55892 Federal Register / Vol. 75, No. 177 / Tuesday, September 14, 2010 / Rules and Regulations 

1See Division A, titled the ‘‘Federal Housing 

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

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

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

2See 12 U.S.C. 4513. 

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

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

5 Id. 

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

7See 24 CFR part 81 (2008). 

8See 24 CFR 81.12 through 81.14 (2008). 

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

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

11See 12 U.S.C. 4562. 

12See 12 U.S.C. 4563. 

FEDERAL HOUSING FINANCE 

AGENCY 

12 CFR Parts 1249, 1282 

RIN 2590–AA26 

2010–2011 Enterprise Housing Goals; 

Enterprise Book-entry Procedures 

AGENCY: Federal Housing Finance 

Agency. 

ACTION: Final rule. 

SUMMARY: Section 1128(b) of the 

Housing and Economic Recovery Act of 

2008 (HERA) amended the Federal 

Housing Enterprises Financial Safety 

and Soundness Act of 1992 (Safety and 

Soundness Act) to provide for the 

establishment, monitoring and 

enforcement of new housing goals 

effective for 2010 and 2011 for the 

Federal National Mortgage Association 

(Fannie Mae) and the Federal Home 

Loan Mortgage Corporation (Freddie 

Mac) (collectively, the Enterprises). 

Section 1332(a) of the Safety and 

Soundness Act, as amended by HERA, 

requires the Federal Housing Finance 

Agency (FHFA) to establish three singlefamily owner-occupied purchase money 

mortgage goals and one single-family 

refinancing mortgage goal. Section 

1333(a) of the Safety and Soundness Act 

requires FHFA to establish one 

multifamily special affordable housing 

goal, as well as providing for a 

multifamily special affordable housing 

subgoal. This final rule establishes new 

housing goals for 2010 and 2011, 

consistent with the Safety and 

Soundness Act, as amended. The final 

rule also revises and updates the rules 

for counting mortgages for purposes of 

the housing goals to ensure clarity and 

consistency with the new goals. In 

addition, the final rule includes 

provisions regarding reporting 

requirements and book-entry 

procedures. 

DATES: This rule is effective October 14, 

2010. 

FOR FURTHER INFORMATION CONTACT: 

Nelson Hernandez, Senior Associate 

Director, Housing Mission and Goals, 

Office of Housing and Community 

Investment, (202) 408–2819, Brian 

Doherty, Manager, Housing Mission and 

Goals, Office of Housing and 

Community Investment, (202) 408– 

2991, Paul Manchester, Principal 

Economist, Housing Mission and Goals, 

Office of Housing and Community 

Investment, (202) 408–2946, Sharon 

Like, Managing Associate General 

Counsel, Office of General Counsel, 

(202) 414–8950, Kevin Sheehan, 

Attorney, Office of General Counsel, 

(202) 414–8952 or Lyn Abrams, 

Attorney, Office of General Counsel, 

(202) 414–8951. These are not toll-free 

numbers. The mailing address for each 

contact is: 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, HERA 

amended the Safety and Soundness Act 

to create FHFA as an independent 

agency of the federal government.1

HERA transferred the safety and 

soundness supervisory and oversight 

responsibilities over the Enterprises 

from the Office of Federal Housing 

Enterprise Oversight (OFHEO) to FHFA. 

HERA also transferred the charter 

compliance authority and responsibility 

to establish, monitor and enforce the 

affordable housing goals for the 

Enterprises from the Department of 

Housing and Urban Development (HUD) 

to FHFA. FHFA is responsible for 

ensuring that the Enterprises operate in 

a safe and sound manner, including 

maintenance of adequate capital and 

internal controls, that their operations 

and activities foster liquid, efficient, 

competitive, and resilient national 

housing finance markets, and that they 

carry out their public policy missions 

through authorized activities.2

Section 1302 of HERA provides, in 

part, that all regulations, orders and 

determinations issued by the Secretary 

of HUD (Secretary) with respect to the 

Secretary’s authority under the Safety 

and Soundness Act, the Federal 

National Mortgage Association Charter 

Act and the Federal Home Loan 

Mortgage Corporation Act (together, the 

Charter Acts), shall remain in effect and 

be enforceable by the Secretary or the 

Director of FHFA, as the case may be, 

until modified, terminated, set aside or 

superseded by the Secretary or the 

Director, any court, or operation of law. 

The Enterprises continue to operate 

under regulations promulgated by 

OFHEO and HUD until FHFA issues its 

own regulations.3 The Enterprises are 

government-sponsored enterprises 

(GSEs) chartered by Congress for the 

purpose of establishing secondary 

market facilities for residential 

mortgages.4 Specifically, Congress 

established the Enterprises to provide 

stability in the secondary market for 

residential mortgages, respond 

appropriately to the private capital 

market, provide ongoing assistance to 

the secondary market for residential 

mortgages, and promote access to 

mortgage credit throughout the nation.5

B. Statutory and Regulatory Background 

Prior to HERA, the Safety and 

Soundness Act provided the Secretary 

of HUD with specific authority to 

establish, monitor and enforce 

affordable housing goals for the 

Enterprises.6 HUD issued regulations 

establishing affordable housing goals for 

the Enterprises, which were periodically 

updated, most recently in 2004, when 

HUD established new housing goal 

levels for 2005 through 2008.7 HUD’s 

regulations provided for the housing 

goal levels for 2008 to continue in effect 

in 2009 and each year thereafter until 

replaced by new annual housing goals 

established by HUD.8 In August 2009, 

FHFA issued a final rule that adopted 

many of the existing housing goals 

provisions in a new part 1282 of title 12 

of the Code of Federal Regulations. As 

authorized by section 1331(c) of the 

Safety and Soundness Act, as amended, 

the final rule also revised the levels of 

the existing affordable housing goals in 

light of current market conditions.9

The Safety and Soundness Act, as 

amended by HERA, requires the 

Director of FHFA to establish new 

housing goals effective for 2010 and 

beyond. The new housing goals include 

four goals for single-family, owneroccupied housing, one multifamily 

special affordable housing goal, and one 

multifamily special affordable housing 

subgoal.10 The single-family housing 

goals target purchase money mortgages 

for low-income families, families that 

reside in low-income areas, and very 

low-income families, and refinancing 

mortgages for low-income families.11

The multifamily special affordable 

housing goal targets multifamily 

housing affordable to low-income 

families, and the multifamily special 

affordable housing subgoal targets 

multifamily housing affordable to very 

low-income families.12


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Federal Register / Vol. 75, No. 177 / Tuesday, September 14, 2010 / Rules and Regulations 55893 

C. Conservatorship 

On September 6, 2008, the Director of 

FHFA appointed FHFA as conservator 

of the Enterprises in accordance with 

the Safety and Soundness Act, as 

amended by HERA, to maintain the 

Enterprises in a safe and sound financial 

condition. The Enterprises remain 

under conservatorship at this time. 

