[Federal Register Volume 74, Number 152 (Monday, August 10, 2009)]
[Rules and Regulations]
[Pages 39873-39900]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-18517]



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Rules and Regulations
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Federal Register / Vol. 74, No. 152 / Monday, August 10, 2009 / Rules 
and Regulations

[[Page 39873]]



FEDERAL HOUSING FINANCE AGENCY

12 CFR Part 1282

RIN 2590-AA25


2009 Enterprise Transition Affordable Housing Goals

AGENCY: Federal Housing Finance Agency.

ACTION: Final rule.

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SUMMARY: Section 1128(b) of the Housing and Economic Recovery Act of 
2008 (HERA) transferred the authority to establish, monitor and enforce 
the affordable housing goals for the Federal National Mortgage 
Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation 
(Freddie Mac) (collectively, Enterprises) from the Department of 
Housing and Urban Development (HUD) to the Federal Housing Finance 
Agency (FHFA). Section 1128(b) further provides that the annual housing 
goals in effect for 2008 as established by HUD shall remain in effect 
for 2009, except that the Director of FHFA shall review such goals to 
determine their feasibility given current market conditions, and make 
appropriate adjustments consistent with such market conditions. 
Pursuant to this directive, FHFA has analyzed current market conditions 
and is adopting a final rule that adjusts the housing goal, home 
purchase subgoal and special affordable multifamily housing subgoal 
levels for the Enterprises for 2009. The final rule also permits loans 
owned or guaranteed by an Enterprise that are modified in accordance 
with the Administration's Making Home Affordable Program (also known as 
the Homeowner Affordability and Stability Plan) announced on March 4, 
2009, to be treated as mortgage purchases and count for purposes of the 
housing goals. In addition, the final rule excludes purchases of jumbo 
conforming loans from counting towards the 2009 housing goals. FHFA's 
housing goals regulation is set forth in a new part of FHFA's 
regulations, and is generally consistent with the housing goals 
provisions previously established by HUD, except as modified herein. 
Pursuant to section 1302 of HERA and 12 U.S.C. 4603, to the extent FHFA 
is adopting provisions from HUD regulations in new FHFA regulations, 
those provisions in the HUD regulations are no longer in effect.

DATES: The final rule is effective on August 10, 2009.

FOR FURTHER INFORMATION CONTACT: Nelson Hernandez, Senior Associate 
Director, Housing Mission and Goals, (202) 408-2993, Brian Doherty, 
Acting Manager, Housing Mission and Goals-Policy, (202) 408-2991, or 
Paul Manchester, Acting Manager, Housing Mission and Goals-Quantitative 
Analysis, (202) 408-2946 (these are not toll-free numbers); Kevin 
Sheehan, Attorney-Advisor, (202) 414-8952 (these are not toll-free 
numbers), Lyn Abrams, Attorney-Advisor, (202) 414-8951, or Sharon Like, 
Associate General Counsel, (202) 414-8950, 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. Background

A. Establishment of FHFA

    Effective July 30, 2008, Division A of HERA, Public Law 110-289, 
122 Stat. 2654 (2008), amended the Federal Housing Enterprises 
Financial Safety and Soundness Act of 1992 (Safety and Soundness Act), 
12 U.S.C. 4501 et seq., and created the 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 HUD to FHFA. HERA provides for the 
abolishment of OFHEO one year after the date of enactment. 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. See 12 U.S.C. 4513.
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    \1\ See Division A, titled the ``Federal Housing Finance 
Regulatory Reform Act of 2008,'' Title I, Section 1101 of HERA.
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    Section 1302 of HERA provides, in part, that all regulations, 
orders and determinations issued by the Secretary of HUD (Secretary) 
with respect to the Secretary's authority under the Safety and 
Soundness Act, the Federal National Mortgage Association Charter Act, 
12 U.S.C. 1716 et seq., and the Federal Home Loan Mortgage Corporation 
Act, 12 U.S.C. 1451 et seq., (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. See HERA at section 
1302, 122 Stat. 2795; 12 U.S.C. 4603.
    The Enterprises are government-sponsored enterprises (GSEs) 
chartered by Congress for the purpose of establishing secondary market 
facilities for residential mortgages. See 12 U.S.C. 1716 et seq.; 12 
U.S.C. 1451 et seq. 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. Id.

B. Statutory and Regulatory Background

    Prior to HERA, the Safety and Soundness Act provided the Secretary 
with the authority to establish, monitor and enforce affordable housing 
goals for the Enterprises. See 12 U.S.C. 4561 et seq. (2008). 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. See 
24 CFR part 81. HUD's regulations provide

[[Page 39874]]

that the housing goal levels for 2008 continue in effect in 2009 and 
each year thereafter until replaced by new annual housing goals 
established by HUD. See 24 CFR 81.12 through 81.14.
    Section 1331(c) of the Safety and Soundness Act, as amended by 
section 1128(b) of HERA, provides that the housing goal levels 
established by HUD for 2008 ``shall remain in effect for 2009, except 
that not later than the expiration of the 270-day period beginning on 
the date of the enactment of [HERA], the Director shall review such 
goals applicable for 2009 to determine the feasibility of such goals 
given the market conditions current at such time and, after seeking 
public comment for a period not to exceed 30 days, may make appropriate 
adjustments consistent with such market conditions.'' See 12 U.S.C. 
4561(c). Under section 1336 of the Safety and Soundness Act, as amended 
by section 1130 of HERA, the Director of FHFA has authority to monitor 
and enforce compliance with the 2009 housing goals, as well as the 
housing goals established by FHFA for subsequent years. See 12 U.S.C. 
4566.\2\
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    \2\ Sections 1331 through 1335 of the Safety and Soundness Act, 
as amended by HERA, also contain new housing goal requirements for 
the Enterprises effective for 2010 and thereafter, as well as duty 
to serve underserved markets requirements. FHFA will implement these 
requirements pursuant to separate rulemaking. See 12 U.S.C. 4561 
through 4565.
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C. Conservatorship

    On September 7, 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.

II. Proposed Rule

    Section 1128(b) of HERA authorizes the Director of FHFA to adjust 
the housing goal levels established by HUD for 2009 based on current 
market conditions. FHFA reviewed the current market conditions and 
determined that the 2009 housing goal and home purchase subgoal levels 
established in 24 CFR part 81 are not feasible unless they are 
adjusted. Accordingly, on May 1, 2009, FHFA published proposed 
adjustments to the housing goal and home purchase subgoal levels in the 
Federal Register for a 21-day comment period, which closed on May 22, 
2009. See 74 FR 20236 (May 1, 2009). FHFA received a total of 25 
comment letters on the proposed rule, representing 26 commenters.\3\ 
Commenters included: Fannie Mae; Freddie Mac; twelve trade 
associations; seven not-for-profit lenders or lending consortia; one 
credit risk scoring corporation; one credit risk reporting corporation; 
a not-for-profit mortgage lending policy advocacy organization; one 
labor union; and one Member of Congress. FHFA has considered all of the 
comments it received on the proposed rule, and has determined to adopt 
a final rule adjusting the 2009 housing goal, home purchase subgoal, 
and special affordable multifamily housing subgoal levels, and to make 
certain other revisions, as further discussed below. Comments that 
raised issues beyond the scope of the proposed rule are not addressed 
in this final rule, but may be considered by FHFA at a future date.
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    \3\ One of the letters contained joint comments from two trade 
associations.
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III. Summary of Final Rule

A. Adoption of Housing Goals Provisions in New 12 CFR Part 1282

    HUD's regulations on establishing, monitoring and enforcing the 
housing goals for the Enterprises are set forth in 24 CFR part 81, 
Subparts A and B. Under section 1302 of HERA, part 81 continues in 
effect and is enforceable by the Director of FHFA until modified, 
terminated, set aside or superseded by the Secretary or the Director, 
any court, or operation of law. Consistent with the proposed rule, the 
final rule establishes housing goal requirements for the Enterprises 
for 2009 in new part 1282 of title 12 of FHFA's regulations. The 
housing goal requirements are generally consistent with the HUD housing 
goal provisions in Subparts A and B, except as modified herein. Upon 
the effective date of this final rule, the related housing goal 
provisions adopted by FHFA in chapter XII from 24 CFR part 81 will no 
longer be in effect pursuant to section 1302 of HERA.

B. Adjustment of Housing Goal, Home Purchase Subgoal, and Special 
Affordable Multifamily Housing Subgoal Levels

    Section 1128(b) of HERA authorizes the Director of FHFA to adjust 
the housing goal levels established by HUD for 2009 based on current 
market conditions. FHFA has reviewed current market conditions and has 
determined that the 2009 housing goal and home purchase subgoal levels 
established in 24 CFR part 81 are not feasible unless they are 
adjusted.\4\ Adverse market conditions, such as stricter underwriting 
standards, the increased standards of private mortgage insurers, and 
the high rate of unemployment will result in the origination of fewer 
goals-qualifying loans, as will a surge in refinancing. Moreover, the 
increase in the share of the mortgage market of mortgages insured by 
the government and the decline in private label securities backed by 
mortgages are two of several factors that will contribute to fewer 
goals-qualifying mortgages available for purchase by the Enterprises.
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    \4\ Performance under each of the housing goals is measured 
using a fraction that is converted into a percentage. See Sec.  
1282.15(a); 24 CFR 81.15(a). The numerator of each fraction is the 
number of dwelling units financed by an Enterprise's mortgage 
purchases in a particular year that count toward achievement of the 
housing goal. The denominator of each fraction is, for all mortgages 
purchased, the number of dwelling units that could count toward 
achievement of the goal under appropriate circumstances. The 
denominator may not include Enterprise transactions or activities 
that are not mortgages or mortgage purchases as defined by the FHFA 
or transactions that are specifically excluded as ineligible under 
the rule. See id.
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    Based on FHFA's review of the public comments on the proposed rule 
and a revised and updated assessment of current market conditions, FHFA 
has determined that the overall housing goal levels in the proposed 
rule should be adjusted downward, the three home purchase subgoal 
levels should remain as proposed, and the dollar-based special 
affordable multifamily housing subgoal levels in the proposed rule 
should be adjusted upward for each Enterprise as indicated below. 
Specifically, the final rule sets the goal and subgoal levels as 
follows:

--Low- and moderate-income housing goal: 43 percent;
--Special affordable housing goal: 18 percent;
--Underserved areas housing goal: 32 percent;
--Low- and moderate-income home purchase subgoal: 40 percent;
--Special affordable home purchase subgoal: 14 percent;
--Underserved areas home purchase subgoal: 30 percent;
--Special affordable multifamily housing subgoal for Fannie Mae: $6.56 
billion;
--Special affordable multifamily housing subgoal for Freddie Mac: $4.60 
billion.

    FHFA's market analysis that serves as the basis for these 
determinations is set forth in section IV. Analysis of Final Rule 
below.

C. New Counting Requirements

    Exclusion of jumbo conforming loans. Consistent with the proposed 
rule, the final rule excludes the Enterprises' purchases of jumbo 
conforming loans from counting towards the 2009 housing goals.
    MHA loan modifications. Consistent with the proposed rule, the 
final rule

[[Page 39875]]

permits loans owned or guaranteed by an Enterprise that are modified in 
accordance with the Administration's Making Home Affordable Program, 
announced on March 4, 2009 (MHA), to be treated as mortgage purchases 
and count for purposes of the housing goals.

IV. Analysis of Final Rule

A. Scope of Part--Sec.  1282.1

    Consistent with the proposed rule, Sec.  1282.1 of the final rule 
sets forth the scope of new part 1282. Section 81.1 of HUD's 
regulations describes the scope with regard to the respective duties of 
HUD and OFHEO in relation to the Enterprises. 24 CFR 81.1. Section 
1282.1 describes the scope with reference to the Director of FHFA's 
regulatory authority, since HUD's housing goals authority and OFHEO's 
safety and soundness supervisory authority were transferred to FHFA by 
HERA.

B. Definitions--Sec.  1282.2

    Consistent with the proposed rule, Sec.  1282.2 sets forth 
definitions of terms used in the final rule that are generally 
consistent with the definitions in Sec.  81.2 of HUD's regulations, 
except for minor technical and clarifying changes and the addition of 
several new definitions in light of the transfer of the housing goals 
authority from HUD to FHFA and other changes made by HERA. See 24 CFR 
81.2.

C. Housing Goal and Subgoal Levels for 2009--Sec. Sec.  1282.12 Through 
1282.14

    In 2004, HUD established by regulation new housing goal levels for 
years 2005 through 2008, with the 2008 levels applicable in 2009 
pending establishment by HUD of goals for 2009 (2004 Rule). See 69 FR 
63639 (Nov. 2, 2004) (codified at 24 CFR 81.12 through 81.14). The 2004 
Rule also implemented home purchase subgoals under each housing goal 
and established target levels for each subgoal. Id. These levels rose 
in yearly increments, capping out at the highest levels in 2008. HUD 
had not established new goal levels for 2009 before HERA was enacted 
and HUD's housing goals authority was transferred to FHFA.
1. Adjustment of Housing Goal and Home Purchase Subgoal Levels
    Section 1128(b) of HERA provides that the housing goals established 
by HUD for the Enterprises shall continue in effect for 2009 at their 
2008 levels, unless the Director of FHFA adjusts the levels based on 
current market conditions. FHFA reviewed the feasibility of the 2009 
housing goal and subgoal levels established by HUD, and determined that 
the current goal and home purchase subgoal levels are not feasible 
given current market conditions. The proposed rule would have adjusted 
downward the housing goal levels for 2009, as follows:
    <bullet> Low- and moderate-income housing goal--51 percent (down 
from the 56 percent level set by HUD for 2008 and 2009).
    <bullet> Underserved areas housing goal--37 percent (down from the 
39 percent level set by HUD for 2008 and 2009).
    <bullet> Special affordable housing goal--23 percent (down from the 
27 percent level set by HUD for 2008 and 2009).
    <bullet> Low- and moderate-income home purchase subgoal--40 percent 
(down from the 47 percent level set by HUD for 2008 and 2009).
    <bullet> Underserved areas home purchase subgoal--30 percent (down 
from the 34 percent level set by HUD for 2008 and 2009).
    <bullet> Special affordable home purchase subgoal--14 percent (down 
from the 18 percent level set by HUD for 2008 and 2009).
    The majority of commenters on the proposed housing goal levels 
either supported the proposed levels or recommended higher levels than 
those proposed. Four trade associations supported the proposed levels 
but expressed caution about the potential for increased risk of default 
that could result from inappropriate or overly ambitious housing goals. 
Two other trade associations stated that overly stringent goals have 
not supported affordable housing, as shown by foreclosures, 
neighborhood blight and the Enterprises' serious financial problems. 
One mortgage lending policy advocacy organization, the Center for 
Responsible Lending, stated that the goals must be responsibly 
attainable under current market conditions. The commenter expressed 
concern that the goal levels in the proposed rule may not be low 
enough, given the extreme impairment of the credit and housing markets, 
and the economic hardships for low- and moderate-income families in 
particular. The commenter stated that the goal levels in the proposed 
rule could be lowered still further, and urged that they be applied 
flexibly in 2009 to ensure that they can be responsibly met.
    One trade association recommended higher levels than those proposed 
for the special affordable and underserved area housing goals, stating 
that the past performance of the Enterprises and the current primary 
mortgage market levels indicate that higher levels should be 
achievable. Another trade association recommended higher levels than 
those proposed for the low- and moderate-income housing goal and home 
purchase subgoals, stating that the manufactured housing industry is in 
an unprecedented decline largely because of the unavailability of 
private financing fueled by Enterprise policy, and that reduction of 
these levels would allow the Enterprises to retreat from their mission 
of providing liquidity for low- and moderate-income home purchasers.
    Fannie Mae and Freddie Mac both recommended further lowering the 
proposed goal levels. Freddie Mac stated that the proposed levels are 
five percentage points or more above the highest level of expected 
primary mortgage market origination levels, and that the refinance 
wave, contraction in the multifamily mortgage sector, and increasingly 
important role of the Federal Housing Administration (FHA) in the low- 
and moderate-income segment of the housing market could make it 
infeasible for the Enterprises to meet the goals. Fannie Mae was 
concerned that the proposed levels might be higher than current 
economic conditions support and might ultimately prove to be 
infeasible.
    One trade association expressed concerns about the profound 
negative impact of lower housing goal levels on low- and moderate-
income communities, and the brief comment period of the proposed rule, 
and urged withdrawal of the proposed rule for reconsideration.
    After review of the current market conditions and the comments 
received on the proposed rule, FHFA has determined that the three 
overall housing goal levels should be further adjusted downward from 
the levels set by HUD for 2008 and 2009 and the levels in the proposed 
rule. Based on the most recent conventional mortgage market size 
estimates and consistent with current market conditions, the final rule 
establishes goals for 2009 as follows:
    <bullet> Low- and moderate-income housing goal--43 percent (down 
from the 56 percent level set by HUD for 2008 and 2009 and the 51 
percent level in the proposed rule). That is, under Sec.  1282.12, the 
2009 goal for each Enterprise's purchases of mortgages on housing for 
low- and moderate-income families is 43 percent of the total number of 
dwelling units financed by that Enterprise's mortgage purchases.
    <bullet> Underserved areas housing goal--32 percent (down from the 
39 percent level set by HUD for 2008 and 2009 and the 37 percent level 
in the proposed rule). That is, under Sec.  1282.13, the 2009 goal for 
each Enterprise's purchases of mortgages on housing located in central 
cities, rural areas, and other underserved areas is 32 percent of the

