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 §§ 1282.20 and 1282.21 

Proposed § 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 § 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

Proposed § 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 

§ 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 § 1282.62(b) would 

require the Enterprises to submit loanlevel 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 

§§ 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 § 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 § 1282.64 

would eliminate the requirement for the 

Enterprises to submit information that is 

typically made publicly available by 

each Enterprise. The Director may 


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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 § 1282.64 is sufficiently 

broad to encompass any requests for 

additional data or reports that the 

Director deems necessary. 

Proposed § 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 bookentry 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 bookentry procedures in 24 CFR part 81 will 

no longer be in effect. The proposed rule 

would also relocate definitions that are 

currently found in § 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 § 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 bookentry 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. 

§ 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). 


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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 Bookentry Enterprise Security) maintained in 

the Book-entry System, as set forth in 

Federal Reserve Bank Operating 

Circulars. 

§ 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. 

§ 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 

§ 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 § 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. 

§ 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 § 1249.12(b) or (d). The 

perfection, effect of perfection or nonperfection 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. 

§ 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 § 1249.13(c)(1), for the 


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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. 

§ 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 Bookentry 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. 

§ 1249.16 Withdrawal of Eligible Bookentry 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. 

§ 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. 

§ 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. 

§ 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). 


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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 

§ 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 


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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 residentmember 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 taxexempt 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 


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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 

§ 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 owneroccupied 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. 

§ 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 owneroccupied single-family properties. 

(d) Very Low-income Families 

Housing Goal. The percentage share of 

each Enterprise’s total purchases of 

purchase money mortgages on owneroccupied single-family housing that 

consists of mortgages for very lowincome 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 owneroccupied 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 


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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 owneroccupied 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. 

§ 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 lowincome 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. 

§ 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). 

§ 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 § 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 owneroccupied 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., lowor 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 § 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 


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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 

§ 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 § 1282.17, or 

as provided in § 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 § 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 §§ 1282.17 

through 1282.19 and the definitions in 

§ 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. 

§ 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 


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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: 


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(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 § 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. 

§ 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: 

Number of persons 

in family 

Percentage of 

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: 

Number of persons 

in family 

Percentage of 

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: 

Number of persons 

in family 

Percentage of 

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: 

Number of persons 

in family 

Percentage of 

area median 

income 

1 .......................................... 35 

Number of persons 

in family 

Percentage of 

area median 

income 

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: 

Number of persons 

in family 

Percentage of 

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). 

§ 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: 

Unit size 

Percentage of 

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: 

Unit size 

Percentage of 

area median 

income 

Efficiency ............................ 56 

1 bedroom .......................... 60 

2 bedrooms ......................... 72 


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Unit size 

Percentage of 

area median 

income 

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: 

Unit size 

Percentage of 

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: 

Unit size 

Percentage of 

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: 

Unit size 

Percentage of 

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). 

§ 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: 

Unit size 

Percentage of 

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: 

Unit size 

Percentage of 

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: 

Unit size 

Percentage of 

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: 

Unit size 

Percentage of 

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: 

Unit size 

Percentage of 

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 § 1282.15(e)(1). 

§ 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 Lowincome 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 singlefamily 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). 

§ 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. 


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(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 

§ 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. 

§ 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 loanlevel 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. 

§ 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. 

§ 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. 

§ 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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