Although the Enterprises’ substantial 

market presence has been a key step to 

restoring market stability, neither 

company would be capable of serving 

the mortgage market today without the 

ongoing financial support provided by 

the U.S. Department of Treasury. Fannie 

Mae has drawn $85.1 billion and 

Freddie Mac has drawn $63.1 billion in 

Treasury support under the Senior 

Preferred Stock Purchase Agreements, 

over $148 billion in total. Under the 

terms of the Senior Preferred Stock 

Purchase Agreements, the Enterprises 

will be shrinking their retained 

mortgage portfolio by ten percent per 

year. The Administration has 

announced its intention to develop and 

present to Congress a plan for the future 

of the nation’s housing finance system 

that will include a proposal for the 

ultimate resolution of the Enterprises in 

conservatorship. Administration and 

congressional leadership have each 

pointed to the coming year as likely to 

see action affecting the Enterprises’ 

future form and function. While reliance 

on the Treasury Department’s backing 

will continue until legislation produces 

a final resolution to the Enterprises’ 

future, FHFA is monitoring the 

activities of the Enterprises to: (a) Limit 

their risk and exposure by avoiding new 

lines of business; (b) ensure profitability 

in the new book of business without 

deterring market participation or 

hindering market recovery; and (c) 

minimize losses on the mortgages 

already on their books. 

II. Proposed Rule 

On February 26, 2010, FHFA 

published in the Federal Register a 

proposed rule to establish new housing 

goals for the Enterprises. The 45-day 

comment period closed April 12, 2010. 

See 75 FR 9034 (Feb. 26, 2010). FHFA 

received a total of 29 comment letters on 

the proposed rule. Eight of the comment 

letters were from real estate 

professionals and addressed seller 

concessions in real estate transactions, 

an issue that is not applicable to this 

rulemaking. The remaining 21 comment 

letters were from 11 trade associations, 

two not-for-profit organizations, two 

policy advocacy groups, one 

corporation, one government entity, one 

financial research organization, one 

individual, and both Enterprises. 

In the proposed rule, FHFA proposed 

measuring the Enterprises’ single-family 

performance against specified 

benchmark levels and against the 

primary mortgage market. FHFA 

received 11 comment letters on this 

proposal, all in support of the two-part 

approach. Most of the trade 

associations, as well as the Enterprises, 

recognized the difficulty of forecasting 

the mortgage market in the current 

economic environment and were 

receptive to the alternative 

measurements. 

Seven commenters supported the 

proposed benchmark levels for the 

single-family home purchase goals. 

These commenters also supported the 

new separate low-income families 

refinancing goal. The Enterprises did 

not object to the mortgage purchase goal 

levels, but were concerned that the lowincome refinancing goal was set too 

high. One trade association stated that 

the mortgage purchase goal levels were 

set at only 50 to 60 percent of Enterprise 

purchases in 2008 and should be higher. 

The multifamily housing goal levels 

were supported generally by four 

commenters, although two commenters 

noted that the multifamily market may 

be difficult to measure. Eight 

commenters did not support the 

multifamily housing goal levels. Six 

commenters stated that the goal levels 

were too low, and that the Enterprises 

should be required to provide more 

assistance to the multifamily market. On 

the other hand, the Enterprises 

commented that demand for 

multifamily financing is too weak to 

support the proposed goal levels, and 

that they should be set lower. 

The proposed rule invited comment 

on whether there should be housing 

goals established for mortgages secured 

by small multifamily properties, in 

addition to reporting requirements. Five 

commenters supported the proposed 

reporting requirements, and urged 

FHFA to also establish small 

multifamily housing goals. The 

commenters stated that the small 

multifamily market is an underserved 

market segment, and assistance is 

needed in smaller communities. Three 

commenters, including both Enterprises, 

stated that reporting on small 

multifamily properties was appropriate, 

but they discouraged a small 

multifamily housing goal at this time 

given the state of the multifamily market 

and the financial condition of the 

Enterprises. 

Eight commenters addressed the 

proposed standards for exclusion of 

certain mortgage purchases from 

counting toward achievement of the 

housing goals. Five commenters were in 

favor of excluding private label 

securities from the housing goals, 

although Freddie Mac favored inclusion 

if due diligence is conducted. A few 

other commenters suggested the use of 

Regulation Z and the Home Ownership 

and Equity Protection Act (HOEPA) 

rather than interagency guidance to 

determine goals eligibility. Commenters 

also suggested that FHFA explicitly 

exclude from the housing goals 

mortgages with other characteristics 

such as low teaser rates, interest-only 

options, negative amortization, reduced 

documentation, and second liens. One 

commenter expressed support for the 

provision that allows FHFA discretion 

to enumerate additional unacceptable 

terms and conditions that constitute 

unacceptable mortgages. 

FHFA has considered all of the 

comments on the proposed rule and has 

determined to adopt a final rule that 

makes certain revisions to the proposed 

rule, as described in detail 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. 

III. Summary of Final Rule 

A. Modification of Housing Goal 

Structure 

The final rule modifies the structure 

of the housing goals in accordance with 

HERA’s revisions to the Safety and 

Soundness Act. HUD established overall 

housing goals for 2005–2008 that 

combined an Enterprise’s purchases of 

mortgages on single-family housing, 

multifamily housing, purchase money 

mortgages, and refinancing mortgages. 

FHFA adjusted the levels of these 

overall goals for 2009. These goals are 

revised for 2010 and 2011 to include 

four separate goals and one subgoal for 

purchases of single-family mortgages 

and one goal and one subgoal for 

purchases of multifamily mortgages. To 

carry out the requirements of HERA 

regarding designated disaster areas 

while continuing to provide a focus on 

low-income and high minority 

concentration census tracts, the final 

rule establishes both a low-income areas 

home purchase goal and subgoal. As in 

the proposed rule, the final rule 

provides for a retrospective, marketbased assessment of the achievement by 

the Enterprises of their housing goals as 

well as the traditional prospective, 

benchmark goals approach. These 

changes are described in more detail 

below. 


jdjones on DSK8KYBLC1PROD with RULES_2
55894 Federal Register / Vol. 75, No. 177 / Tuesday, September 14, 2010 / Rules and Regulations 

13 12 U.S.C. 4502. 

B. Adjustment of Home Purchase and 

Refinancing Goal Levels, and 

Multifamily Goal and Subgoal Levels 

Consistent with the proposed rule, the 

final rule provides that Enterprise goal 

performance under each of the singlefamily housing goals shall be measured 

using a fraction of qualifying mortgage 

purchases as a percent of total mortgage 

purchases. Neither the numerator nor 

the denominator includes Enterprise 

transactions or activities that are not 

mortgage purchases as defined by FHFA 

or that are specifically excluded as 

ineligible under § 1282.16(b). The final 

rule establishes separate single-family 

goals for home purchase mortgages and 

refinancing mortgages. This differs from 

previous treatment, which combined 

Enterprise purchases of home purchase 

and refinancing mortgages for the 

overall goals. 

Consistent with the proposed rule, the 

final rule bases the 2010–2011 

multifamily goals on the numbers of 

affordable dwelling units financed, 

rather than specifying such goals in 

minimum dollar terms. The special 

affordable multifamily subgoal in effect 

prior to 2010 applied to purchases of 

mortgages on housing for families with 

incomes below 60 percent of area 

median income (AMI) and for families 

with incomes between 60 percent and 

80 percent of AMI living in low-income 

areas. The overall multifamily goal for 

2010–2011 is somewhat broader in its 

coverage than the previous special 

affordable multifamily goal, applying to 

mortgages on housing for families with 

incomes no greater than 80 percent of 

AMI, regardless of location. However, 

the 2010–2011 very low-income 

multifamily subgoal is targeted to 

households with significantly lower 

incomes. The qualifying household 

income for purposes of the 2010–2011 

multifamily subgoal is at or below 50 

percent of AMI. 