[[Page 39876]]

total number of dwelling units financed by that Enterprise's mortgage 
purchases.
    <bullet> Special affordable housing goal--18 percent (down from the 
27 percent level set by HUD for 2008 and 2009 and the 23 percent level 
in the proposed rule). That is, under Sec.  1282.14, the 2009 goal for 
each Enterprise's purchases of mortgages on rental and owner-occupied 
housing meeting the then-existing, unaddressed needs of and affordable 
to low-income families in low-income areas and very low-income families 
is 18 percent of the total number of dwelling units financed by that 
Enterprise's mortgage purchases.
    In addition, based on review of current market conditions and the 
comments received on the proposed rule, FHFA has determined that the 
three home purchase subgoal levels for 2009 should be adjusted downward 
from the levels set by HUD for 2008 and 2009 and remain at the levels 
in the proposed rule, as follows:
    <bullet> Low- and moderate-income home purchase subgoal--40 percent 
(down from the 47 percent level set by HUD for 2008 and 2009 and the 
same as the level in the proposed rule). That is, under Sec.  1282.12, 
40 percent of the total number of home purchase mortgages in 
metropolitan areas financed by the Enterprise's mortgage purchases 
shall be home purchase mortgages in metropolitan areas which count 
toward the low- and moderate-income housing goal for 2009. This level 
is slightly above the upper end of the market estimate (39 percent) in 
light of the significant improvements in the affordability of housing, 
as reflected in data published by the National Association of Realtors.
    <bullet> Underserved areas home purchase subgoal--30 percent (down 
from the 34 percent level set by HUD for 2008 and 2009 and the same as 
the level in the proposed rule). That is, under Sec.  1282.13, 30 
percent of the total number of home purchase mortgages in metropolitan 
areas financed by the Enterprise's mortgage purchases shall be home 
purchase mortgages in metropolitan areas which count toward the 
underserved areas housing goal for 2009.
    <bullet> Special affordable home purchase subgoal--14 percent (down 
from the 18 percent level set by HUD for 2008 and 2009 and the same as 
the level in the proposed rule). That is, under Sec.  1282.14, 14 
percent of the total number of home purchase mortgages in metropolitan 
areas financed by the Enterprise's mortgage purchases shall be home 
purchase mortgages in metropolitan areas which count toward the special 
affordable housing goal for 2009.
    At the time the 2008 and 2009 housing goal levels were established 
in HUD's 2004 Rule, mortgage markets were still evidencing significant 
expansion. However, as discussed further below, based on current market 
conditions, FHFA estimates that the market shares for certain goals and 
home purchase subgoals have declined significantly. Adjusting the 2009 
housing goals and home purchase subgoals to levels that reflect market 
conditions consistent with current projections is necessary to ensure 
that the Enterprises continue to serve their secondary market purposes 
at feasible and appropriate levels that reflect their capacity to lead 
the market.
    Notably, this rule, for the first time, allows housing goal credit 
for certain loan modifications, which will tend to improve the 
Enterprises' performance on the housing goals. By adjusting the housing 
goal and home purchase subgoal levels to challenging levels for 2009, 
and by allowing housing goal credit for loan modifications that 
directly affect the 2009 housing market through the prevention of 
foreclosures, FHFA seeks to ensure that the Enterprises place a high 
priority on the achievement of their affordable housing mission based 
on performance standards that align with current market conditions.
2. Special Affordable Multifamily Housing Subgoals--Sec.  1282.14
    The final rule increases the 2009 minimum dollar-based special 
affordable multifamily housing subgoal levels to $6.56 billion for 
Fannie Mae, and $4.60 billion for Freddie Mac. In the 2004 Rule, these 
subgoal levels were established at 1.0 percent of the average aggregate 
dollar volume of total mortgage purchases by each Enterprise in a base 
period (2000, 2001 and 2002), and were set at $5.49 billion for Fannie 
Mae and $3.92 billion for Freddie Mac for 2008 and 2009. 24 CFR 81.14. 
In the proposed rule, FHFA did not propose to adjust these levels 
downward for 2009 because both Enterprises have exceeded their 
respective multifamily subgoals by wide margins in recent years, 
especially in 2007. FHFA also did not propose to increase these levels 
for 2009 because the prospects for multifamily mortgage market volume 
in 2009 are significantly less favorable than in recent years.
    Most commenters on the special affordable multifamily housing 
subgoals, including nonprofit organizations and trade associations, 
recommended raising the subgoal levels. Many of the nonprofit 
organizations stated that maintaining the existing goals levels for 
2009 would exacerbate lenders' liquidity crises, limit the ability to 
meet the housing needs of a growing number of families, and undermine 
economic recovery. These commenters urged that the Enterprises purchase 
performing seasoned multifamily mortgages that are held in the 
portfolios of conventional lenders, which they stated would help 
stabilize communities.
    One trade association stated that the Enterprises are the main 
sources for multifamily rental development, and with multifamily 
originations projected at $43 to $65 billion in 2009, the Enterprises 
should be expected to surpass the existing subgoal levels for 2009. The 
commenter noted that the Enterprises have restricted credit for 
multifamily loans by tightening underwriting standards and increasing 
risk-based delivery fees, resulting in higher mortgage rates for 
borrowers and impairing their ability to obtain credit.
    Two trade associations cautioned that meeting the existing special 
affordable multifamily housing subgoals levels may be challenging. The 
commenters stated that, with increased risk of default and the impact 
of deteriorating market conditions, there will be limited property 
acquisitions, declining reinvestment and fewer loan originations and 
refinancing opportunities for the Enterprises. These commenters also 
anticipated that the Enterprises' portfolio of maturing loans would 
present challenges in meeting capital requirements and loan terms for 
new debt, and expected that 2009 multifamily loan and transaction 
volume will be less than 2008 volume.
    A Member of Congress urged higher multifamily special affordable 
housing subgoal levels that would be commensurate with the Enterprises' 
historical performance levels and purchase opportunities, and that 
would send a clear message to the Enterprises about their critical role 
in providing liquidity in light of current multifamily mortgage market 
dislocations.
    FHFA review of the Enterprises' special affordable multifamily 
mortgages goals performance through May 2009 suggests that the 
Enterprises will not have the high performance level in this area in 
2009 that they experienced in recent years. Based on the comments 
received and FHFA's review of current market conditions, FHFA has set 
``stretch'' special affordable multifamily housing subgoal levels by 
changing the base for these subgoals from 2000-2002 in the 2004 Rule 
and the proposed rule to 1999-2008, which includes years with very high 
mortgage volume such as 2003 and years with lower volume such as 2000.

[[Page 39877]]

FHFA is applying the same 1.0 percent of average total mortgage 
purchases factor to this base period in setting these subgoal levels. 
Total mortgage purchases averaged $656 billion for Fannie Mae and $460 
billion for Freddie Mac over the 1999-2008 period. Thus, FHFA is 
setting the subgoal levels at 1.0 percent of these amounts--$6.56 
billion for Fannie Mae (an increase of 19 percent over the 2008 and 
proposed 2009 subgoal level of $5.49 billion), and $4.60 billion for 
Freddie Mac (an increase of 17 percent over the 2008 and proposed 2009 
subgoal level of $3.92 billion).
    Several nonprofit organizations and a trade association commented 
that the Enterprises should be more active in the purchase of seasoned 
multifamily loans held by portfolio lenders, many of which purchased 
such loans as a result of Community Reinvestment Act (CRA) 
responsibilities. FHFA expects each Enterprise to actively purchase 
CRA-related multifamily loans from portfolio lenders, among other 
avenues, in meeting the special affordable multifamily housing 
subgoals.
3. Market Conditions
a. Market Conditions Do Not Support the Current Housing Goals and Home 
Purchase Subgoals Levels
    FHFA has determined that 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 considered in setting the proposed and final 
housing goal and subgoal levels for 2009 include: (1) Tightened credit 
underwriting practices; (2) the sharply increased standards of private 
mortgage insurance companies; (3) the increased role of FHA in the 
marketplace; (4) the collapse of the mortgage private label securities 
(PLS) market; (5) increasing unemployment; (6) multifamily market 
volatility; and (7) a refinancing surge in 2009. FHFA finds that while 
the existence of lower home prices and lower mortgage interest rates 
has increased affordability, there is ample evidence to support a 
conclusion that the housing goal and home purchase subgoal levels for 
2009 that were set in 2004 are not attainable.
    Tightened underwriting practices. In general, tighter underwriting 
standards result in fewer goals-qualifying loans and a lower percentage 
of goals-qualifying loans in the market. Underwriting standards in the 
mortgage market generally, and at Fannie Mae and Freddie Mac, tightened 
considerably in 2008 in response to declining market conditions and 
early payment defaults, among other factors. For example, in May 2008, 
responding to private mortgage insurance underwriting changes, Fannie 
Mae revised its down payment policy to lower the maximum loan-to-value 
(LTV) for loans underwritten by Desktop Underwriter and for manually 
underwritten loans. Freddie Mac similarly tightened its underwriting 
standards. These industry-wide underwriting standards are expected to 
remain in place for the balance of 2009.
    Sharply increased standards of private mortgage insurers. Much like 
tighter underwriting standards generally, higher underwriting standards 
of private mortgage insurance (MI) result in fewer goals-qualifying 
loans and a lower percentage of goals-qualifying loans in the market. 
Beginning in late 2007, MI providers implemented profound and sweeping 
changes in the types of risk they were willing to insure. Most MI 
providers faced substantial ratings downgrades and acted to minimize 
losses by imposing stricter underwriting standards on loans with high 
LTVs. For example, on February 12, 2009, Moody's downgraded the 
internal strength rating of the Mortgage Guaranty Insurance Corporation 
(MGIC) to Ba1 from A1, and downgraded the ratings of other mortgage 
insurers. These actions may limit the ability of MI providers to write 
new business in 2009 and reduce the overall mortgage lending volume, 
particularly for higher LTV mortgages, which tend to be more goals-
rich. By increasing the cost of borrowing and the difficulty in 
obtaining loan approval, the tighter underwriting standards limit the 
number of goals-qualifying mortgages. This has an adverse effect on 
high-LTV loan purchases by the Enterprises, which generally require 
some form of credit enhancement.
    MI providers have implemented measures in ``declining markets'' 
that have sharply limited the insurability of certain higher LTV 
mortgage loans. Generally, the availability of MI for high-LTV or low 
credit score loans is much reduced relative to a few years ago. The 
goals-qualifying portion of loans in the market is thereby reduced as 
it becomes more difficult and more expensive for borrowers requiring 
mortgages with lower down payments to qualify for mortgages eligible 
for purchase by the Enterprises.
    Increased role of FHA in the marketplace. Another factor having a 
much greater impact on the Enterprises' housing goals in 2009 than in 
recent years is the increase in the share of the mortgage market of 
mortgages insured by the FHA and guaranteed by the Veterans 
Administration (VA). These loans generally are pooled into mortgage-
backed securities issued by the Government National Mortgage 
Association (GNMA). Purchases of mortgages insured by FHA and VA 
ordinarily do not receive goals credit. In general, the impact of the 
FHA market on the goal-richness of the conventional market depends on: 
(1) The goal-richness of the overall market (conventional plus FHA); 
(2) the share of the market accounted for by FHA mortgages; and (3) the 
goal-richness of FHA mortgages.
    The market share of mortgages insured by FHA and VA has risen 
dramatically. 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.
    As discussed in the proposed rule, in order to assess the impact 
that the increased FHA share is likely to have on the housing goals for 
2009, FHFA analyzed mortgages originated in 2007 with loan amounts no 
greater than the conforming loan limit for Fannie Mae and Freddie Mac 
for 1-unit properties in that year--$417,000 for most areas, but 50 
percent higher in Alaska, Hawaii, Guam, and the Virgin Islands. Loans 
guaranteed by VA or the Rural Housing Service were excluded from this 
analysis, as were loans with missing information necessary to determine 
whether they qualified for the housing goals. The remaining loans 
included both conventional and FHA loans with information about whether 
they qualified for the housing goals, resulting in a total of 2.7 
million home purchase mortgages and 3.3 million refinance mortgages.
    The shares of FHA mortgages that would have qualified for the 
Enterprises' housing goals were much higher than the goal-qualifying 
shares of conventional mortgages. Specifically, 60 percent of FHA home 
purchase mortgages qualified for the low- and moderate-income housing 
goal in 2007, but only 40 percent of conventional home purchase 
mortgages so qualified. Similarly, 23 percent of FHA home purchase 
mortgages qualified for the special affordable housing goal, but only 
15 percent of conventional home purchase mortgages so qualified. The 
discrepancy was comparable for underserved areas, where 46 percent of 
FHA home purchase mortgages