Consistent with the proposed rule, the 

final rule provides that the 2010–2011 

low-income home purchase and 

refinancing goals target households with 

lower incomes than the previous lowand moderate-income goal. The 

previous low- and moderate-income 

goal included families with incomes at 

or below 100 percent of AMI. Under the 

final rule, the low-income home 

purchase goal and refinancing goal 

include only families with incomes no 

greater than 80 percent of AMI. 

Consistent with the proposed rule, the 

final rule provides that the 2010–2011 

low-income areas home purchase goal 

includes families in census tracts with 

incomes up to 80 percent of AMI, while 

the previous underserved areas home 

purchase subgoal included families in 

census tracts with incomes up to 90 

percent of AMI. 

Although this final rule establishing 

the new housing goals is effective in 

mid-2010, FHFA will evaluate 

performance under the housing goals 

established for 2010 on a calendar year 

basis. 

C. New Counting Requirements 

In accordance with HERA, and 

consistent with the proposed rule, the 

final rule counts only conventional 

loans for purposes of the single-family 

housing goals. This means that certain 

Federal Housing Administration (FHA) 

loans that previously counted toward 

the goals, such as Home Equity 

Conversion Mortgages (HECMs), will no 

longer be counted. Second liens, which 

also counted toward the goals in the 

past, will now be excluded from 

counting for purposes of the singlefamily and multifamily housing goals. 

Consistent with the proposed rule, the 

final rule provides that mortgages 

financing rental units in investor-owned 

single-family properties, which were 

previously included in the goals, are no 

longer counted for purposes of the 

housing goals. Rental units in 2–4 unit 

owner-occupied single-family properties 

will continue to be counted. However, 

FHFA will continue to monitor the 

Enterprises’ purchases of such 

mortgages with regard to rental units in 

both 2–4 unit owner-occupied housing 

and investor-owned 1–4 unit rental 

housing. 

IV. Analysis of Final Rule 

A. Definitions—§ 1282.1 

As in the proposed rule, the final rule 

includes a number of technical 

amendments to conform the definitions 

to the statutory definitions in the Safety 

and Soundness Act, as amended by 

HERA. 

Consistent with the proposed rule, 

§ 1282.1 of the final rule removes a 

number of definitions that were used in 

regulatory provisions that were revised 

or eliminated based on HERA’s 

amendments of the Safety and 

Soundness Act. Specifically, § 1282.1 of 

the final rule no longer includes 

definitions for ‘‘central city,’’ ‘‘ECOA,’’ 

‘‘government-sponsored enterprise, or 

GSE,’’ ‘‘home purchase mortgage,’’ ‘‘New 

England,’’ ‘‘ongoing program,’’ ‘‘other 

underserved area,’’ ‘‘owner-occupied 

unit,’’ ‘‘portfolio of loans,’’ ‘‘real estate 

mortgage investment conduit (REMIC),’’ 

‘‘rural area,’’ ‘‘underserved area,’’ and 

‘‘wholesale exchange.’’ 

As in the proposed rule, § 1282.1 of 

the final rule adds new definitions of 

‘‘extremely low-income,’’ ‘‘low-income,’’ 

and ‘‘moderate-income,’’ and revises the 

income levels in the definition of ‘‘very 

low-income.’’ The final rule also 

replaces the definition of ‘‘low-income 

area’’ with a new definition for ‘‘families 

in low-income areas.’’ Each of these 

definitions is revised to be substantially 

the same as the corresponding 

definition in section 1303 of the Safety 

and Soundness Act, as amended by 

HERA.13

Consistent with the proposed rule, 

§ 1282.1 of the final rule adds new 

definitions for ‘‘borrower income,’’ 

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

tract,’’ ‘‘mortgage revenue bond,’’ ‘‘nonmetropolitan area,’’ ‘‘owner-occupied 

housing,’’ ‘‘private label security,’’ and 

‘‘purchase money mortgage.’’ The new 

definitions are intended to reflect 

common usage and provide certainty in 

interpreting the terms as used in new 

and existing regulatory provisions. 

The definition of ‘‘contract rent,’’ 

consistent with the proposed rule, is 

revised to make clear that the market 

rent for similar units in the 

neighborhood, as used by the lender or 

appraiser in underwriting a property, 

may be used as the anticipated rent for 

unoccupied units. As in the proposed 

rule, the final rule adds language to the 

definition of ‘‘utilities’’ clarifying that 

charges for cable or telephone service 

shall not be included. In addition, the 

final rule adopts the proposed 

clarification that Metropolitan Divisions 

are included in the definition of 

‘‘metropolitan area’’ to facilitate 

comparisons with census and HMDA 

information. As in the proposed rule, 

the final rule removes unnecessary 

references to the form of payment from 

the definition of ‘‘mortgage purchase.’’ 

Consistent with the proposed rule, the 

final rule removes the definition of 

‘‘refinancing’’ and incorporates those 

provisions in a new definition of 

‘‘refinancing mortgage.’’ The final rule 

also provides for the exclusion of most 

workout agreements from the definition 

of ‘‘refinancing.’’ The proposed rule 

omitted this provision to avoid 

confusion over whether a transaction 

should be treated as a loan modification 

or a refinancing. The final rule includes 

the provision to maintain consistency 

with the prior definition of 

‘‘refinancing’’ under the housing goals. 

Mortgage. Consistent with the 

proposed rule, the final rule removes 

personal property (chattel) loans on 

manufactured housing from the 

definition of ‘‘mortgage,’’ with the result 

that such purchases would not qualify 

for credit under the housing goals. 


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Federal Register / Vol. 75, No. 177 / Tuesday, September 14, 2010 / Rules and Regulations 55895 

14The Department of the Treasury, the Federal 

Reserve Board and the Federal Deposit Insurance 

Corporation, Community Reinvestment Act; 

Interagency Questions and Answers Regarding 

Community Reinvestment; Notice, 74 FR 509 (Jan. 

6, 2009). 

Two trade associations, both for the 

manufactured housing industry, 

maintained that the Enterprises should 

be more active in the area of personal 

property loans. One commented that 

Enterprise purchases of these loans 

provide much-needed liquidity to 

lenders, lower borrowing costs, and 

ensure the continued availability of this 

form of affordable housing. The other 

commented that the unavailability of 

purchase-money financing effectively 

discriminates against manufactured 

homes and consumers, and also 

contravenes federal housing policy 

contained in the Manufactured Housing 

Improvement Act of 2000. 

The final rule does not revise the 

proposed definition of ‘‘mortgage’’ to 

include personal property loans on 

manufactured housing. The Enterprises 

have minimal experience with chattel 

financing, and the high level of defaults 

related to such financing creates 

significant credit and operational risks. 

The depreciation in the value of the 

manufactured home could result in 

greater loss to the Enterprise in the 

event of default on the loan. The role of 

the Enterprises in the market for 

personal property loans on 

manufactured housing is the subject of 

FHFA final rulemaking on the duty to 

serve requirements of HERA. FHFA may 

revise the definition of ‘‘mortgage’’ in 

future rulemaking to ensure 

conformance with the final regulation 

on duty to serve. Until that time, 

purchases of personal property loans on 

manufactured housing will not be 

counted as mortgage purchases for 

purposes of the housing goals. 

Mortgage with unacceptable terms or 

conditions. Consistent with the 

proposed rule, the final rule removes 

the definitions for ‘‘mortgages contrary 

to good lending practices’’ and 

‘‘mortgages with unacceptable terms or 

conditions or resulting from 

unacceptable practices,’’ and revises and 

consolidates their substantive 

provisions into a single new definition 

of ‘‘mortgage with unacceptable terms or 

conditions.’’ The definition of ‘‘mortgage 

with unacceptable terms or conditions’’ 

includes a new provision regarding 

mortgages with annual percentage rates 

(APRs) above a certain level. The new 

provision is intended to cover mortgages 

that were formerly included in the 

definition of ‘‘HOEPA mortgage.’’ The 

definition of ‘‘HOEPA mortgage’’ is 

revised to conform FHFA’s definition to 

the coverage in HOEPA itself. The 

provision in the definition of ‘‘mortgage 

with unacceptable terms or conditions’’ 

relating to a borrower’s ability to pay is 

replaced with a provision incorporating 

interagency guidance on nontraditional 

and subprime mortgages. This change is 

intended to cover similar types of 

mortgages while providing greater 

consistency between the provisions of 

the housing goals and other regulatory 

provisions. 

FHFA received several comments on 

the proposed definition of ‘‘mortgages 

with unacceptable terms or conditions,’’ 

both supporting and opposing particular 

terms or conditions. One commenter 

noted that the definition does not 

explicitly exclude subprime loans. One 

trade association objected to the 

inclusion of prepaid single-premium 

credit life insurance products, and 

recommended that the rule specifically 

allow mortgages where the insurance 

premiums are calculated and paid on a 

monthly basis and are not financed by 

the lender. Another trade association 

commented that FHFA should 

strengthen the terms and conditions that 

constitute unacceptable mortgages, and 

recommended the use of Regulation Z 

and HOEPA rather than interagency 

guidance. A policy advocacy group 

supported requiring the Enterprises to 

follow interagency guidance, but noted 

that the current regulatory guidance 

may not be sufficient. This commenter 

cautioned that FHFA should not 

surrender its independent authority to 

restrict the Enterprises from engaging in 

abusive and unsafe lending practices. 

One trade association supported the 

provision that allows FHFA to 

determine other additional unacceptable 

terms and conditions because markets 

and abusive practices evolve. Fannie 

Mae noted that its single-family 

underwriting guidelines are already 

consistent with the interagency 

guidance. 

In the final rule, the definition of 

‘‘mortgages with unacceptable terms or 

conditions’’ does not explicitly exclude 

all subprime loans, but loans with any 

of the listed terms or conditions are 

excluded from counting towards the 

goals. Mortgages with prepaid singlepremium credit life insurance products, 

for example, which have adverse effects 

on borrowers, continue to be excluded 

from counting, as they have in the past. 

While the final rule specifically 

references interagency guidance on 

subprime and nontraditional loans, 

FHFA expects the Enterprises to ensure 

that mortgage loans they acquire comply 

with Regulation Z and HOEPA, as well 

as any federal law related to minimum 

standards for mortgages and predatory 

lending. While compliance with these 

and other applicable laws is expected, 

FHFA retains its independent authority 

to restrict the Enterprises from engaging 

in abusive and unsafe lending practices. 

Accordingly, as markets and abusive 

practices evolve, FHFA may determine 

additional terms and conditions to be 

unacceptable. 

Families in low-income areas. 

Consistent with the proposed rule, the 

new definition of ‘‘families in lowincome areas’’ in the final rule includes 

families with incomes at or below 100 

percent of AMI who reside in 

‘‘designated disaster areas.’’ The 

proposed rule defined ‘‘designated 

disaster areas’’ as areas at the census 

tract level and included only census 

tracts in counties approved for 

individual assistance within the 

declared major disaster area where the 

average real property damage severity, 

as reported by the Federal Emergency 

Management Agency (FEMA), exceeds 

$1,000 per household for that census 

tract. 

Fannie Mae commented that the rule 

language should reflect the Community 

Reinvestment Act (CRA) criteria for 

designated disaster areas. For purposes 

of complying with the CRA, regulators 

have determined that ‘‘[e]xaminers will 

consider institution activities related to 

disaster recovery that revitalize or 

stabilize a designated disaster area for 

36 months following the date of 

designation. Where there is a 

demonstrable community need to 

extend the period for recognizing 

revitalization or stabilization activities 

in a particular disaster area to assist in 

long-term recovery efforts, this time 

period may be extended.’’ 14

In response to this comment and to 

ensure efficiency in implementation, the 

final rule draws on the CRA criteria for 

designated disaster areas. Section 

1282.1 of the final rule provides that a 

designated disaster area will include (1) 

any county designated by the federal 

government as adversely affected by a 

declared major disaster under FEMA’s 

administration, (2) where individual 

assistance payments were authorized by 

FEMA. Section 1282.12(e) of the final 

rule establishes an overall low-income 

areas goal that includes families in lowincome census tracts, moderate-income 

families in minority census tracts, and 

moderate-income families in designated 

disaster areas. Section 1282.12(f) of the 

final rule also establishes a low-income 

areas subgoal that includes only families 

in low-income census tracts and 

moderate-income families in minority 

census tracts. Both the overall goal and 

the subgoal include a benchmark level 

and a market-based assessment. The 


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55896 Federal Register / Vol. 75, No. 177 / Tuesday, September 14, 2010 / Rules and Regulations 

15See 12 U.S.C. 4561(b). 

16See 58 FR 53048 (Oct. 13, 1993) and 58 FR 

53072 (Oct. 13, 1993). 

17See 60 FR 61846 (Dec. 1, 1995). 

18See 65 FR 65044 (Oct. 31, 2000). 

19See 69 FR 63580 (Nov. 2, 2004). 

20See 75 FR 9034–9036 (Feb. 26, 2010). 

benchmark levels for both the overall 

goal and the subgoal are set based on a 

market analysis that is similar to the 

analysis that was used for the proposed 

rule. The benchmark level for the 

subgoal is set at 13 percent. The 

benchmark level for the overall goal will 

be set annually by FHFA notice based 

on the subgoal benchmark level plus an 

amount that reflects the impact of 

designated disaster areas in the most 

recent year for which data is available. 

The market-based assessment for both 

the overall goal and the subgoal will use 

the designated disaster areas from the 

year for which performance is 

measured, as will the measurement of 

the Enterprises’ performance each year. 

To accommodate the Enterprises’ 

business planning requirements, for 

purposes of the low-income areas 

housing goal, the final rule, consistent 

with the proposed rule, treats a 

designated disaster area as effective 

beginning on the January 1 after the 

FEMA designation of the county and 

continuing through December 31 of the 

third full calendar year following the 

FEMA designation. If data is available in 

a particular case to support treatment as 

a designated disaster area from an 

earlier date or for a longer period of 

time, FHFA may provide for such 

treatment by notice to the Enterprises. 

B. Housing Goals—§§ 1282.11 through 

1282.13 

As required by sections 1331(a) and 

1333(a)(2) of the Safety and Soundness 

Act, as amended by HERA, and 

consistent with the proposed rule, this 

subpart of the final rule establishes, for 

2010 and 2011, four single-family 

housing goals, one single-family 

housing subgoal, one multifamily 

special affordable housing goal, and one 

multifamily special affordable housing 

subgoal. As under the proposed rule, the 

single-family housing goals in the final 

rule are based both on the benchmark 

levels and on an evaluation of the 

Enterprise’s performance relative to the 

market for each housing goal in each 

year. Section 1282.11(b) requires the 

Director to establish housing goals for a 

particular year by December 1st of the 

previous year.15

1. Prospective and Market-Based 

Approach 

As discussed in the proposed rule, 

following passage of the Safety and 

Soundness Act, HUD established 

housing goals for Fannie Mae and 

Freddie Mac in October 1993,16 and 

revised and expanded those goals in 

1995,17 2000,18 and 2004.19 Multi-year 

goals were established in the 1993 

housing goals rule for 1993–94 

(subsequently extended to 1995), in the 

1994 housing goals rule for 1996–99 

(with the goal levels for 1999 continuing 

in effect for 2000), in the 2000 housing 

goals rule for 2001–03 (with the goal 

levels for 2003 continuing in effect for 

2004), and in the 2004 housing goals 

rule for 2005–08.20

In each case, the numerical goals were 

established up to four years in advance. 