[[Page 39878]]

qualified for the underserved areas housing goal versus 34 percent of 
conventional home purchase mortgages.
    The discrepancies between the goal-qualifying shares of FHA 
refinance mortgages and conventional refinance mortgages were similar 
to those for home purchase mortgages. For example, 56 percent of FHA 
refinance mortgages qualified for the low- and moderate-income housing 
goal, but only 42 percent of conventional refinance mortgages so 
qualified.
    This analysis measures the degree to which FHA mortgages ``siphon 
off'' goal-rich mortgages from the overall mortgage market. That is, in 
2007, 42 percent of all home purchase mortgages were for low- and 
moderate-income families, but because 60 percent of FHA home purchase 
mortgages were for such families, only 40 percent of conventional 
conforming mortgages were in this category. While in 2007 the goal-
qualifying shares of FHA mortgages were much higher than the 
corresponding shares of conventional mortgages, the impact on the goal-
qualifying shares of conventional mortgages was mitigated by the fact 
that in 2007, FHA accounted for only 9.9 percent of home purchase 
mortgages and only 4.7 percent of refinance mortgages. Although Home 
Mortgage Disclosure Act (HMDA) data for 2008 is not yet available, this 
data will likely show a much larger impact of FHA mortgages because 
FHA's share of the mortgage market was much higher in 2008 than it was 
in 2007.
    Based on FHA's estimated market share in late 2008, its shares of 
both the home purchase mortgage and refinance mortgage markets may be 
significantly higher in 2009 than they were in 2008. The impact of 
these higher shares may be mitigated to some extent by reduced goal-
richness of FHA mortgages as higher-income borrowers obtain FHA loans. 
The net impact of the FHA market on the goal-richness of the 
conventional mortgage market in 2009, however, is likely to be greater 
than it was in either 2007 or 2008. Accordingly, the projected increase 
in the size of the FHA market was a major factor taken into account in 
adjusting the Enterprises' housing goal levels for 2009.
    Collapse of PLS market. The lack of PLS backed by mortgages will 
make it more difficult for the Enterprises to achieve the existing 
housing goals in 2009. FHFA will determine, in its upcoming rulemaking 
for the 2010 housing goals, whether, and if so, under what conditions 
PLS investment may contribute to meeting housing goals.
    Between 2005 and 2008, the period covered by the 2004 Rule, Fannie 
Mae and Freddie Mac were major purchasers of the AAA-rated tranches of 
PLS that included substantial amounts of subprime mortgages. These 
purchases were due in part to the goal-richness of the securities and, 
particularly, their subgoal-richness.
    While the size and nature of the Enterprises' subprime holdings 
differed, such 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, and are unlikely to be a major factor in 2009. 
FHFA guidance incorporating interagency policy guidance from the 
Federal Deposit Insurance Corporation, the Office of the Comptroller of 
the Currency, the Board of Governors of the Federal Reserve System and 
the National Credit Union Administration now restricts the purchase of 
such securities by the Enterprises when certain terms of mortgages 
backing those securities are harmful to the borrower.\5\
---------------------------------------------------------------------------

    \5\ In 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 conforms 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.
---------------------------------------------------------------------------

    Increasing unemployment. Unemployment increased significantly 
during 2008 and in 2009, which added to demands on mortgage servicers 
to address increasing delinquencies and foreclosures. 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.
    NeighborWorks, a national network of approximately 230 community-
based organizations actively involved in foreclosure mitigation 
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).\6\ While a reduction in income 
by itself does not necessarily lead to a mortgage default, with falling 
home prices it is difficult for the home owner with little or no home 
equity to either sell the home or refinance into an affordable 
mortgage. The high rates of unemployment and underemployment are likely 
to continue to have a significant impact on the size of the mortgage 
market in 2009.
---------------------------------------------------------------------------

    \6\ NeighborWorks, National Foreclosure Mitigation Counseling 
Program Update, January 23, 2009.
---------------------------------------------------------------------------

    Multifamily market volatility. The multifamily housing market faces 
great uncertainty in 2009. Recent housing data suggests that 
multifamily housing activity (new construction and refinances) will 
continue to decline in 2009 after slowing significantly in 2008. 
Because multifamily housing tends to have high percentages of units 
that qualify for one or more housing goals, declines in multifamily 
housing activity make it more difficult for the Enterprises to achieve 
the housing goals.
    As a result of the financial crisis and ensuing credit crunch, 
important sources of affordable multifamily financing have been 
diminished, including Commercial Mortgage-Backed Securities (CMBS) and 
Low-Income Housing Tax Credits (LIHTCs). Other traditional providers of 
financing for multifamily housing, including thrifts, commercial banks 
and life insurance companies, have significantly reduced their 
multifamily financing activities. The Enterprises, FHA and GNMA are the 
principal sources of multifamily financing now.
    New multifamily construction is not expected to provide a 
significant source of goals-eligible units in 2009. Multifamily housing 
starts amounted to 277,300 units in 2007 and 266,000 units in 2008, but 
have fallen to an average annual rate of 129,000 units for the first 
six months of 2009.\7\ Some traditionally strong markets, such as New 
York City, San Francisco and San Jose, have seen apartment rents fall 
and vacancy rates rise from the fourth quarter of 2008 to the first 
quarter of 2009. During the same period, multifamily vacancy rates were 
highest in the Southeast, Arizona and Nevada, according to recent 
commercial real estate data. Declining rents, increasing vacancy rates 
and decreasing multifamily property values in many markets are 
significant obstacles confronting Enterprise multifamily activity in 
2009.\8\ Additional fees and tighter underwriting standards may make it 
difficult for many multifamily investors to qualify for financing. 
Declining multifamily prices will especially impact owners who financed 
with interest only loans over the past decade. As these loans

[[Page 39879]]

come due, properties with interest only loans may not have accumulated 
additional equity over the term of the loan to counter the effects of 
declining property values. The lack of new CMBS issuances will also 
significantly affect the number of multifamily units financed by the 
Enterprises, thereby making the housing goals more difficult to 
achieve.
---------------------------------------------------------------------------

    \7\ U.S. Census Bureau press release, July 17, 2009.
    \8\ ``Landlords See a Jump in Vacancy Rates Even as Rents 
Drop,'' Wall Street Journal, April 8, 2009.
---------------------------------------------------------------------------

    Refinancing surge in 2009. A significant increase in the volume of 
refinancings of single-family mortgages makes it more difficult for the 
Enterprises to achieve the housing goals. Higher income borrowers are 
more likely to take advantage of falling interest rates and refinance. 
Furthermore, when single-family owner-occupied refinance loans dominate 
both the market and the Enterprises' purchases, the share of goals-rich 
multifamily mortgages declines, which hampers the ability of the 
Enterprises to meet goal targets.
    Many forecasters expect 2009 to be a high refinancing year. 
Projections of the 2009 refinance rate have been up to around 70 
percent since March of this year, with the Mortgage Bankers Association 
(MBA) projecting 66 percent in its July 10, 2009 forecast,\9\ Fannie 
Mae projecting 70 percent in its June 11, 2009 forecast,\10\ and 
Freddie Mac projecting 67 percent in its July 8, 2009 forecast.\11\ In 
addition, the Administration's MHA Program includes an initiative to 
allow more borrowers with loans owned or guaranteed by Fannie Mae or 
Freddie Mac to refinance into a new mortgage that will be held or 
guaranteed by Fannie Mae or Freddie Mac.
---------------------------------------------------------------------------

    \9\ MBA Mortgage Finance Forecast, June 22, 2009.
    \10\ Fannie Mae Economics and Mortgage Market Analysis, June 11, 
2009.
    \11\ Freddie Mac Economic and Housing Market Outlook, June 11, 
2009.
---------------------------------------------------------------------------

    FHFA will continue to monitor the size of the refinance market 
closely in 2009. Refinances may continue to be a very large part of the 
market in 2009, with the likely effect of a lower percentage of goals-
qualifying loans available for purchase by the Enterprises, thus making 
it more difficult to achieve the goals. FHFA will consider the size of 
the refinance market in any determination as to the feasibility of any 
goal an Enterprise fails to achieve in 2009.
b. Size of the Mortgage Market That Qualifies for the Housing Goals
    FHFA recognizes that there is no single, comprehensive data set for 
estimating the size of the affordable lending market, and that the 
available databases on different sectors of the market must be combined 
in order to implement FHFA's market share model. The major public data 
sources from which these market estimates were developed are: (1) 
Market originations data submitted by lenders in accordance with HMDA 
for the years 2003 through 2007; (2) the 2000 Decennial Census; (3) the 
American Community Survey (ACS) for years 2005 and 2006; (4) the 
American Housing Survey (AHS); and (5) the 2001 Residential Finance 
Survey (RFS). To a lesser extent, other privately available data and 
information, including market forecasts, were also used. Sources 
included the MBA,\12\ Inside Mortgage Finance Publications, Inc.,\13\ 
First American Loan Performance,\14\ Global Insight,\15\ Fannie Mae, 
and Freddie Mac.
---------------------------------------------------------------------------

    \12\ The MBA is a national association representing the real 
estate finance industry.
    \13\ Inside Mortgage Finance Publications, Inc. is a company 
providing business-to-business news and statistics on the 
residential mortgage market.
    \14\ First American Loan Performance databases track the 
delinquency and prepayment performance of 50 million active 
individual mortgage payments per month, and provide loan-level 
information on more than $2.0 trillion in non-agency mortgage-backed 
and asset-backed securities.
    \15\ Global Insight is a privately-held company formed from two 
former economic and financial information and forecasting companies: 
DRI (Data Resources, Inc.) and WEFA (Wharton Econometric Forecasting 
Associates).
---------------------------------------------------------------------------

    Refinance Activity. The 2009 refinancing surge has a major impact 
on the size of the mortgage market that qualifies for the housing 
goals. Refinances in the early part of 2009 may have accounted for more 
than 70 percent of all single-family mortgage originations. This rate 
has increased from the anticipated 59 percent refinance rate used by 
FHFA as the basis for the market estimates in the proposed rule.
    Table 1 contains FHFA's housing goals market estimates, using a 70 
percent refinance volume and share of the single-family conventional 
conforming market, which is derived from the forecasts of the MBA, 
Fannie Mae and Freddie Mac cited above.
BILLING CODE C

[[Page 39880]]

[GRAPHIC] [TIFF OMITTED] TR10AU09.016


[[Page 39881]]


    The Multifamily Market. In the first quarter of 2009, multifamily 
mortgage acquisitions by the Enterprises accounted for less than half 
of the average first quarter acquisitions in the previous three years. 
Under current economic conditions, it is estimated that the Enterprises 
and FHA represent at least 90 percent of the entire multifamily 
mortgage market, which results in total estimated multifamily mortgage 
originations of $8.3 billion in the first quarter of 2009.
    Using the monthly HMDA time series data of multifamily mortgage 
origination volume provided by the Federal Reserve Board, FHFA has 
projected the quarterly share of multifamily mortgage originations for 
2009. The distributions of quarterly shares for each quarter were 
normally and independently distributed. The first quarter share was 
significantly lower than the other three quarters, and the fourth 
quarter share was significantly higher. These shares are shown in Table 
2, along with the ranges associated with a 95 percent confidence level.

[[Page 39882]]

[GRAPHIC] [TIFF OMITTED] TR10AU09.017


[[Page 39883]]


    Based on the historical patterns, FHFA made quarterly estimates of 
the multifamily mortgage origination volume, as well as estimates based 
on the upper and lower limits of the confidence intervals. Given 
current economic conditions, it is likely that the ``end of the year'' 
spike in multifamily mortgage originations that has occurred in prior 
years will not occur in 2009. Therefore, FHFA made a second set of 
estimates with the fourth quarter multifamily mortgage origination 
volume equal to the average of the three prior quarters. From these 
estimates, FHFA derived scenarios B through E. Scenario A, which is the 
``bottom end of the market'' estimate, includes only loans maturing in 
2009. To the extent that these loans are able to qualify for 
refinancing, new mortgages will be originated to replace them as these 
mortgages mature. Scenarios A, C and E were used to derive the market 
estimations in Table 1, with scenario C estimates based on historical 
averages with no fourth quarter spike, as the most likely to occur.
    As indicated in scenarios A through E, FHFA estimates that the size 
of the multifamily mortgage origination market will be between $30 
billion and $40 billion in 2009. This is lower than FHFA's estimate of 
$43 billion to $65 billion used to project the 9 to 13 percent 
multifamily mix in the proposed rule.\16\ Under FHFA's revised 
estimate, which reflects a higher rate of refinance and a lesser amount 
of goal-rich multifamily activity than assumed in the proposed rule, 
FHFA's estimates of the size of the conventional mortgage market for 
the income-based housing goals and subgoals are lower than those in the 
proposed rule or in the 2004 Rule. FHFA's revised market size estimates 
for the three overall housing goals categories for 2009 are as follows:
---------------------------------------------------------------------------

    \16\ See 74 FR 20236, 20248 (May 1, 2009).
---------------------------------------------------------------------------