The goals were set as specific minimum 

goal-qualifying percentages of all 

dwelling units financed by mortgages 

acquired by each Enterprise in a given 

year, except for the special affordable 

multifamily subgoal, which was set as a 

minimum dollar volume for purchases 

of goal-qualifying loans. In the 2004 

final rule, HUD added three singlefamily home purchase subgoals, which 

were similarly established as specific 

minimum goal-qualifying percentages of 

all home purchase mortgages financed 

by the Enterprises on owner-occupied 

properties in metropolitan statistical 

areas (MSAs). 

HUD set the goals for 1993–2008 

based on the six factors as specified in 

the Safety and Soundness Act. The most 

important factors were past performance 

on the goals and, especially for the 

home purchase subgoals, HUD’s 

estimates of the goal-qualifying shares of 

home purchase mortgages in the 

primary mortgage market on properties 

in MSAs. For the overall goals, HUD’s 

estimates of the goal-qualifying shares of 

all dwelling units financed in the 

primary market by the Enterprises in 

each year were also important. For 

example, HUD estimated that low- and 

moderate-income units would account 

for 50–55 percent of all units financed 

in the primary mortgage market for 

2003–04, and 51–56 percent of all units 

financed in 2005–08. The low- and 

moderate-income goal was set at 50 

percent for 2003–04, and was later 

established to increase in accordance 

with the market range over the 2005–08 

period—specifically, 52 percent for 

2005, 53 percent for 2006, 55 percent for 

2007, and 56 percent for 2008. A similar 

approach was followed with regard to 

the overall underserved areas and 

special affordable goals for 2005–08. 

As recent market developments show, 

it can be difficult to forecast the goalqualifying shares of the primary 

mortgage market several years in 

advance. The forecasts developed by 

HUD were based on the assumption of 

a ‘‘home purchase market environment,’’ 

a market environment in which 

purchase mortgages dominate over 

refinancing mortgages. However, when 

market conditions result in higher than 

average refinance activity, the actual 

market goal-qualifying shares can be 

significantly different from the forecast 

because the actual refinance share 

would dominate. A second reason for 

the divergence between forecasted and 

actual shares of goal-qualifying units in 

the primary mortgage market is the 

variation in the affordability of housing, 

such as measured by the National 

Association of Realtors (NAR) housing 

affordability index. If the price of a 

product or service declines, it is more 

affordable to the consumer. In this 

respect, housing is no different from any 

other product. A third reason for 

divergence is the variance in the size of 

the multifamily mortgage market over 

time. Under the previous goals counting 

regime, multifamily units played a 

significant role in whether an Enterprise 

met the goals. A fourth reason for the 

divergence is the change in the size of 

the share of the mortgage market 

accounted for by Federal Housing 

Administration (FHA) and Department 

of Veterans Affairs (VA) mortgages. As 

discussed below, the market share of 

mortgages insured by FHA increased 

dramatically in recent years. 

As measured after the fact, HUD’s 

market estimates often differed 

significantly from the actual goalqualifying shares of the primary market. 

Specifically, the actual low- and 

moderate-income share of the primary 

market in 2003 was 53 percent, which 

was within HUD’s 2001–2003 forecasted 

range of 50–55 percent, but when the 

share increased to 58 percent for 2004, 

it exceeded the upper end of the range. 

The low- and moderate-income share of 

the primary market remained high, at 57 

percent for 2005, above HUD’s 2005– 

2008 forecasted range of 51–56 percent, 

but then decreased to 55 percent for 

2006 and 52 percent for 2007. Thus, 

over the 2005–2007 period, the low- and 

moderate-income goals increased 

steadily, while the low- and moderateincome share of the primary mortgage 

market decreased steadily. 

While the Enterprises are in 

conservatorship, FHFA expects the 

Enterprises to continue to fulfill their 

core statutory purposes, including their 

support for affordable housing. The 

housing goals are one set of measures of 

that support. FHFA does not intend for 

the Enterprises to undertake 

uneconomic or high-risk activities in 

support of the goals. However, the fact 


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21See 12 U.S.C. 4561(b), acknowledging ‘‘the 

need for the enterprises to reasonably and 

sufficiently plan their operations and activities in 

advance, including operations and activities 

necessary to meet such annual goals.’’ 

22 12 U.S.C. 4562(e)(2)(A). 

23 12 U.S.C. 4562(e)(3). 

24 12 U.S.C. 4564(b)(1), (2). 

25 12 U.S.C. 4566(b). 

that the Enterprises are in 

conservatorship should not be a 

justification for withdrawing support 

from these market segments. While in 

conservatorship the Enterprises have 

tightened their underwriting standards 

to avoid poor quality mortgages that 

may have contributed to their losses. 

Maintaining sound underwriting 

discipline going forward is important 

for conserving the Enterprises’ assets 

and for supporting their mission in a 

manner in which the achievement of 

housing goals directly relates to actual 

market conditions. 

In light of these circumstances and 

the difficulties in anticipating market 

deviations from the normal home 

purchase environment in the traditional 

approach to goal-setting, the final rule 

adopts the approach in the proposed 

rule to measure the Enterprises’ singlefamily goal performance relative to 

benchmark levels for the goal-qualifying 

shares of the Enterprises’ mortgage 

purchases, as well as relative to the 

actual goal-qualifying shares of the 

primary mortgage market. A dual 

approach prevents exclusive reliance on 

multi-year mortgage market forecasts. 

The primary disadvantage of this 

approach is that information on the 

goal-qualifying shares of the current 

single-family primary market is not 

available until the release of HMDA data 

in late summer of the following year, 

approximately nine months after the 

rating period. However, FHFA believes 

that this market-based approach is an 

appropriate measure of mission 

achievement under the housing goals, 

especially while the Enterprises are 

operating in conservatorship, and that 

the overall advantages of this approach 

outweigh the disadvantages. 

FHFA received 11 comments on the 

proposal to calculate goals performance 

based on the eligible market share and 

the benchmark level. All 11 commenters 

supported this approach. One trade 

association cautioned that FHFA should 

carefully reassess this approach for 

accuracy after actual data is available to 

compare with forecasts. A policy 

advocacy group agreed with the 

proposed approach, and stated that it 

would help FHFA more effectively 

match Enterprise performance to actual 

market conditions. This commenter 

added that the benchmark should be 

considered the floor. Fannie Mae 

supported the proposed approach, but 

expressed concern about the time delay 

between submission of goals 

performance data and the availability of 

HMDA data, which could cause 

regulatory uncertainty. Regarding 

§ 1282.11(b), one commenter stated that 

setting the housing goals annually, 

based upon the most recent data, would 

be an improvement over the HUD 

projection of five or so years into the 

future. 

Nine commenters supported the 

proposed single-family housing goal 

benchmark levels. One policy advocacy 

group commented that the goals are an 

improvement over previous years 

because they target the same 

populations as the CRA. This 

commenter also supported the inclusion 

of minorities in the low-income areas 

housing goal. Both Enterprises 

commented that the proposed purchase 

money mortgage goal benchmark levels 

were reasonable. One trade association 

opposed the proposed single-family 

housing goal benchmark levels, stating 

that the proposed levels would be 50 to 

60 percent of Enterprise purchases in 

2008, which the commenter believed is 

too low to realize HERA’s objectives. 

Two commenters specifically 

supported the separate refinancing 

housing goal. One trade association 

commented that a separate refinancing 

goal is important because of the cyclical 

nature of refinancing. The other 

commenter stated that refinance volume 

can vary, from less than the volume of 

home purchase mortgages to over three 

times the volume of home purchase 

mortgages, depending upon interest 

rates, which makes a combined goal 

unworkable. The Enterprises did not 

oppose the separate refinancing housing 

goal, but stated that the proposed 

refinancing housing goal benchmark 

level was too high. Fannie Mae noted 

that non-HAMP (Home Affordable 

Modification Program) loan 

modifications are not goal-eligible, and 

there is also a reluctance to refinance 

when the labor market is weak. Freddie 

Mac commented that the current low 

interest rate environment is not 

favorable for a high share of low-income 

qualifying refinance mortgages. 

As in the proposed rule, the final rule 

establishes single-family housing goals 

that include (1) an assessment of 

Enterprise performance as compared to 

the actual share of the market that meets 

the criteria for each goal, and (2) a 

benchmark level to measure Enterprise 

performance. The benchmark levels for 

performance are intended to provide 

greater certainty for the Enterprises in 

establishing strategies for meeting the 

housing goals. An Enterprise would fail 

to meet a housing goal if its annual 

performance fell below both the 

benchmark level and the actual share of 

the market that met the criteria for a 

particular housing goal for that year. An 

Enterprise would not fail to meet a goal 

if it achieved the benchmark level for 

that goal, even if the actual market size 

for the year was higher than the 

benchmark level. In order to plan their 

operations, the Enterprises must be able 

to rely on the benchmark levels that 

FHFA has set.21

This approach to setting the goals, 

involving both the setting of a 

prospective target and an assessment of 

actual market opportunity, is a 

departure from the approach used by 

HUD and FHFA in the past. FHFA has 

determined that this approach is 

appropriate because of the difficulties of 

predicting the market, especially in light 

of recent market turmoil and the 

difficulty of making accurate projections 

even in more stable economic 

environments. This approach is 

consistent with Congressional intent, as 

Congress authorized FHFA to establish 

the goal levels for the Enterprises. In 

addition, several provisions of the 

Safety and Soundness Act, as amended, 

authorize the Director to set or adjust 

the goal levels in light of changing 

market conditions. These provisions 

include: the requirement that FHFA 

calculate the preceding three-year 

average percentages of goal-eligible 

originations for each goal category, and 

take that information into account in 

setting the single-family goals; 22 the 

authority to adjust previously 

established goal levels based on current 

market conditions; 23 the authority to 

adjust goal levels in response to a 

petition by an Enterprise based, in part, 

on market conditions and the risk of 

‘‘over-investment’’; 24 and relief from 

enforcement if the goal levels are 

determined to be infeasible.25

FHFA will carefully assess the 

approach of using both prospective 

targets and assessments of actual market 

opportunity for accuracy after actual 

data is available to compare with 

forecasts. The benchmark level, 

however, will not be considered the 

floor in assessing whether an Enterprise 

achieved a particular housing goal. The 

time delay between submission of goals 

performance data and the availability of 

HMDA data, while not optimal, is also 

unavoidable for this market-based 

approach. 

FHFA notes that because HERA 

mandates separate single-family home 

purchase and refinance low-income 

goals, each goal level is set individually, 

based on projected market conditions. 


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Prior to HERA, the home purchase and 

refinance components of the incomebased goals (both the low- and 

moderate-income and the special 

affordable goals) provided cumulative 

effects toward the overall goal, 

including a cumulative impact from the 

Enterprises’ multifamily acquisitions. 

This is no longer the case under the 

separate HERA single-family home 

purchase and refinance low-income 

goals. 

2. Retrospective Measurement of the 

Market 

Consistent with the proposed rule, 

§ 1282.12(b) of the final rule sets forth 

specific criteria for determining the size 

of the market based on HMDA data. 

This retrospective measurement of the 

size of the market will be used to 

evaluate the performance of each 

Enterprise on each single-family 

housing goal. The specific criteria for 

establishing the size of the market 

reflect the types of mortgages that are 

counted for purposes of the housing 

goals and that are typically eligible for 

purchase by an Enterprise. The 

retrospective measurement of the size of 

the market is defined under the 

limitations of HMDA data. The market 

includes only originations of 

conventional conforming first-lien nonHOEPA single-family mortgages on 

owner-occupied properties. Only home 

purchase mortgages are included in the 

market estimates for the three home 

purchase mortgage goals and the home 

purchase mortgage subgoal, and only 

refinance mortgages are included in the 

market estimates for the refinance 

mortgage goal. Mortgages with rate 

spreads of 150 basis points or more 

above the applicable Average Prime 

Offer Rate (APOR) reported in HMDA 

would be excluded, as would mortgages 

that are missing information that would 

be necessary to determine the 

appropriate counting treatment under 

the housing goals. Additional details 

regarding the housing goals are 

discussed above, along with the factors 

considered by FHFA in establishing the 

housing goals. 

FHFA received five comments on the 

proposed criteria for establishing the 

size of the market. One commenter from 

the manufactured housing sector noted 

that many manufactured housing loans 

are personal property loans for 

affordable housing, and questioned the 

prudence of excluding higher interest 

rate loans (300 basis points over prime) 

from the market size. One trade 

association urged FHFA to make public 

its goal calculation methodology as 

technical guidance, and expressed 

concerns that excluding FHA and other 

government loans from the market 

calculation would distort the market 

measurement. Another trade association 

was concerned that tighter underwriting 

standards and lower loan-to-value 

requirements were not fully factored 

into the market size. Another 

commenter stated that FHFA’s monthly 

survey of single-family mortgage 

originations will provide a more timely 

and in-depth addition to HMDA data. 

Freddie Mac recommended that the 

definition of higher-priced loan used to 

establish market size conform to the 

definition set by the Federal Reserve 

Board, which is 150 basis points or 

more above APOR for first loans. 

To the extent possible, the market 

estimates are based on the universe of 

goal-eligible mortgages. Manufactured 

housing loans that are not higher-cost 

loans are included in the market 

estimates, to the extent that they are 

included in the HMDA data. 

Manufactured housing loans make up 

two percent of the single-family 

originations reported in the HMDA data, 

and approximately 60 percent of those 

manufactured housing loans are highercost loans, which FHFA is using as a 

proxy for personal property loans, not 

eligible for goals credit under this rule. 

FHFA also determined that subprime 

loans should not be included in the 

market estimates. Therefore, the final 

rule excludes higher-priced loans (150 

basis points or more above APOR) as a 

proxy for subprime loans. Because most 

government-insured mortgages are 

ineligible under HERA to qualify for the 

housing goals, FHA and other 

government loans are not included in 

the market estimates. 