    <bullet> 39-45 percent of units financed in the conventional 
conforming primary mortgage market will qualify for the low- and 
moderate-income housing goal. This is a downward adjustment from the 
estimate in the proposed rule that 43-51 percent of units financed in 
the conventional conforming primary mortgage market would qualify for 
the low- and moderate-income housing goal;
    <bullet> 30-35 percent of units will qualify for the underserved 
areas housing goal. This is a downward adjustment from the estimate in 
the proposed rule that 32-37 percent of units would qualify for the 
underserved areas housing goal;
    <bullet> 15-19 percent of units will qualify for the special 
affordable housing goal. This is a downward adjustment from the 
estimate in the proposed rule that 16-23 percent of units would qualify 
for the special affordable housing goal.
    FHFA's revised market size estimates for the three home purchase 
subgoal categories for 2009 are close to those in the proposed rule, as 
follows:
    <bullet> 34-39 percent of owner-occupied single-family home 
purchase mortgages on properties in metropolitan areas will qualify for 
the low- and moderate-income home purchase subgoal. This is a slight 
downward adjustment from the 35-41 percent market size estimate in the 
proposed rule;
    <bullet> 27-31 percent of such mortgages will qualify for the 
underserved areas home purchase subgoal. This is identical to the 
market size estimate in the proposed rule;
    <bullet> 10-14 percent of such mortgages will qualify for the 
special affordable home purchase subgoal. This is a slight downward 
adjustment from the 10-15 percent market size estimate in the proposed 
rule.
    As discussed in the proposed rule, the Economic Stimulus Act of 
2008 (Stimulus Act) temporarily increased the conforming loan limits 
for certain high-cost areas for loans originated between July 1, 2007 
and December 31, 2008. Public Law 110-185, Sec.  201, 122 Stat. 618, 
619. The Stimulus Act also excluded purchases of jumbo conforming loans 
(those which exceed the nationwide conforming loan limits in certain 
high-cost areas and exceed 150% of the nationwide conforming loan 
limits in Alaska, Guam, Hawaii and the Virgin Islands) from counting 
towards the housing goals for 2008. The limit for each high-cost area 
was set at 125% of the area median price of a residence, up to a limit 
of $729,750 for one-unit properties (175% of the overall conforming 
loan limit for 2008). HERA established the 2009 conforming loan limit 
at $417,000 for one-unit properties and correspondingly higher for two- 
to four-unit properties. Public Law 110-289, Sec.  1124, 122 Stat. 
2654, 2691 (2008) (to be codified at 12 U.S.C. 1717, 1454). HERA also 
established permanent increases in the loan limit for certain high-cost 
areas, at 115% of the area median price of a residence, up to a limit 
of $625,500 for one-unit properties in 2009 (150% of the overall 
conforming loan limit for 2009). The American Recovery and Reinvestment 
Act of 2009 (Recovery Act), signed into law by the President on 
February 17, 2009, generally established the limits that were in place 
in 2008 as a floor for the 2009 limits. Public Law 111-5, Sec.  1203, 
123 Stat. 115.
    FHFA has determined that the treatment of jumbo conforming loans in 
2008 should remain in effect for 2009, i.e., that purchases of such 
loans should not be counted toward the housing goals in 2009. This 
treatment is consistent with section 1336(a)(2) of the Safety and 
Soundness Act, which provides FHFA with authority to exclude certain 
categories of mortgage purchases from counting towards the housing 
goals. See 12 U.S.C. 4566(a)(2). Accordingly, in determining the market 
share estimates for the three housing goal categories for 2009, FHFA 
has excluded all jumbo conforming loans on one- to four-unit 
properties.
    FHFA's revised analysis of the mortgage market for 2009, which 
includes a detailed description of FHFA's market model, is contained in 
a document entitled ``Estimating the Size of the Conventional 
Conforming Market for each Housing Goal in 2009: Final Rule,'' of June 
2009, which is available at http://www.fhfa.gov.
4. Past Performance of the Enterprises on the Housing Goals
    This section describes the Enterprises' past performance on the 
three overall housing goals, the three home purchase subgoals, and the 
special affordable multifamily housing subgoals as determined by HUD 
for 2005 and 2006, and by FHFA for 2007 and 2008.\17\ As discussed in 
the proposed rule, although HERA does not explicitly require 
consideration of the Enterprises' past performance on the housing goals 
in determining whether to adjust the 2009 goal levels, FHFA believes 
that the Enterprises' past performance is relevant to this 
determination. Consideration of past performance was required in 
establishing the goal levels for 2008 and prior years, and is required 
in establishing the goal levels for 2010 and thereafter. See 12 U.S.C. 
4562(e)(2)(B)(iii). Current market conditions depend in part on the 
Enterprises' loan purchase activities, including their goal 
performance, in previous years. For example, if the Enterprises 
purchased a substantial volume of a certain type of loan to meet the 
housing goals in 2008, lenders might be induced to originate more loans 
of that type in 2009. In addition, the Enterprises' combined shares of 
the single-family conventional conforming

[[Page 39884]]

market and the multifamily market were likely at record levels in 2008. 
Given these high levels and the collapse of the subprime market, 
combined Enterprise past performance on the goals is likely a good 
measure of the goals-qualifying shares of the primary market. Thus, 
FHFA has analyzed combined Enterprise past performance, and finds that 
it is of the same magnitude as FHFA's estimates of the 2008 mortgage 
market goal-qualifying shares.
---------------------------------------------------------------------------

    \17\ The Enterprises submitted to FHFA their Annual Housing 
Activities Reports (AHARs), tables on 2008 goals performance, and 
loan-level data on mortgages purchased on March 16, 2009. FHFA 
notified the Enterprises of the official performance figures for the 
2008 goals and subgoals in letters dated June 11, 2009, and these 
results are posted on FHFA's Web site.
---------------------------------------------------------------------------

a. Housing Goals
    The three overall goal levels for 2005 through 2008 were set to 
increase each year so that by 2008, the levels would correspond with 
the top end of the range of estimates for the goals-qualifying shares 
of units financed in the primary mortgage market. Analysis of loan-
level data for 2005 through 2008 indicates the following results for 
overall goal performance:
    <bullet> Low- and moderate-income housing goal--This goal level was 
set at 52 percent for 2005, 53 percent for 2006, 55 percent for 2007, 
and 56 percent for 2008. Fannie Mae's performance was 55.1 percent in 
2005, 56.9 percent in 2006, and 55.5 percent in 2007. Freddie Mac's 
performance was 54.0 percent in 2005, 55.9 percent in 2006, and 56.1 
percent in 2007. Both Enterprises' performance exceeded the low- and 
moderate-income housing goal levels from 2005 through 2007. In 2008, 
both Enterprises fell significantly short of meeting the 56 percent 
goal level, with Fannie Mae at 53.7 percent and Freddie Mac at 51.5 
percent. In letters to Fannie Mae and Freddie Mac, dated March 16, 
2009, FHFA notified the Enterprises of its final determination that 
there was a substantial probability of failure by the Enterprises to 
meet this 2008 goal level, and that achievement of the goal was not 
feasible for each Enterprise.\18\
---------------------------------------------------------------------------

    \18\ See Letter from Edward J. DeMarco, Chief Operating Officer 
& Senior Deputy Director for Housing Mission and Goals, FHFA, to 
Herb Allison, Chief Executive Officer, Fannie Mae, dated March 16, 
2009; Letter from Edward J. DeMarco, Chief Operating Officer & 
Senior Deputy Director for Housing Mission and Goals, FHFA, to John 
Koskinen, Interim Chief Executive Officer, Freddie Mac, dated March 
16, 2009 (2008 Goals Feasibility Letters).
---------------------------------------------------------------------------

    <bullet> Underserved areas housing goal--This goal level was set at 
37 percent for 2005, 38 percent for 2006 and 2007, and 39 percent for 
2008. Fannie Mae's performance was 41.4 percent in 2005, 43.6 percent 
in 2006, and fell slightly to 43.4 percent in 2007. Freddie Mac's 
performance was 42.3 percent in 2005, 42.7 percent in 2006, and 43.1 
percent in 2007. Both Enterprises' performance exceeded the underserved 
areas housing goal levels from 2005 through 2007. In 2008, Fannie Mae 
exceeded the 39 percent goal level, at 39.4 percent, and Freddie Mac 
fell short at 37.7 percent. In the 2008 Goals Feasibility Letter to 
Freddie Mac, FHFA notified the Enterprise of its final determination 
that there was a substantial probability of failure by Freddie Mac to 
meet this 2008 goal level, and that achievement of the goal was 
feasible but challenging.
    <bullet> Special affordable housing goal--This goal level was set 
at 22 percent for 2005, 23 percent for 2006, 25 percent for 2007, and 
27 percent for 2008. Fannie Mae's performance was 26.3 percent in 2005, 
27.8 percent in 2006, and 26.8 percent in 2007. Freddie Mac's 
performance was 24.3 percent in 2005, 26.4 percent in 2006, and 25.8 
percent in 2007. Both Enterprises surpassed this goal level from 2005 
through 2007. In 2008, Fannie Mae's performance fell slightly to 26.4 
percent, below the 27 percent goal level, and Freddie Mac's performance 
fell sharply to 23.1 percent. In the 2008 Goals Feasibility Letters, 
FHFA notified the Enterprises of its final determination that there was 
a substantial probability of failure by the Enterprises to meet this 
2008 goal level, and that achievement of the goal was not feasible for 
each Enterprise.
    These results are shown in Table 3.
b. Special Affordable Multifamily Housing Subgoals
    In order to encourage the Enterprises to play a significant role in 
the multifamily mortgage market, HUD established minimum dollar-based 
special affordable multifamily housing subgoals. These subgoals were 
established at 1.0 percent of the average aggregate dollar volume of 
total mortgage purchases by each Enterprise in a base period (2000, 
2001 and 2002). Unlike the overall goal levels, these subgoal levels 
differ between the Enterprises. Specifically, for 2005 through 2008, 
the subgoal level was established at $5.49 billion per year for Fannie 
Mae, and $3.92 billion per year for Freddie Mac.
    Results for these special affordable multifamily housing subgoals 
are also presented in Table 3. As indicated, the Enterprises surpassed 
the subgoal levels by wide margins in each year through 2008. In 2008, 
Fannie Mae's performance was 242 percent of its subgoal level ($13.31 
billion compared with its subgoal level of $5.49 billion), and Freddie 
Mac's performance was 191 percent of its subgoal level ($7.49 billion 
compared with its subgoal level of $3.92 billion).
c. Home Purchase Subgoals
    In the 2004 Rule, HUD established home purchase subgoals for the 
first time. The overall housing goals are expressed in terms of minimum 
qualifying shares of all dwelling units financed by the Enterprises, 
combining mortgages on both single-family and multifamily, owner-
occupied and rental housing. They include all mortgages, whether for 
home purchase, refinancing, or some other purpose. The home purchase 
subgoals are expressed in terms of minimum qualifying shares of each 
Enterprise's acquisitions of single-family home purchase mortgages in 
metropolitan areas. The subgoals specify minimum shares of home 
purchase mortgages that the Enterprises must purchase under each 
category of the housing goals. The home purchase subgoals are expressed 
in terms of mortgages, rather than dwelling units.
    Analysis of loan-level data for 2005 through 2008 indicates the 
following results for the Enterprises' home purchase subgoal 
performance, as shown in Table 4:
    <bullet> Low- and moderate-income home purchase subgoal--This 
subgoal level was set at 45 percent for 2005, 46 percent for 2006, and 
47 percent for 2007 and 2008. Fannie Mae's performance was 44.6 percent 
in 2005 (falling slightly short of the subgoal), 46.9 percent in 2006, 
and 42.1 percent in 2007. Freddie Mac's performance was 46.8 percent in 
2005, 47.0 percent in 2006, and 43.5 percent in 2007. Neither 
Enterprise met this subgoal level in 2007, but in letters to the 
Enterprises dated April 24, 2008, HUD declared that the subgoal for 
2007 was not feasible. In 2008, Fannie Mae's performance was 38.8 
percent, and Freddie Mac's performance was 39.3 percent. In the 2008 
Goals Feasibility Letters, FHFA notified the Enterprises of its final 
determination that there was a substantial probability of failure by 
the Enterprises to meet this 2008 subgoal level, and that achievement 
of the subgoal was not feasible for each Enterprise.
    <bullet> Underserved areas home purchase subgoal--This subgoal 
level was set at 32 percent for 2005, 33 percent for 2006 and 2007, and 
34 percent for 2008. Fannie Mae's performance was 32.6 percent in 2005, 
34.5 percent in 2006, and decreased to 33.4 percent in 2007, slightly 
exceeding the subgoal level in that year. Freddie Mac's performance was 
35.5 percent in 2005, exceeding both Fannie Mae's performance and the 
32 percent subgoal level by wide margins. In 2006 and 2007, Freddie Mac 
exceeded this subgoal level by narrow

[[Page 39885]]

margins at 33.6 percent and 33.8 percent, respectively. In 2008, both 
Enterprises fell short of the subgoal level, at 30.4 percent and 30.2 
percent for Fannie Mae and Freddie Mac, respectively. In the 2008 Goals 
Feasibility Letters, FHFA notified the Enterprises of its final 
determination that there was a substantial probability of failure by 
the Enterprises to meet this 2008 subgoal level, and that achievement 
of the subgoal was not feasible for each Enterprise.
    <bullet> Special affordable home purchase subgoal--This subgoal 
level was set at 17 percent for 2005 and 2006, and 18 percent for 2007 
and 2008. Fannie Mae's performance was 17.0 percent in 2005, and 17.9 
percent in 2006, and decreased to 15.5 percent in 2007. Freddie Mac's 
performance was 17.7 percent in 2005, and 17.0 percent in 2006, and 
decreased further to 15.9 percent in 2007. Thus, Freddie Mac surpassed 
this subgoal level in 2005, and barely met it in 2006. Conversely, 
Fannie Mae barely met the subgoal level in 2005, and surpassed it in 
2006. Both Enterprises fell short on this subgoal level in 2007, but in 
letters to the Enterprises dated April 24, 2008, HUD declared that the 
subgoal for 2007 was not feasible. In 2008, Fannie Mae's performance 
was 13.6 percent, and Freddie Mac's performance was 15.1 percent. In 
the 2008 Goals Feasibility Letters, FHFA notified the Enterprises of 
its final determination that there was a substantial probability of 
failure by the Enterprises to meet this subgoal level, and that 
achievement of the 2008 subgoal was not feasible for each Enterprise.
[GRAPHIC] [TIFF OMITTED] TR10AU09.018


[[Page 39886]]


[GRAPHIC] [TIFF OMITTED] TR10AU09.019

D. General Requirements--Sec.  1282.15

    Consistent with the proposed rule, Sec.  1282.15 of the final rule 
sets forth general requirements for the counting of mortgage purchases 
toward the achievement of the housing goals. These requirements are 
generally consistent with those established by HUD in 24 CFR 81.15.

E. Special Counting Requirements--Sec.  1282.16

    Consistent with the proposed rule, Sec.  1282.16 of the final rule 
sets forth the requirements for receipt of full, partial or no credit 
for a transaction toward achievement of the housing goals. These 
requirements are generally consistent with those established by HUD in 
24 CFR 81.16, with the addition of the counting requirements for jumbo 
conforming loans and MHA loan modifications discussed below. In some 
provisions, where the HUD regulatory language cites to specific 
statutory provisions that no longer appear in the statute due to 
amendment by HERA, the

[[Page 39887]]

final rule incorporates the applicable statutory language.
    Comments received on counting issues were generally limited to 
jumbo conforming loans and loan modifications. Several commenters, 
however, made recommendations on other counting issues that are beyond 
the scope of this rulemaking. Specifically, a trade association 
recommended that personal property manufactured housing loans insured 
under FHA Title I, a program that insures mortgage loans made by 
private lending institutions to finance the purchase of a new or used 
manufactured home, be given full credit rather than half credit towards 
the housing goals. A mortgage lending policy advocacy organization 
recommended that the Enterprises' guidelines for loan purchases should 
also apply to private label securities, and that goals credit should be 
given only to those loans in private label securities that satisfy the 
guidelines. A trade association urged that the Enterprises be required 
to assist insured depository institutions meet their CRA obligations as 
set forth in section 1335 of the Safety and Soundness Act, and 
recommended that the Enterprises be given extra goals credit for the 
purchase of CRA loans. Another trade association recommended that 
mortgages required by the Enterprises to be repurchased should be 
subtracted from the goals calculation in the year in which they were 
repurchased. One trade association stated that the slowdown in 
commercial lending has made it difficult for owners of land-lease 
manufactured housing communities to refinance, and recommended that, 
while it may be difficult to estimate the income of the manufactured 
housing community residents, commercial loans to such communities 
should be eligible to count towards the special affordable multifamily 
housing subgoal.
    Because these comments relate to issues that are beyond the scope 
of this rulemaking, the final rule does not address these issues. 
However, these issues may be considered by FHFA in its upcoming 
rulemaking on the 2010 affordable housing goals.
1. Exclusion of Jumbo Conforming Loans--Sec.  1282.16(b)(10)
    Consistent with the proposed rule, Sec.  1282.16(b)(10) of the 
final rule excludes purchases of jumbo conforming loans from counting 
towards the 2009 housing goals. Jumbo conforming loans will not be 
included in the numerator or the denominator when calculating 
performance under the housing goals. Commenters generally supported the 
exclusion of jumbo conforming loans from counting towards the 2009 
housing goals. A trade association supported the exclusion of jumbo 
conforming loans, but also stated that the lack of jumbo loan 
availability is hindering the economic and housing recoveries. Another 
trade association opposed the exclusion of jumbo conforming loans, 
stating that there are many areas of the country where the low end of 
the jumbo conforming loan limits encompasses borrowers who satisfy 
housing goals criteria.
    As discussed in the proposed rule, the Stimulus Act excluded 
purchases of jumbo conforming loans from counting towards the housing 
goals for 2008. Consistent with this treatment of jumbo conforming 
loans in 2008, and in accordance with FHFA's authority under the Safety 
and Soundness Act to exclude certain categories of mortgage purchases 
from counting towards the housing goals, FHFA has determined that 
purchase of jumbo conforming loans shall not be counted toward the 
housing goals in 2009. See 12 U.S.C. 4566(a)(2).
2. Making Home Affordable (MHA) Loan Modifications--Sec.  
1282.16(c)(10)
    Currently, Enterprise purchases of loans that have been modified by 
third parties are eligible for goals credit. To address the increasing 
importance of loan modifications, consistent with the proposed rule, 
Sec.  1282.16(c)(10) of the final rule provides that an Enterprise's 
modification of a loan in accordance with the Administration's MHA 
Program that is held in portfolio, or in a pool backing a security 
guaranteed by the Enterprise, shall be treated as a mortgage purchase 
and count for purposes of the housing goals. The MHA Program, also 
known as the Homeowner Affordability and Stability Plan (HASP), was 
announced by the Administration on March 4, 2009.\19\
---------------------------------------------------------------------------

    \19\ See http://makinghomeaffordable.gov. The proposed rule 
referred to this Program by the name ``HASP.'' The final rule uses 
the name ``MHA'' in lieu of ``HASP,'' consistent with the usage on 
the MHA Program Web site.
---------------------------------------------------------------------------

    As discussed in the proposed rule, many homeowners face the 
prospect of sharp increases in monthly mortgage costs as a result of 
rate resets. While loan modifications cannot prevent all defaults or 
foreclosures from occurring, they can help some existing homeowners 
stay in their homes, which will enhance the stability and liquidity of 
the housing and credit markets. In addition, such loan modifications 
may help to stabilize local communities and preserve the home values of 
homeowners who are not in danger of losing their jobs. The 
Administration's MHA initiative is designed to help families modify or 
refinance their troubled mortgages to achieve an affordable payment and 
avoid foreclosure. MHA includes access to low-cost refinance loans for 
borrowers with loans that are owned or guaranteed by the Enterprises. 
Many borrowers may also be eligible for loan modification assistance 
under MHA. Allowing goals credit for MHA loan modifications may 
encourage the Enterprises to modify more loans.
    The general rule for counting mortgages in Sec.  1282.16(a), 
consistent with 24 CFR 81.16(a), permits FHFA to assign goals credit 
upon its determination that a transaction or activity is substantially 
equivalent to a mortgage purchase, adds liquidity to an existing 
market, and fulfills an Enterprise's purpose and is in accordance with 
its Charter Act. As discussed in the proposed rule, FHFA believes that 
MHA loan modifications meet the standards in Sec.  1282.16(a) for goals 
credit. In today's unique market conditions, the largest threat to home 
ownership, including for the low- and moderate-income borrowers and 
communities at whom the housing goals are targeted, is the risk of 
default and foreclosure. The Administration's MHA loan modification 
initiative is a principal means of combating that risk. Therefore, 
during these unique conditions, FHFA finds that loan modifications 
within the MHA initiative are ``substantially equivalent to a mortgage 
purchase'' for purposes of the housing goals. FHFA also finds that they 
add liquidity, fulfill an Enterprise's purpose, and are consistent with 
the Charter Acts.
    A number of commenters (Fannie Mae, Freddie Mac, five trade 
associations and one nonprofit organization) supported the proposed 
loan modification proposal, primarily because it would provide further 
incentive for the Enterprises to assist efforts by financial 
institutions to modify the loans of at-risk borrowers and lower the 
incidence of defaults and foreclosures. A trade association stated that 
loan modifications ensure ongoing home ownership unlike loan 
refinancings that are executed to realize home-equity appreciation, or 
promote consumption spending or other goals not directly related to 
maintaining home ownership. Freddie Mac stated that loan modifications 
extend the life of a mortgage and that, by avoiding foreclosure, these 
modifications will potentially avoid the dislocation, financial 
distress, and community

[[Page 39888]]

destabilization that can occur in the wake of foreclosure.
    Fannie Mae requested technical clarifications regarding counting 
loan modifications toward the housing goals, including the appropriate 
date for determining the unpaid principal balance and affordability of 
the loan, the appropriate date for treating loan modifications with 
trial periods as purchases, and the treatment of loan modifications 
with missing data. These issues will be addressed in forthcoming 
guidance to the Enterprises.
    A number of comments were received in response to FHFA's specific 
request for comment in the proposed rule on whether other types of loan 
modifications in addition to MHA loan modifications should receive 
goals credit. Several trade associations suggested that loan 
modifications on multifamily properties receive goals credit. Fannie 
Mae stated that providing goals credit to other types of loan 
modifications would not have a significant impact on goals performance.
    FHFA believes that the large number of loans subject to some form 
of modification, and the often complex nature of the loans and their 
resulting modifications, present operational difficulties in 
determining when to count a modified loan toward the housing goals. In 
addition, only owner-occupied loans are eligible for consideration 
under the MHA Program. Accordingly, under the final rule, only loans 
that are modified under the MHA Program will receive credit towards the 
2009 housing goals. Other types of loan modifications may be considered 
for housing goals credit in future rulemakings.
3. HOEPA Mortgages and Mortgages With Unacceptable Terms and 
Conditions--Sec.  1282.2, and Sec.  1282.16(c)(12), (c)(13)
    The proposed rule did not propose changes to the existing 
regulatory provisions regarding HOEPA mortgages and mortgages with 
unacceptable terms or conditions, or mortgages contrary to good lending 
practices. Section 1282.16(c)(12) provides that Enterprise purchases of 
HOEPA mortgages and mortgages with unacceptable terms or conditions, as 
defined in Sec.  1282.2, shall not receive credit towards the three 
housing goals. Section 1282.16(c)(13) provides that, based on the 
results of the Director's monitoring of the Enterprises' practices, the 
Director may determine, pursuant to Sec.  1282.16(d), that mortgages 
contrary to good lending practices, as defined in Sec.  1282.2, shall 
not receive credit towards the three housing goals.
    Nonetheless, a number of commenters suggested that additional types 
of loans should be excluded from receiving housing goals credit under 
these regulatory provisions, and recommended specific factors that 
should be considered in determining whether loans should be excluded. A 
labor union suggested that mortgages originated by the affiliated 
lender of homebuilders should not receive goals credit, stating that 
homebuilders use tactics to entice or frighten borrowers into loans 
with affiliated lenders that are contrary to good lending practices or 
that contain unacceptable terms and conditions. Two trade associations 
recommended that a loan be excluded unless the underwriting standards 
are at least as stringent as those for HOEPA loans or under the 
recently-revised Regulation Z (12 CFR part 226, Truth in Lending). One 
of these trade associations also suggested that loans violating the 
Home Valuation Code of Conduct (HVCC) should not be counted towards 
goal performance. Two trade associations encouraged FHFA to take the 
lead in prohibiting the Enterprises from financing loans with abusive 
terms and conditions, to impose penalties for loans that go into early 
default, and to develop mandates to ensure Charter Act compliance.
    Because these comments relate to issues that are beyond the scope 
of this rulemaking, the final rule does not address these issues. 
However, these issues may be considered by FHFA in its upcoming 
rulemaking on the 2010 affordable housing goals.

F. Affordability--Income Level and Rent Level Definitions--Sec. Sec.  
1282.17 through 1282.19

    Consistent with the proposed rule, Sec. Sec.  1282.17 through 
1282.19 of the final rule include income level and rent level 
definitions for purposes of determining whether a dwelling or rental 
unit is affordable to very low-, low- or moderate-income families. The 
definitions are consistent with the definitions established by HUD in 
24 CFR 81.17 through 81.19.

G. Actions To Meet the Goals--Sec.  1282.20

    Consistent with the proposed rule, Sec.  1282.20 of the final rule 
provides that to meet the housing goals under this rule, the 
Enterprises shall operate in accordance with 12 U.S.C. 4565(b). This is 
generally consistent with 24 CFR 81.20.

H. Notice and Determination of Failure To Meet Goals--Sec.  1282.21

    Consistent with the proposed rule, Sec.  1282.21 of the final rule 
provides that if the Director of FHFA preliminarily determines than an 
Enterprise has failed, or there is a substantial probability that an 
Enterprise will fail, to meet any housing goal, the Director shall 
follow the procedures in 12 U.S.C. 4566(b) for purposes of making a 
final determination on the Enterprises' achievement of the goals and 
the feasibility of the goals. This is generally consistent with 24 CFR 
81.21.

I. Housing Plans--Sec.  1282.22

    Consistent with the proposed rule, Sec.  1282.22 of the final rule 
includes 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 requirements are generally consistent 
with 24 CFR 81.22, except that the requirement to submit a housing plan 
will be at the discretion of the Director, pursuant to the amendments 
made by HERA to Sec.  1336(c) of the Safety and Soundness Act. See 12 
U.S.C. 4566(c).

J. Other Issues

    Credit Score Terminology. The proposed rule provided a market 
analysis to support the proposed adjustment of the housing goals levels 
for 2009, and discussed the effect of tighter underwriting standards of 
private mortgage insurers and the reduction in mortgage insurance 
availability for borrowers with low credit scores. A credit reporting 
corporation and a credit scoring corporation commented that FHFA's 
analysis should not specifically reference ``FICO'' credit scores, 
stating that the reference implies endorsement of the Fair Isaac 
Corporation product and creates an unfair advantage. FHFA did not 
intend to endorse a specific product. Accordingly, the market analysis 
in the final rule refers generally to credit scores rather than to a 
specific product.
    Other HERA Requirements. Two trade associations requested that FHFA 
address HERA's requirements that FHFA determine an annual publication 
date for housing goals for the years 2010 and beyond, and establish a 
manner for evaluating the Enterprises' duty to serve the manufactured 
housing market. These statutory mandates are beyond the scope of this 
rulemaking and, therefore, are not addressed in the final rule. 
However, these statutory

[[Page 39889]]

provisions will be implemented by FHFA in upcoming rulemakings.

V. Paperwork Reduction Act

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

VI. Regulatory Flexibility Act

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

List of Subjects in 12 CFR Part 1282

    Federal Reserve System, Mortgages, Reporting and recordkeeping 
requirements, Securities.

0
Accordingly, for the reasons stated in the preamble, FHFA hereby amends 
chapter XII of title 12 of the Code of Federal Regulations, by adding 
new part 1282 to subchapter E to read as follows:

PART 1282--ENTERPRISE HOUSING GOALS AND MISSION

Sec.
Subpart A--General
1282.1 Scope of part.
1282.2 Definitions.
Subpart B--Housing Goals
1282.11 General.
1282.12 Low- and Moderate-Income Housing Goal.
1282.13 Central Cities, Rural Areas, and Other Underserved Areas 
Housing Goal.
1282.14 Special Affordable Housing Goal.
1282.15 General 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).
1282.19 Affordability--Rent level definitions--tenant income is not 
known.
1282.20 Actions to be taken to meet the goals.
1282.21 Notice and determination of failure to meet goals.
1282.22 Housing plans.

    Authority: 12 U.S.C. 4501, 4502, 4511, 4513, 4526, 4561(c), 
4565(b), 4566, 4603.

Subpart A--General


Sec.  1282.1  Scope of part.

    The Director has general regulatory and supervisory authority over 
Fannie Mae and Freddie Mac, and is required to make such regulations as 
are necessary to carry out the Director's duties under the Safety and 
Soundness Act, the Fannie Mae Charter Act, and the Freddie Mac Act, and 
to ensure that the purposes of such statutes are accomplished.


Sec.  1282.2  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.
    Book-entry GSE Security means a GSE Security issued or maintained 
in the Book-entry System. Book-entry GSE Security also means the 
separate interest and principal components of a Book-entry GSE Security 
if such security has been designated by the GSE 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 GSEs, on 
which Book-entry GSE Securities are issued, recorded, transferred and 
maintained in book-entry form.
    Central city means the underserved areas located in any political 
subdivision designated as a central city by the Office of Management 
and Budget of the Executive Office of the President.
    Charter Act means the Fannie Mae Charter Act or the Freddie Mac 
Act.
    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.
    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.
    Definitive GSE Security means a GSE Security in engraved or printed 
form, or that is otherwise represented by a certificate.
    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.
    ECOA means the Equal Credit Opportunity Act (15 U.S.C. 1691 et 
seq.).
    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 means Fannie Mae or Freddie Mac (Enterprises means, 
collectively, Fannie Mae and Freddie Mac).
    Entitlement Holder means a Person or a GSE to whose account an 
interest in a Book-entry GSE Security is credited on the records of a 
Securities Intermediary.