3. Sustainable Mortgages 

The proposed rule requested 

comments on an alternative to defining 

the market for determining whether a 

mortgage is eligible to count toward the 

housing goals that would focus on the 

sustainability of the mortgage. Under 

this approach, the housing goals would 

be defined in such a way that only 

mortgages that support sustainable 

homeownership would count toward 

the goals. This would require a standard 

to differentiate between mortgages that 

are sustainable and mortgages that are 

not likely to be sustainable. 

Four commenters supported an 

alternative discussed in the proposed 

rule that would use historical data on 

the cumulative default rate (CDR) of 

mortgages acquired by the Enterprises 

for defining the sustainable mortgage 

market, while one commenter opposed 

this approach. A trade association urged 

deferral of the use of CDR until final 

Congressional and regulatory action on 

risk retention and the exemption of 

certain qualified mortgages from the risk 

retention requirements. A policy 

advocacy group favored the use of CDR 

to define the market, but cautioned that 

the use of particular features to define 

a market would be useful only to the 

extent the models are reliable and 

reflect likely market conditions over 

some length of time. A trade association 

favored the use of CDR. Both Enterprises 

supported the use of CDR to define the 

market, but expressed reservations. 

Fannie Mae stated that its systems 

already filter out loans with the most 

risk, and given the considerations that 

must go into determining whether a 

loan is sustainable, it stated that it 

would be difficult to develop a system 

that appropriately removes 

unsustainable loans from the market 

sizing analysis. Freddie Mac stated that 

the use of CDR should help FHFA and 

the Enterprises align and maintain 

appropriate balance between 

affordability, sustainability, and safety 

and soundness, but cautioned that any 

methodology to develop market share 

estimates must be aligned with the 

proprietary models used by the 

Enterprises so that inconsistency can be 

avoided. 

FHFA has considered the comments 

on this alternative approach to 

determining whether a mortgage is 

eligible to count toward the housing 

goals. Because the sustainable mortgage 

approach raises multiple policy and 

technical issues that require further 

consideration, the final rule does not 

implement this approach. FHFA may 

solicit further public comments 

regarding a sustainable mortgage 

approach toward the housing goals in 

the future. 

4. Monthly Mortgage Survey 

As described in the proposed 

rulemaking, FHFA is conducting a 

monthly survey of single-family 

mortgage originations pursuant to 

section 1324(c) of the Safety and 

Soundness Act, as amended by HERA, 

and will make data collected under that 

survey available to the public. Release 

of that data will provide additional 

information on home mortgage lending 

activity. FHFA will use the survey data 

in its monitoring of Enterprise housing 

goals performance. 

C. Analysis of Factors for Single-Family 

Housing Goals 

Section 1332(e)(2) of the Safety and 

Soundness Act, as amended by HERA, 

requires FHFA to consider the following 

seven factors in setting the single-family 

housing goals: 

(1) National housing needs; 


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26 12 U.S.C. 4562(e)(2). 

27See 12 U.S.C. 4562(e)(2)(A). 

28U.S. Census Bureau, ‘‘Residential Vacancies 

and Homeownership in the Second Quarter 2010,’’ 

tables 4 and 7, July 27, 2010. 

29 ‘‘HMDA Data Show Huge Decline in 2008 

Mortgage Activity—Except at Government Insured 

Programs.’’ Inside Mortgage Finance. Oct. 2, 2009 at 

8. 

30See Office of Federal Housing Enterprise 

Oversight, ‘‘OFHEO Director James B. Lockhart 

Commends Enterprises on Implementation of 

Subprime Mortgage Lending Guidance,’’ News 

Release (Sept. 10, 2007), available at http://www.

fhfa.gov/webfiles/1608/Lockhartcommends

ENTERPRISEsreSubprime91007.pdf. See also Office 

of the Comptroller of the Currency, Federal Reserve 

Board, Federal Deposit Insurance Corporation, 

Office of Thrift Supervision, National Credit Union 

Administration, Statement on Subprime Mortgage 

Lending, 72 FR 37569–37575 (July 10, 2007); and 

Office of the Comptroller of the Currency, Federal 

Reserve Board, Federal Deposit Insurance 

Corporation, Office of Thrift Supervision, National 

Credit Union Administration, Interagency Guidance 

on Nontraditional Mortgage Product Risks, 71 FR 

58609–58618 (Oct. 4, 2006). 

(2) Economic, housing, and 

demographic conditions, including 

expected market developments; 

(3) The performance and effort of the 

Enterprises toward achieving the 

housing goals under this section in 

previous years; 

(4) The ability of the Enterprise to 

lead the industry in making mortgage 

credit available; 

(5) Such other reliable mortgage data 

as may be available; 

(6) The size of the purchase money 

conventional mortgage market, or 

refinance conventional mortgage 

market, as applicable, serving each of 

the types of families described, relative 

to the size of the overall purchase 

money mortgage market or the overall 

refinance mortgage market, respectively; 

and 

(7) The need to maintain the sound 

financial condition of the Enterprises.26

FHFA’s consideration of the size of 

the market for each housing goal 

includes consideration of the percentage 

of goal-qualifying mortgages under each 

housing goal, as calculated based on 

HMDA data for the three most recent 

years for which data is available.27

FHFA’s analysis of each of the factors, 

which has been updated since the 

proposed rulemaking, is set forth below. 

1. National Housing Needs 

With the collapse of subprime and 

Alt-A lending, tighter credit conditions, 

and stricter underwriting standards, 

single-family mortgage originations fell 

38 percent in 2008. The Enterprises’ 

share of single-family mortgage-backed 

securities (MBS) issuance rose to over 

73 percent in that year, however, and 

the credit risk characteristics of their 

purchases began to improve. In 2009, 

the Enterprises’ mortgage purchase and 

guarantee activity represented more 

than 76 percent of conforming singlefamily originations. Falling house prices 

caused equity in homes to decline 

sharply. The resetting of interest rates 

on poorly underwritten adjustable rate 

mortgages (ARMs) originated in recent 

years, deteriorating household balance 

sheets, rising unemployment, continued 

credit tightening, and the deepening 

recession contributed to increases in 

mortgage delinquency and home 

foreclosure rates as well as sharply 

lower housing starts and sales. 

Continued tightening in lender credit 

policies, large inventories of unsold 

homes, significant volumes of homes in 

foreclosure, rising unemployment, and 

increasing pessimism among potential 

homebuyers combined to drive home 

prices down further. 

Despite improving housing 

affordability, the U.S. homeownership 

rate declined since peaking at an 

average rate of 69 percent in 2004. In the 

second quarter of 2010, the 

homeownership rate was 66.9 percent, 

down from 67.4 percent in the second 

quarter of 2009. The homeownership 

rate for Black households in the second 

quarter of 2010 was 46.2 percent, down 

from 46.5 percent in the second quarter 

of 2009. The homeownership rate for 

Hispanic households in the second 

quarter of 2010 was 47.8 percent, down 

from 48.1 percent in the second quarter 

of 2009.28

In 2008, the most recent year in which 

HMDA data is publicly available, 

applications from Black borrowers fell 

by 48 percent, and applications from 

Hispanic borrowers fell by 55 percent.29

One of the key catalysts of the current 

economic crisis was falling housing 

prices after the substantial increase that 

began in 2000. From January 2000 

through the May 2006 peak, the S&P/ 

Case-Shiller Home Price Index rose by 

approximately 105 percent, only to fall 

dramatically since then. The less 

volatile FHFA House Price Index, which 

reflects the book of business of the 

Enterprises, peaked later and also 

showed a decline. 