[[Page 39890]]

    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 (12 U.S.C. 1715 et seq.).
    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 GSE Securities) and transfers book-entry 
Securities (including Book-entry GSE Securities).
    FHFA means the Federal Housing Finance Agency.
    FOIA means the Freedom of Information Act (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 (12 U.S.C. 1451 et seq.).
    Government-sponsored enterprise or GSE means Fannie Mae or Freddie 
Mac.
    GSE Security means any security or obligation of Fannie Mae or 
Freddie Mac issued under its respective Charter Act in the form of a 
Definitive GSE Security or a Book-entry GSE Security.
    HOEPA mortgage means a mortgage for which the annual percentage 
rate (as calculated in accordance with the relevant provisions of 
section 107 of the Home Ownership Equity Protection Act (HOEPA) (15 
U.S.C. 1606)) exceeds the threshold described in section 103(aa)(1)(A) 
of HOEPA (15 U.S.C. 1602(aa)(1)(A)), or for which the total points and 
fees payable by the borrower exceed the threshold described in section 
103(aa)(1)(B) of HOEPA (15 U.S.C. 1602(aa)(1)(B)), as those thresholds 
may be increased or decreased by the Federal Reserve Board or by 
Congress, unless the Enterprises are otherwise notified in writing by 
FHFA. Notwithstanding the exclusions in section 103(aa)(1) of HOEPA, 
for purposes of this part, the term ``HOEPA mortgage'' includes all 
types of mortgages as defined in this section, including residential 
mortgage transactions as that term is defined in section 103(w) of 
HOEPA (15 U.S.C. 1602(w)), but does not include reverse mortgages.
    Home Purchase Mortgage means a residential mortgage for the 
purchase of an owner-occupied single-family property.
    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 area means a census tract or block numbering area in 
which the median income does not exceed 80 percent of the area median 
income.
    Median income means, with respect to an area, the unadjusted median 
family income for the area as most recently determined by HUD. FHFA 
will provide the 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 for which median family income estimates 
are determined by HUD.
    Minority means any individual who is included within any one or 
more of the following racial and ethnic categories:
    (1) American Indian or Alaskan Native--a person having origins in 
any of the original peoples of North and South America (including 
Central America), and who maintains Tribal affiliation or community 
attachment;
    (2) Asian--a person having origins in any of the original peoples 
of the Far East, Southeast Asia, or the Indian subcontinent, including, 
for example, Cambodia, China, India, Japan, Korea, Malaysia, Pakistan, 
the Philippine Islands, Thailand, and Vietnam;
    (3) Black or African American--a person having origins in any of 
the black racial groups of Africa;
    (4) Hispanic or Latino--a person of Cuban, Mexican, Puerto Rican, 
South or Central American, or other Spanish culture or origin, 
regardless of race; and
    (5) Native Hawaiian or Other Pacific Islander--a person having 
origins in any of the original peoples of Hawaii, Guam, Samoa, or other 
Pacific Islands.
    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, or a 
manufactured home that is personal property under the laws of the State 
in which the manufactured home is located, together with the credit 
instruments, if any, secured thereby, and includes interests in 
mortgages. ``Mortgage'' includes a mortgage, lien, including a 
subordinate lien, or other security interest on the stock or membership 
certificate issued to a tenant-stockholder or resident-member by a 
cooperative housing corporation, as defined in section 216 of the 
Internal Revenue Code of 1986, and on the proprietary lease, occupancy 
agreement, or right of tenancy in the dwelling unit of the tenant-
stockholder or resident-member in such cooperative housing corporation.
    Mortgage data means data obtained by the Director from the 
Enterprises under subsection 309(m) of the Fannie Mae Charter Act and 
subsection 307(e) of the Freddie Mac Act.
    Mortgage purchase means a transaction in which an Enterprise bought 
or otherwise acquired with cash or other thing of value, a mortgage for 
its portfolio or for securitization.
    Mortgages contrary to good lending practices means a mortgage or a 
group or category of mortgages entered into by a lender and purchased 
by an Enterprise where it can be shown that a lender engaged in a 
practice of failing to:
    (1) Report monthly on the borrower's repayment history to credit 
repositories on the status of each Enterprise loan that a lender is 
servicing;
    (2) Offer mortgage applicants products for which they qualify, but 
rather steer applicants to high cost products that are designed for 
less credit worthy borrowers. Similarly, for consumers who seek 
financing through a lender's higher-priced subprime lending channel, 
lenders should not fail to offer or direct such consumers toward the 
lender's standard mortgage line if they are able to qualify for one of 
the standard products;
    (3) Comply with fair lending requirements; or
    (4) Engage in other good lending practices that are:
    (i) Identified in writing by an Enterprise as good lending 
practices for inclusion in this definition; and
    (ii) Determined by the Director to constitute good lending 
practices.
    Mortgages with unacceptable terms or conditions or resulting from 
unacceptable practices means a mortgage or a group or category of 
mortgages with one or more of the following terms or conditions:
    (1) Excessive fees, where the total points and fees charged to a 
borrower exceed the greater of 5 percent of the loan amount or a 
maximum dollar amount of $1000, or an alternative amount requested by 
an Enterprise and determined by the Director as appropriate for small 
mortgages.
    (i) For purposes of this definition, points and fees include:
    (A) Origination fees;
    (B) Underwriting fees;
    (C) Broker fees;
    (D) Finder's fees; and

[[Page 39891]]

    (E) Charges that the lender imposes as a condition of making the 
loan, whether they are paid to the lender or a third party.
    (ii) For purposes of this definition, points and fees do not 
include:
    (A) Bona fide discount points;
    (B) Fees paid for actual services rendered in connection with the 
origination of the mortgage, such as attorneys' fees, notary's fees, 
and fees paid for property appraisals, credit reports, surveys, title 
examinations and extracts, flood and tax certifications, and home 
inspections;
    (C) The cost of mortgage insurance or credit-risk price 
adjustments;
    (D) The costs of title, hazard, and flood insurance policies;
    (E) State and local transfer taxes or fees;
    (F) Escrow deposits for the future payment of taxes and insurance 
premiums; and
    (G) Other miscellaneous fees and charges that, in total, do not 
exceed 0.25 percent of the loan amount.
    (2) Prepayment penalties, except where:
    (i) The mortgage provides some benefits to the borrower (e.g., a 
rate or fee reduction for accepting the prepayment premium);
    (ii) The borrower is offered the choice of another mortgage that 
does not contain payment of such a premium;
    (iii) The terms of the mortgage provision containing the prepayment 
penalty are adequately disclosed to the borrower; and
    (iv) The prepayment penalty is not charged when the mortgage debt 
is accelerated as the result of the borrower's default in making his or 
her mortgage payments.
    (3) The sale or financing of prepaid single-premium credit life 
insurance products in connection with the origination of the mortgage;
    (4) Evidence that the lender did not adequately consider the 
borrower's ability to make payments, i.e., mortgages that are 
originated with underwriting techniques that focus on the borrower's 
equity in the home, and do not give full consideration of the 
borrower's income and other obligations. Ability to repay must be 
determined and must be based upon relating the borrower's income, 
assets, and liabilities to the mortgage payments; or
    (5) Other terms or conditions that are:
    (i) Identified in writing by an Enterprise as unacceptable terms or 
conditions or resulting from unacceptable practices for inclusion in 
this definition; and
    (ii) Determined by the Director as an unacceptable term or 
condition of a mortgage for which goals credit should not be received.
    Multifamily housing means a residence consisting of more than four 
dwelling units. The term includes cooperative buildings and condominium 
projects.
    New England means Connecticut, Maine, Massachusetts, New Hampshire, 
Rhode Island, and Vermont.
    Ongoing program means a program that is expected to continue for 
the foreseeable future.
    Other underserved area means any underserved area that is in a 
metropolitan area, but not in a central city.
    Owner-occupied unit means a dwelling unit in single-family housing 
in which a mortgagor of the unit resides.
    Participant means a Person or GSE that maintains a Participant's 
Securities Account with a Federal Reserve Bank.
    Participation means a fractional interest in the principal amount 
of a mortgage.
    Person, as used in subpart H of 24 CFR part 81, 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, a GSE, or 
a Federal Reserve Bank.
    Portfolio of loans means 10 or more loans.
    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.
    Real estate mortgage investment conduit (REMIC) means multi-class 
mortgage securities issued by a tax-exempt entity.
    Refinancing means a transaction in which an existing mortgage is 
satisfied or replaced by a new mortgage undertaken by the same 
borrower. The term does not include:
    (1) A renewal of a single payment obligation with no change in the 
original terms;
    (2) A reduction in the annual percentage rate of the mortgage as 
computed under the Truth in Lending Act, with a corresponding change in 
the payment schedule;
    (3) An agreement involving a court proceeding;
    (4) A workout agreement, in which a change in the payment schedule 
or collateral requirements is agreed to as a result of the mortgagor's 
default or delinquency, unless the rate is increased or the new amount 
financed exceeds the unpaid balance plus earned finance charges and 
premiums for the continuation of insurance;
    (5) The renewal of optional insurance purchased by the mortgagor 
and added to an existing mortgage;
    (6) 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
    (7) 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:
    (1) When the contract rent includes all utilities, the contract 
rent; or
    (2) When the contract rent does not include all utilities, the 
contract rent plus:
    (i) The actual cost of utilities not included in the contract rent; 
or
    (ii) 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.
    Revised Article 8 has the same meaning as in 31 CFR 357.2.
    Rural area means any underserved area located outside of any 
metropolitan area.
    Safety and Soundness Act means the Federal Housing Enterprises 
Financial Safety and Soundness Act of 1992, as amended by the Housing 
and Economic Recovery Act of 2008, codified generally at 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

[[Page 39892]]

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.
    Securities Documentation means the applicable statement of terms, 
trust indenture, securities agreement or other documents establishing 
the terms of a Book-entry GSE 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''.
    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.
    Transfer message means an instruction of a Participant to a Federal 
Reserve Bank to effect a transfer of a Book-entry Security (including a 
Book-entry GSE Security) maintained in the Book-entry System, as set 
forth in Federal Reserve Bank Operating Circulars.
    Underserved area means:
    (1) For purposes of the definitions of ``Central city'' and ``Other 
underserved area'', a census tract, a Federal or State American Indian 
reservation or Tribal or individual trust land, or the balance of a 
census tract excluding the area within any Federal or State American 
Indian reservation or Tribal or individual trust land, having:
    (i) A median income at or below 120 percent of the median income of 
the metropolitan area and a minority population of 30 percent or 
greater; or
    (ii) A median income at or below 90 percent of median income of the 
metropolitan area.
    (2) For purposes of the definition of ``Rural area'', a whole 
census tract, a Federal or State American Indian reservation or Tribal 
or individual trust land, or the balance of a census tract excluding 
the area within any Federal or State American Indian reservation or 
Tribal or individual trust land, having:
    (i) A median income at or below 120 percent of the greater of the 
State non-metropolitan median income or the nationwide non-metropolitan 
median income and a minority population of 30 percent or greater; or
    (ii) A median income at or below 95 percent of the greater of the 
State non-metropolitan median income or nationwide non-metropolitan 
median income.
    (3) Any Federal or State American Indian reservation or Tribal or 
individual trust land that includes land that is both within and 
outside of a metropolitan area and that is designated as an underserved 
area by FHFA. In such cases, FHFA will notify the Enterprises as to 
applicability of other definitions and counting conventions.
    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 telephone service.
    Utility allowance means either:
    (1) 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
    (2) 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, for purposes of the 2009 housing goals:
    (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, income not in excess of 60 percent 
of area median income, with adjustments for smaller and larger 
families, as determined by the Director.
    Wholesale exchange means a transaction in which an Enterprise buys 
or otherwise acquires mortgages held in portfolio or securitized by the 
other Enterprise, or where both Enterprises swap such mortgages.
    Working day means a day when FHFA is officially open for business.
    (c) Subpart H terms. Unless the context requires otherwise, terms 
used in subpart H of 24 CFR part 81 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 GSEs.

Subpart B--Housing Goals


Sec.  1282.11  General.

    This subpart establishes three housing goals for 2009 as required 
by section 1331(c) of the Safety and Soundness Act, requirements for 
measuring performance under the goals, and procedures for monitoring 
and enforcing the goals.


Sec.  1282.12  Low- and Moderate-Income Housing Goal.

    (a) Purpose of goal. This annual goal for the purchase by each 
Enterprise of mortgages on housing for low- and moderate-income 
families (``the Low- and Moderate-Income Housing Goal'') is intended to 
achieve increased purchases by the Enterprises of such mortgages.
    (b) Factors. In establishing the Low- and Moderate-Income Housing 
Goals for 2009, the Director considered the feasibility of the goals 
given the current market conditions as required by section 1331(c) of 
the Safety and Soundness Act.
    (c) Goals. For the year 2009, the goal for each Enterprise's 
purchases of mortgages on housing for low- and moderate-income families 
shall be 43 percent of the total number of dwelling units financed by 
that Enterprise's mortgage purchases in 2009. In addition, as a Low- 
and Moderate-Income Housing Home Purchase Subgoal, 40 percent of the 
total number of home purchase mortgages in metropolitan areas financed 
by that Enterprise's mortgage purchases shall be home purchase 
mortgages in metropolitan areas which count toward the Low- and 
Moderate-Income Housing Goal for 2009.


Sec.  1282.13  Central Cities, Rural Areas, and Other Underserved Areas 
Housing Goal.

    (a) Purpose of the goal. This annual goal for the purchase by each 
Enterprise of mortgages on housing located in central cities, rural 
areas, and other underserved areas is intended to achieve increased 
purchases by the Enterprises of mortgages financing housing in areas 
that are underserved in terms of mortgage credit.
    (b) Factors. In establishing the Central Cities, Rural Areas, and 
Other Underserved Areas Goals for 2009, the Director considered the 
feasibility of the goals given the current market conditions as 
required by section 1331(c) of the Safety and Soundness Act.
    (c) Goals. For the year 2009, the goal for each Enterprise's 
purchases of mortgages on housing located in central cities, rural 
areas, and other underserved areas shall be 32 percent of the total 
number of dwelling units financed by that Enterprise's mortgage 
purchases in 2009. In addition, as a Central Cities, Rural Areas, and 
Other Underserved Areas Home Purchase Subgoal, 30 percent of the total 
number of home purchase mortgages in metropolitan areas financed by 
that Enterprise's mortgage purchases shall be home purchase mortgages 
in metropolitan areas which count toward the Central Cities, Rural 
Areas, and Other Underserved Areas Housing Goal for 2009.
    (d) Measuring performance. The Enterprises shall determine on a 
mortgage-by-mortgage basis, through

[[Page 39893]]

geocoding or any similarly accurate and reliable method, whether a 
mortgage finances one or more dwelling units located in a central city, 
rural area, or other underserved area.


Sec.  1282.14  Special Affordable Housing Goal.

    (a) Purpose of the goal. This goal is intended to achieve increased 
purchases by the Enterprises of mortgages on rental and owner-occupied 
housing meeting the then-existing unaddressed needs of, and affordable 
to, low-income families in low-income areas and very low-income 
families.
    (b) Factors. In establishing the Special Affordable Housing Goals 
for 2009, the Director considered the feasibility of the goals given 
the current market conditions as required by section 1331(c) of the 
Safety and Soundness Act.
    (c) Goals. For the year 2009, the goal for each Enterprise's 
purchases of mortgages on rental and owner-occupied housing meeting the 
then-existing, unaddressed needs of and affordable to low-income 
families in low-income areas and very low-income families shall be 18 
percent of the total number of dwelling units financed by that 
Enterprise's mortgage purchases in 2009. The goal for the year 2009 
shall include mortgage purchases financing dwelling units in 
multifamily housing totaling not less than 1.0 percent of the annual 
average dollar volume of combined (single-family and multifamily) 
mortgages purchased by the respective Enterprise in the years 1999 
through 2008. That is, this multifamily subgoal for 2009 is $6.56 
billion for Fannie Mae and $4.60 billion for Freddie Mac. In addition, 
as a Special Affordable Housing Home Purchase Subgoal, 14 percent of 
the total number of home purchase mortgages in metropolitan areas 
financed by that Enterprise's mortgage purchases shall be home purchase 
mortgages in metropolitan areas which count toward the Special 
Affordable Housing Goal for 2009.
    (d) Counting of multifamily units.--(1) Dwelling units affordable 
to low-income families and financed by a particular purchase of a 
mortgage on multifamily housing shall count toward achievement of the 
Special Affordable Housing Goal where at least:
    (i) 20 percent of the dwelling units in the particular multifamily 
property are affordable to especially low-income families; or
    (ii) 40 percent of the dwelling units in the particular multifamily 
property are affordable to very low-income families.
    (2) Where only some of the units financed by a purchase of a 
mortgage on multifamily housing count under the multifamily component 
of the goal, only a portion of the unpaid principal balance of the 
mortgage attributable to such units shall count toward the multifamily 
component. The portion of the mortgage counted under the multifamily 
requirement shall be equal to the ratio of the total units that count 
to the total number of units in the mortgaged property.
    (e) Full Credit Activities.--(1) For purposes of this paragraph 
(e), full credit means that each unit financed by a mortgage purchased 
by an Enterprise and meeting the requirements of this section shall 
count toward achievement of the Special Affordable Housing Goal for 
that Enterprise.
    (2) The following mortgages meet the requirements of paragraph 
(e)(3) of this section: mortgages insured under HUD's Home Equity 
Conversion Mortgage (``HECM'') Insurance Program, 12 U.S.C. 1715z-20; 
mortgages guaranteed under the Rural Housing Service's Single Family 
Housing Guaranteed Loan Program, 42 U.S.C. 1472; mortgages on 
properties on Tribal lands insured under FHA's Section 248 program, 12 
U.S.C. 1715z-13, HUD's Section 184 program, 12 U.S.C. 1515z-13a, or 
Title VI of the Native American Housing Assistance and Self-
Determination Act of 1996, 25 U.S.C. 4191 through 4195.
    (3) FHFA will give full credit toward achievement of the Special 
Affordable Housing Goal for the purchase or securitization of Federally 
insured or guaranteed mortgages if such mortgages cannot be readily 
securitized through the Government National Mortgage Association or any 
other Federal Agency, and participation of the Enterprise substantially 
enhances the affordability of the housing subject to such mortgages, 
provided the Enterprise submits documentation to FHFA that supports 
eligibility under this paragraph for FHFA's approval.
    (4)(i) FHFA will give full credit toward achievement of the Special 
Affordable Housing Goal for the purchase or refinancing of existing 
seasoned portfolios of loans if the seller is engaged in a specific 
program to use the proceeds of such sales to originate additional loans 
that meet such goal, and such purchases or refinancings support 
additional lending for housing that otherwise qualifies under such goal 
to be considered for purposes of such goal. For purposes of determining 
whether a seller meets the requirement in this paragraph (e)(4), a 
seller must currently operate on its own or actively participate in an 
on-going, discernible, active, and verifiable program directly targeted 
at the origination of new mortgage loans that qualify under the Special 
Affordable Housing Goal.
    (ii) A seller's activities must evidence a current intention or 
plan to reinvest the proceeds of the sale into mortgages qualifying 
under the Special Affordable Housing Goal, with a current commitment of 
resources on the part of the seller for this purpose.
    (iii) A seller's actions must evidence willingness to buy 
qualifying loans when these loans become available in the market as 
part of active, on-going, sustainable efforts to ensure that additional 
loans that meet the goal are originated.
    (iv) Actively participating in such a program includes purchasing 
qualifying loans from a correspondent originator, including a lender or 
qualified housing group, that operates an on-going program resulting in 
the origination of loans that meet the requirements of the goal, has a 
history of delivering, and currently delivers qualifying loans to the 
seller.
    (v) The Enterprise must verify and monitor that the seller meets 
the requirements in paragraphs (e)(4)(i) through (e)(4)(iv) of this 
section and develop any necessary mechanisms to ensure compliance with 
the requirements, except as provided in paragraphs (e)(4)(vi) and (vii) 
of this section.
    (vi) Where a seller's primary business is originating mortgages on 
housing that qualifies under this Special Affordable Housing Goal, such 
seller is presumed to meet the requirements in paragraphs (e)(4)(i) 
through (e)(4)(iv) of this section. Sellers that are institutions that 
are:
    (A) Regularly in the business of mortgage lending;
    (B) Depository institutions insured under the Deposit Insurance 
Fund; and
    (C) Subject to, and have received at least a satisfactory 
performance evaluation rating for:
    (1) At least the two most recent consecutive examinations under the 
Community Reinvestment Act, if the lending institutions have total 
assets in excess of $250 million; or
    (2) The most recent examination under the Community Reinvestment 
Act if the lending institutions which have total assets no more than 
$250 million are identified as sellers that are presumed to have a 
primary business of originating mortgages on housing that qualifies 
under this Special Affordable Housing Goal and, therefore, are presumed 
to meet the requirements in paragraphs (e)(4)(i) through (e)(4)(iv) of 
this section.

[[Page 39894]]

    (vii) Classes of institutions or organizations that are presumed to 
have as their primary business originating mortgages on housing that 
qualifies under this Special Affordable Housing Goal and, therefore, 
are presumed in paragraphs (e)(4)(i) through (e)(4)(iv) of this section 
to meet the requirements are as follows: State housing finance 
agencies; affordable housing loan consortia; and Federally insured 
credit unions that are:
    (A) Members of the Federal Home Loan Bank System and meet the 
first-time homebuyer lending standard of the Community Support Program; 
or
    (B) Community development credit unions; community development 
financial institutions; public loan funds; or non-profit mortgage 
lenders. FHFA may determine that additional classes of institutions or 
organizations are primarily engaged in the business of financing 
affordable housing mortgages for purposes of this presumption, and if 
so, will notify the Enterprises in writing.
    (viii) For purposes of paragraph (e)(4) of this section, if the 
seller did not originate the mortgage loans but the originator of the 
mortgage loans fulfills the requirements of either paragraphs (e)(4)(i) 
through (e)(4)(iv), paragraph (e)(4)(vi) or paragraph (e)(4)(vii) of 
this section, and the seller has held the loans for six months or less 
prior to selling the loans to the Enterprise, FHFA will consider that 
the seller has met the requirements of this paragraph (e)(4).
    (f) Partial credit activities. Mortgages insured under HUD's Title 
I program, which includes property improvement and manufactured home 
loans, shall receive one-half credit toward the Special Affordable 
Housing Goal until such time as the Government National Mortgage 
Association fully implements a program to purchase and securitize Title 
I loans.
    (g) No credit activities. Neither the purchase nor the 
securitization of mortgages associated with the refinancing of an 
Enterprise's existing mortgages or mortgage-backed securities 
portfolios shall receive credit toward the achievement of the Special 
Affordable Housing Goal. Refinancings that result from the wholesale 
exchange of mortgages between the two Enterprises shall not count 
toward the achievement of this goal. Refinancings of individual 
mortgages shall count toward achievement of this goal when the 
refinancing is an arms-length transaction that is borrower-driven and 
the mortgage otherwise counts toward achievement of this goal. For 
purposes of this paragraph (g), ``mortgages or mortgage-backed 
securities portfolios'' includes mortgages retained by Fannie Mae or 
Freddie Mac and mortgages utilized to back mortgage-backed securities.


Sec.  1282.15  General requirements.

    (a) Calculating the numerator and denominator. Performance under 
each of the housing goals shall be measured using a fraction that is 
converted into a percentage.
    (1) The numerator. The numerator of each fraction is the number of 
dwelling units financed by an Enterprise's mortgage purchases in a 
particular year that count toward achievement of the housing goal.
    (2) The denominator. The denominator of each fraction is, for all 
mortgages purchased, the number of dwelling units that could count 
toward achievement of the goal under appropriate circumstances. The 
denominator shall not include Enterprise transactions or activities 
that are not mortgages or mortgage purchases as defined by FHFA or 
transactions that are specifically excluded as ineligible under Sec.  
1282.16(b).
    (3) Missing data or information. 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 housing goal, that mortgage purchase shall be included in 
the denominator for that housing goal, except under the circumstances 
described in paragraphs (d) and (e)(6) of this section.
    (b) Properties with multiple dwelling units. For the purposes of 
counting toward the achievement of the goals, whenever the property 
securing a mortgage contains more than one dwelling unit, each such 
dwelling unit shall be counted as a separate dwelling unit financed by 
a mortgage purchase.
    (c) 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.
    (d) Counting owner-occupied units. (1) For purposes of counting 
owner-occupied units toward achievement of the Low- and Moderate-Income 
Housing Goal or the Special Affordable Housing Goal, mortgage purchases 
financing such units shall be evaluated based on the income of the 
mortgagors and the area median income at the time of origination of the 
mortgage. To determine whether mortgages may be counted under a 
particular family income level, i.e., especially low-, very low-, low- 
or moderate-income, the income of the mortgagors is compared to the 
median income for the area at the time of the mortgage application, 
using the appropriate percentage factor provided under Sec.  1282.17.
    (2)(i) When the income of the mortgagor(s) is not available to 
determine whether an owner-occupied unit in a property securing a 
single-family mortgage originated after 1992 and purchased by an 
Enterprise counts toward achievement of the Low- and Moderate-Income 
Housing Goal or the Special Affordable Housing Goal, an Enterprise's 
performance with respect to such unit may be evaluated using estimated 
affordability information in accordance with one of the following 
methods:
    (A) Excluding from the denominator and the numerator single-family 
owner-occupied units located in census tracts with median incomes less 
than, or equal to, area median income based on the most recent 
decennial census, up to a maximum of one percent of the total number of 
single-family owner-occupied dwelling units eligible to be counted 
toward the respective housing goal in the current year. Mortgage 
purchases with missing data in excess of the maximum will be included 
in the denominator and excluded from the numerator;
    (B) For home purchase mortgages and for refinance mortgages 
separately, multiplying the number of owner-occupied units with missing 
borrower income information in properties securing mortgages purchased 
by the Enterprise 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; 
or
    (C) Such other data source and methodology as may be approved by 
FHFA.
    (ii) In any calendar year, an Enterprise may use only one of the 
methods specified in paragraph (d)(2)(i) of this section to estimate 
affordability information for single-family owner-occupied units.
    (iii) If an Enterprise chooses to use an estimation methodology 
under paragraph (d)(2)(i)(B) or (d)(2)(i)(C) of this section to 
determine affordability for owner-occupied units in properties securing 
single-family mortgage purchases eligible to be counted toward the 
respective housing goal, then that methodology may be used up to 
nationwide maximums for home purchase mortgages and for refinance 
mortgages that shall be calculated by multiplying, for each census 
tract, the

[[Page 39895]]

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 single-family 
owner-occupied units in properties securing mortgages purchased by the 
Enterprise for each census tract, summed up over all census tracts. If 
this nationwide maximum is exceeded, then the estimated number of goal-
qualifying units will be adjusted by the ratio of the applicable 
nationwide maximum number of units for which income information may be 
estimated to the total number of single-family owner-occupied units 
with missing income information in properties securing mortgages 
purchased by the Enterprise. Owner-occupied units in excess of the 
nationwide maximum, and any units for which estimation information is 
not available, shall remain in the denominator of the respective goal 
calculation.
    (e) Counting rental units--(1) Use of income, rent--(i) Generally. 
For purposes of counting rental units toward achievement of the Low- 
and Moderate-Income Housing Goal or the Special Affordable Housing 
Goal, 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.
    (ii) Availability of income information.--(A) Each Enterprise shall 
require lenders to provide to the Enterprise tenant income information 
under paragraphs (e)(3) and (4) of this section, but only when such 
information is known to the lender.
    (B) 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 the income of prospective tenants, if paragraph (e)(4) of 
this section is applicable. If paragraph (e)(4) of this section is not 
applicable, the Enterprise shall use rent levels for comparable units 
in the property to determine affordability.
    (2) Model units and rental offices. A model unit or rental office 
in a multifamily property may count toward achievement of the housing 
goals only if an Enterprise determines that:
    (i) It is reasonably expected that the units will be occupied by a 
family within one year;
    (ii) The number of such units is reasonable and minimal considering 
the size of the multifamily property; and
    (iii) Such unit otherwise meets the requirements for the goal.
    (3) Income of actual tenants. When the income of actual tenants is 
available, to determine whether a tenant is very low-, low-, or 
moderate-income, the income of the tenant shall be compared to the 
median income for the area, adjusted for family size as provided in 
Sec.  1282.17.
    (4) Income of prospective tenants. 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.
    (5) Use of rent. When the income of the prospective or actual 
tenants of a dwelling unit is not available, performance under these 
goals will be evaluated based on rent and whether the rent is 
affordable to the income group targeted by the housing goal. A rent is 
affordable if the rent does not exceed 30 percent of the maximum income 
level of very low-, low-, or moderate-income families as provided in 
Sec.  1282.19. In determining contract rent for a dwelling unit, the 
actual rent or average rent by unit type shall be used.
    (6) Affordability data unavailable.--(i) Multifamily.--(A) 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 Low- and Moderate-Income 
Housing Goal or the Special Affordable Housing Goal 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 in 
accordance with one of the following methods:
    (1) 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, as determined by FHFA based on the 
most recent decennial census. For units with missing affordability 
information in tracts for which such methodology is not possible, such 
units will be excluded from the denominator as well as the numerator in 
calculating performance under the respective housing goal(s); or
    (2) Such other data source and methodology as may be approved by 
FHFA.
    (B) In any calendar year, an Enterprise may use only one of the 
methods specified in paragraph (e)(6)(i)(A) of this section to estimate 
affordability information for multifamily rental units.
    (C) If an Enterprise chooses to use an estimation methodology under 
paragraph (e)(6)(i)(A) of this section to determine affordability for 
rental units in properties securing multifamily mortgage purchases 
eligible to be counted toward the respective housing goal, then that 
methodology 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. If this 
maximum is exceeded, the estimated number of goal-qualifying units will 
be adjusted by the ratio of the nationwide maximum number of units for 
which affordability information may be estimated to the total number of 
multifamily rental units with missing affordability information in 
properties securing mortgages purchased by the Enterprise. Multifamily 
rental units in excess of the maximum set forth in this paragraph 
(e)(6)(i)(C), and any units for which estimation information is not 
available, shall be removed from the denominator of the respective goal 
calculation.
    (ii) Rental units in 1-4 unit single-family properties.--(A) When 
an Enterprise lacks sufficient information to determine whether a 
rental unit in a property securing a single-family mortgage purchased 
by an Enterprise counts toward achievement of the Low- and Moderate-
Income Housing Goal or the Special Affordable Housing Goal 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

[[Page 39896]]

information in accordance with one of the following methods:
    (1) Excluding rental units in 1- to 4-unit properties with missing 
affordability information from the denominator as well as the numerator 
in calculating performance under those goals;
    (2) Multiplying the number of rental units with missing 
affordability information in properties securing single family 
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, as determined by FHFA 
based on the most recent decennial census. For units with missing 
affordability information in tracts for which such methodology is not 
possible, such units will be excluded from the denominator as well as 
the numerator in calculating performance under the respective housing 
goal(s); or
    (3) Such other data source and methodology as may be approved by 
FHFA.
    (B) In any calendar year, an Enterprise may use only one of the 
methods specified in paragraph (e)(6)(ii)(A) of this section to 
estimate affordability information for single-family rental units.
    (C) If an Enterprise chooses to use an estimation methodology under 
paragraph (e)(6)(ii)(A)(2) or (e)(6)(ii)(A)(3) of this section to 
determine affordability for rental units in properties securing single-
family mortgage purchases eligible to be counted toward the respective 
housing goal, then that methodology may be used up to nationwide 
maximums of five percent of the total number of rental units in 
properties securing non-seasoned single-family mortgage purchases by 
the Enterprise in the current year and 20 percent of the total number 
of rental units in properties securing seasoned single-family mortgage 
purchases by the Enterprise in the current year. If either or both of 
these maximums are exceeded, the estimated number of goal-qualifying 
units will be adjusted by the ratio of the applicable nationwide 
maximum number of units for which affordability information may be 
estimated to the total number of single-family rental units with 
missing affordability information in properties securing seasoned or 
unseasoned mortgages purchased by the Enterprise, as applicable. 
Single-family rental units in excess of the maximums set forth in this 
paragraph (e)(6)(ii)(C), and any units for which estimation information 
is not available, shall be removed from the denominator of the 
respective goal calculation.
    (7) Timeliness of information. In determining performance under the 
housing goals, each Enterprise shall use tenant and rental information 
as of the time of mortgage:
    (i) Acquisition for mortgages on multifamily housing; and
    (ii) Origination for mortgages on single-family housing.
    (f) Application of median income.--(1) For purposes of determining 
an area's median income under Sec. Sec.  1282.17 through 1282.19 and 
for the definition of ``low-income area,'' 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 nonmetropolitan median income is 
higher than the county's median income, the area is the State 
nonmetropolitan 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'').
    (g) Sampling not permitted. Performance under the housing goals for 
each year shall be based on a complete tabulation of mortgage purchases 
for that year; a sampling of such purchases is not acceptable.
    (h) Newly available data. When an Enterprise uses data to determine 
whether a mortgage purchase 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.
    (i) Counting mortgages toward the Home Purchase Subgoals.--(1) 
General. The requirements of this section, except for paragraphs (b) 
and (e) of this section, shall apply to counting mortgages toward the 
Home Purchase Subgoals at Sec. Sec.  1282.12 through 1282.14. However, 
performance under the subgoals shall be counted using a fraction that 
is converted into a percentage for each subgoal and the numerator of 
the fraction for each subgoal shall be the number of home purchase 
mortgages in metropolitan areas financed by each Enterprise's mortgage 
purchases in a particular year that count towards achievement of the 
applicable housing goal. The denominator of each fraction shall be the 
total number of home purchase mortgages in metropolitan areas financed 
by each Enterprise's mortgage purchases in a particular year. For 
purposes of each subgoal, the procedure for addressing missing data or 
information, as set forth in paragraph (d) of this section, shall be 
implemented using numbers of home purchase mortgages in metropolitan 
areas and not single-family owner-occupied dwelling units.
    (2) Special counting rule for mortgages with more than one owner-
occupied unit. For purposes of counting mortgages toward the Home 
Purchase Subgoals, where a single home purchase mortgage finances the 
purchase of two or more owner-occupied units in a metropolitan area, 
the mortgage shall count once toward each subgoal that applies to the 
Enterprise's mortgage purchase.


Sec.  1282.16  Special counting requirements.

    (a) General. FHFA shall determine whether an Enterprise shall 
receive full, partial, or no credit for a transaction toward 
achievement of any of the housing goals. 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 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 
count toward achievement of any of the housing goals and shall not be 
included in the denominator in calculating either Enterprise's 
performance under the housing goals:
    (1) Equity investments in housing development projects;
    (2) Purchases of State and local government housing bonds except as 
provided in Sec.  1282.16(c)(8);
    (3) Purchases of non-conventional mortgages except:
    (i) Where such mortgages are acquired under a risk-sharing 
arrangement with a Federal agency;
    (ii) Mortgages insured under HUD's Home Equity Conversion Mortgage 
(``HECM'') insurance program, 12 U.S.C. 1715z-20; mortgages guaranteed 
under the Rural Housing Service's Single

[[Page 39897]]

Family Housing Guaranteed Loan Program, 42 U.S.C. 1472; mortgages on 
properties on lands insured under FHA's Section 248 program, 12 U.S.C. 
1715z-13, HUD's Section 184 program, 12 U.S.C. 1515z-13a, or Title VI 
of the Native American Housing Assistance and Self-Determination Act of 
1996, 25 U.S.C. 4191 through 4195; and mortgages with expiring 
assistance contracts as defined at 42 U.S.C. 1737f;
    (iii) Mortgages under other mortgage programs involving Federal 
guarantees, insurance or other Federal obligation where FHFA determines 
in writing that the financing needs addressed by the particular 
mortgage program are not well served and that the mortgage purchases 
under such program should count under the housing goals, provided the 
Enterprise submits documentation to FHFA that supports eligibility and 
that FHFA makes such a determination; or
    (iv) As provided in Sec.  1282.14(e)(3);
    (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 mortgage refinancings 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 mortgages on one- to four-unit properties with 
maximum original principal obligations that exceed:
    (i) The nationwide conforming loan limits for properties of a 
particular size; or
    (ii) 150 percent of the nationwide conforming loan limits for 
properties of a particular size located in Alaska, Guam, Hawaii and the 
Virgin Islands; and
    (11) Any combination of factors in paragraphs (b)(1) through (10) 
of this section.
    (c) Other special rules. Subject to FHFA's primary 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 following supplemental rules 
apply:
    (1) Credit enhancements.--(i) Dwelling units financed under a 
credit enhancement entered into by an Enterprise shall be treated as 
mortgage purchases and count toward achievement of the housing goals 
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);
    (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; and
    (C) Such dwelling units otherwise qualify under this part.
    (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) Real estate mortgage investment conduits (``REMICs'').--(i) An 
Enterprise's purchase or guarantee of all or a portion of a REMIC shall 
be treated as a mortgage purchase and receive credit toward the 
achievement of the housing goals provided:
    (A) The underlying mortgages or mortgage-backed securities for the 
REMIC were not:
    (1) Guaranteed by the Government National Mortgage Association; or
    (2) Previously counted toward any housing goal by the Enterprise; 
and
    (B) The Enterprise has the information necessary to support 
counting the dwelling units financed by the REMIC, or that part of the 
REMIC purchased or guaranteed by the Enterprise, toward the achievement 
of a particular housing goal.
    (ii) For REMICs that meet the requirements in paragraph (c)(2)(i) 
of this section and for which the Enterprise purchased or guaranteed:
    (A) The whole REMIC, all of the units financed by the REMIC shall 
be treated as a mortgage purchase and count toward achievement of the 
housing goals; or
    (B) A portion of the REMIC, the Enterprise shall receive partial 
credit toward achievement of the housing goals. This credit shall be 
equal to the percentage of the REMIC purchased or guaranteed by the 
Enterprise (the dollar amount of the purchase or guarantee divided by 
the total dollar amount of the REMIC) multiplied by the number of 
dwelling units that would have counted toward the goal(s) if the 
Enterprise had purchased or guaranteed the whole REMIC. In calculating 
performance under the housing goals, the denominator shall include the 
number of dwelling units included in the whole REMIC multiplied by the 
percentage of the REMIC purchased or guaranteed by the Enterprise.
    (3) Risk-sharing. Mortgage purchases under risk-sharing 
arrangements between the Enterprises and any Federal agency where the 
units would otherwise count toward achievement of the housing goal 
under which the Enterprise is responsible for a substantial amount (50 
percent or more) of the risk shall be treated as mortgage purchases and 
count toward achievement of the housing goal or goals.
    (4) Participations. Participations purchased by an Enterprise shall 
be treated as mortgage purchases and count toward the achievement of 
the housing goals, if the Enterprise's participation in the mortgage is 
50 percent or more.
    (5) Cooperative housing and condominium projects.--(i) The purchase 
of a mortgage on a cooperative housing unit (``a share loan'') or a 
condominium unit is a mortgage purchase. Such a purchase is counted 
toward achievement of a housing goal in the same manner as a mortgage 
purchase of single-family owner-occupied units, i.e., affordability is 
based on the income of the owner(s).
    (ii) The purchase of a mortgage on a cooperative building (``a 
blanket loan'') or a condominium project is a mortgage purchase and 
shall count toward achievement of the housing goals. Where an 
Enterprise purchases both ``a blanket loan'' and mortgages for units in 
the same building (``share loans''), both the blanket loan and the 
share loan(s) are mortgage purchases and shall count toward achievement 
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 are mortgage purchases and shall count 
toward achievement 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 these 
goals and shall be included in the numerator, as appropriate, and the 
denominator in calculating the Enterprise's performance under the 
housing goals, except where:
    (i) The Enterprise has already counted the mortgage under a housing 
goal applicable to 1993 or any subsequent year; or

[[Page 39898]]

    (ii) FHFA determines, based upon a written request by an 
Enterprise, that a seasoned mortgage or class of such mortgages should 
be excluded from the numerator and the denominator in order to further 
the purposes of the Special Affordable Housing Goal.
    (7) Purchase of refinanced mortgages. Except as otherwise provided 
in this part, the purchase of a refinanced mortgage by an Enterprise is 
a mortgage purchase and shall count toward achievement of the housing 
goals to the extent the mortgage qualifies.
    (8) Mortgage revenue bonds.--(i) The purchase of a State or local 
mortgage revenue bond shall be treated as a mortgage purchase and units 
financed under such mortgage revenue bond shall count toward 
achievement of the goals where:
    (A) The mortgage revenue bond is to be repaid only from the 
principal and interest of the underlying mortgages originated with 
funds made available by the mortgage revenue bond; and
    (B) The mortgage revenue bond is not a general obligation of a 
State or local government or agency or is not credit enhanced by any 
government or agency, third party guarantor or surety.
    (ii) Dwelling units financed by a mortgage revenue bond meeting the 
requirements of paragraph (c)(8)(i) of this section shall count toward 
achievement of a housing goal to the extent such dwelling units 
otherwise qualify under this part.
    (9) Expiring assistance contracts. Actions that assist in 
maintaining the affordability of assisted units in eligible multifamily 
housing projects with expiring contracts, as defined under the 
Multifamily Assisted Housing Reform and Affordability Act of 1997, 
shall receive credit under the housing goals as provided in paragraph 
(b)(3)(ii) and in accordance with paragraphs (b) and (c)(1) through 
(c)(10) of this section.
    (i) For restructured (modified) multifamily mortgage loans with an 
expiring assistance contract where an Enterprise holds the loan in 
portfolio and facilitates modification of loan terms that results in 
lower debt service to the project's owner, the Enterprise shall receive 
full credit under any of the housing goals for which the units covered 
by the mortgage otherwise qualify.
    (ii) Where an Enterprise undertakes more than one action to assist 
a single project or where an Enterprise engages in an activity that it 
believes assists in maintaining the affordability of assisted units in 
eligible multifamily housing projects but which is not otherwise 
covered in paragraph (c)(9)(i) of this section, the Enterprise must 
submit the transaction to FHFA for a determination on appropriate goals 
counting treatment.
    (10) Loan modifications. An Enterprise's modification of a loan in 
accordance with the Making Homes 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) HOEPA mortgages and mortgages with unacceptable terms and 
conditions. HOEPA mortgages and mortgages with unacceptable terms or 
conditions as defined in Sec.  1282.2 shall not receive credit toward 
any of the three housing goals.
    (13) Mortgages contrary to good lending practices. The Director 
shall monitor the practices and processes of the Enterprises to ensure 
that they are not purchasing loans that are contrary to good lending 
practices as defined in Sec.  1282.2. Based on the results of such 
monitoring, the Director may determine in accordance with paragraph (d) 
of this section that mortgages or categories of mortgages where a 
lender has not engaged in good lending practices shall not receive 
credit toward the three housing goals.
    (14) Seller dissolution option.--(i) Mortgages acquired through 
transactions involving seller dissolution options shall be treated as 
mortgage purchases and receive credit toward the achievement of the 
housing goals, only when:
    (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) FHFA review of transactions. FHFA will determine whether a 
class of transactions counts as a mortgage purchase under the housing 
goals. If an Enterprise seeks to have a class of transactions counted 
under the housing goals that does not otherwise count under the rules 
in this part, the Enterprise may provide FHFA detailed information 
regarding the transactions for evaluation and determination by FHFA in 
accordance with this section. In making its determination, FHFA may 
also request and evaluate additional information from an Enterprise 
with regard to how the Enterprise believes the transactions should be 
counted. FHFA will notify the Enterprise of its determination regarding 
the extent to which the class of transactions may count under the 
goals.


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

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

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

    (b) Low-income 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:

[[Page 39899]]



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

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

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

    (d) Especially-low-income means, in the case of rental units, where 
the income of actual or prospective tenants is available, income not in 
excess of the following percentages of area median income corresponding 
to the following family sizes:

------------------------------------------------------------------------
                                                          Percentage  of
               Number of persons in family                  area median
                                                              income
------------------------------------------------------------------------
1.......................................................              35
2.......................................................              40
3.......................................................              45
4.......................................................              50
5 or more...............................................               *
------------------------------------------------------------------------
* 50% plus (4.0% multiplied by the number of persons in excess of 4).

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

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

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

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

------------------------------------------------------------------------
                                                           Percentage of
                        Unit size                           area median
                                                              income
------------------------------------------------------------------------
Efficiency..............................................              56
1 bedroom...............................................              60
2 bedrooms..............................................              72
3 bedrooms or more......................................               *
------------------------------------------------------------------------
* 83.2% plus (9.6% multiplied by the number of bedrooms in excess of 3).

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

------------------------------------------------------------------------
                                                           Percentage of
                        Unit size                           area median
                                                              income
------------------------------------------------------------------------
Efficiency..............................................              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 especially low-income, income of prospective tenants shall 
not exceed the following percentages of area median income with 
adjustments, depending on unit size:

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

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

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

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

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

------------------------------------------------------------------------
                                                           Percentage of
                        Unit size                           area median
                                                              income
------------------------------------------------------------------------
Efficiency..............................................            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 very low-income, maximum affordable rents to count as 
housing for very low-income families shall not exceed the following 
percentages of area median income with adjustments, depending on unit 
size:

------------------------------------------------------------------------
                                                           Percentage of
                        Unit size                           area median
                                                              income
------------------------------------------------------------------------
Efficiency..............................................            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 especially low-income, maximum affordable rents to count as 
housing for especially low-income families shall not exceed the 
following percentages of area median income with adjustments, depending 
on unit size:

------------------------------------------------------------------------
                                                           Percentage of
                        Unit size                           area median
                                                              income
------------------------------------------------------------------------
Efficiency..............................................            10.5
1 bedroom...............................................           11.25
2 bedrooms..............................................            13.5

[[Page 39900]]

 
3 bedrooms or more......................................               *
------------------------------------------------------------------------
*15.6% plus (1.8% multiplied by the number of bedrooms in excess of 3).

    (e) Missing Information. Each Enterprise shall make every effort to 
obtain the information necessary to make the calculations in this 
section. If an Enterprise makes such efforts but cannot obtain data on 
the number of bedrooms in particular units, in making the calculations 
on such units, the units shall be assumed to be efficiencies except as 
provided in Sec.  1282.15(e)(6)(i).


Sec.  1282.20  Actions to be taken to meet the goals.

    To meet the goals under this rule, each Enterprise shall operate in 
accordance with 12 U.S.C. 4565(b).


Sec.  1282.21  Notice and determination of failure to meet goals.

    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, the Director shall follow the procedures at 12 U.S.C. 
4566(b).


Sec.  1282.22  Housing plans.

    (a) If the Director determines, under Sec.  1282.21, 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.
    (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 30 days after issuance of a notice 
under Sec.  1282.21 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 
(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.

    Dated: July 28, 2009.
James B. Lockhart III,
Director, Federal Housing Finance Agency.
[FR Doc. E9-18517 Filed 8-7-09; 8:45 am]
BILLING CODE P