Changes in mortgage underwriting, 

particularly for affordable products, had 

a direct impact on the national housing 

market. During the boom, as house price 

appreciation reduced affordability, low 

documentation Alt-A loans, interestonly loans and ARMs proliferated. 

Subprime market share tripled to more 

than 20 percent of the market. Lenders 

accepted more loans with higher loanto-value (LTV) ratios and lower 

borrower credit scores. The Joint Center 

for Housing Studies report, ‘‘State of the 

Nation’s Housing 2009,’’ describes the 

effect of loosened mortgage 

underwriting standards on the housing 

market. According to that report, in 

2005, a household with median owner 

income of about $57,000 and spending 

28 percent of income on mortgage 

principal and interest could qualify for 

a 30-year, fixed-rate loan of $225,000. If 

the same borrower took out an ARM 

loan at a discounted interest rate, the 

maximum loan amount increased to 

$265,000. By adding an interest-only 

feature to that ARM and qualifying the 

household based on the initial interestonly payments, the potential loan size 

grew to $356,000. Allowing the 

borrower to spend 38 percent of income 

on mortgage costs meant that the 

mortgage loan could total approximately 

$482,000. Interagency regulatory 

guidance on nontraditional and 

subprime loans issued in 2006 and 

2007, including guidance to the 

Enterprises by OFHEO, contributed to 

limiting the numbers of such loans as 

underwriting standards were 

subsequently strengthened.30

With the decline in house prices over 

the 2007–2009 period and historically 

low mortgage interest rates, new 

homebuyers encountered a much more 

affordable housing market in 2009 and 

continue to do so in 2010. As measured 

by the National Association of Realtors’ 

composite housing affordability index, 

which reports the ratio of median 

household income to the income that 

would be required to buy a medianpriced home (where 100 indicates the 

exact amount of income required to buy 

a median-priced home), affordability 

continued to increase in 2009. That 

index rose from 166.3 in December 2008 

to 171.5 one year later. The higher value 

of the index mainly reflected the decline 

in the median price of existing singlefamily homes and lower mortgage 

interest rates. The index dipped to 158.9 

in June 2010 as a result of an increase 

in the median price of existing singlefamily homes between December 2009 

and June 2010, but affordability is still 

at a very high level by historical 

standards. 

2. Economic, Housing and Demographic 

Conditions 

The current turmoil in the housing 

and mortgage markets has created less 

than favorable conditions for 

expansions in credit to borrowers on the 

margins of homeownership. The adverse 

market conditions include: (1) 

Tightened credit underwriting practices; 

(2) sharply increased standards of 

private mortgage insurance (MI) 


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55900 Federal Register / Vol. 75, No. 177 / Tuesday, September 14, 2010 / Rules and Regulations 

31 Desktop Originator/Desktop Underwriter 

Release Notes. DU Version 8.0. DODU 0909. Fannie 

Mae. Sept. 22, 2009. DU 8.0 will allow a back-end 

ratio of up to 50 percent for case files with strong 

compensating factors. 

32Statement of Edward J. DeMarco, Acting 

Director, Federal Housing Finance Agency, House 

Financial Services Subcommittee on Capital 

Markets, Insurance and Government Sponsored 

Enterprises. May 26, 2010 at 3. 

33 ‘‘Report to Congress 2009.’’ Federal Housing 

Finance Agency at 10. 

34 ‘‘HUD Secretary, FHA Commissioner Report on 

FHA’s Finances.’’ HUD Press Release No. 09–214. 

Nov. 12, 2009. 

35 ‘‘FHA Announces Policy Changes to Address 

Risk and Strengthen Finances.’’ HUD Press Release 

No. 10–016. Jan. 20, 2010. 

36 ‘‘Free Pass on Risk Retention Could Boost FHA 

Loan Volume.’’ American Banker, June 28, 2010. 

companies; (3) increased role of FHA in 

the marketplace; (4) collapse of the 

private label mortgage-backed securities 

(PLS) market; and (5) high 

unemployment. These developments 

contribute to a decrease in the overall 

number of single-family loans likely to 

qualify for housing goals credit. 

Tightened credit underwriting 

practices. In general, more conservative 

underwriting standards in the mortgage 

market will likely result in fewer goalqualifying loans and a lower percentage 

of goal-qualifying loans in the market. 

Underwriting standards in the mortgage 

market generally, and at Fannie Mae 

and Freddie Mac, have tightened 

considerably in response to declining 

market conditions and early payment 

defaults, among other factors, and such 

standards can be expected to remain in 

place in the near future. In May 2008, 

responding to changes in private MI 

underwriting, Fannie Mae revised its 

down payment policy to lower the 

maximum allowable LTV ratio for loans 

underwritten by Desktop Underwriter 

(DU) and for manually underwritten 

loans. The implementation of Fannie 

Mae’s updated DU Version 8.0, effective 

in December 2009, generally reduces the 

allowable ‘‘back-end’’ borrower debt-toincome ratio—the portion of a 

borrower’s income that goes toward 

paying debts—to 45 percent. In 

addition, it eliminates DU 

recommendations for Expanded 

Approval II and Expanded Approval III 

loans, loans which historically counted 

heavily toward the housing goals.31 If 

the DU 8.0 revisions had been in effect 

for all of 2009, substantially fewer goalqualifying loans would have been 

underwritten. The changes to DU will 

likely have a similar effect in 2010 and 

2011. Freddie Mac has similarly 

tightened its underwriting standards. 

Mortgage underwriting standards in 

the near term at the Enterprises will be 

decidedly more conservative than 

earlier in the decade. During the first 

quarter of 2010, for example, less than 

two percent of Fannie Mae’s purchases 

were interest-only loans, and Freddie 

Mac purchased none. Similarly, Alt-A 

loans were less than one percent of 

acquisitions for both Enterprises. This is 

significant because interest-only loans 

previously purchased by the Enterprises 

have serious delinquency rates of more 

than 18 percent, and Alt-A loans have 

serious delinquency rates of more than 

12 percent. During the first quarter of 

2010, Alt-A loans already on the books 

were responsible for 37 percent of 

Fannie Mae’s losses for the quarter and 

42 percent of Freddie Mac’s losses for 

the quarter. Due to the Enterprises’ 

focus on improved purchase quality and 

underwriting standards, the loans that 

the Enterprises have purchased since 

conservatorship in late 2008 have had 

much lower rates of serious 

delinquency. Serious delinquencies for 

2009 were a fraction of the serious 

delinquency rates for the 2006–2008 

vintages for comparable periods after 

origination.32

Sharply increased standards of 

private mortgage insurers. Much like 

tighter credit underwriting standards 

generally, higher underwriting 

standards of private MI providers have 

resulted in fewer goal-qualifying loans 

and a lower percentage of goalqualifying loans in the market. As a 

result of stress in the mortgage markets, 

beginning in late 2007, private MI 

providers implemented major changes 

in the types of risk they were able to 

insure. Insurers that had experienced 

substantial ratings downgrades acted to 

minimize losses by imposing stricter 

underwriting standards on loans with 

high LTVs and implementing measures 

in ‘‘declining markets’’ that have sharply 

limited the insurability of certain 

higher-LTV mortgage loans. 

As with the Enterprises, the steps 

taken by mortgage insurers to strengthen 

their financial condition, while 

necessary to improving mortgage 

sustainability, may reduce the overall 

mortgage lending volume, particularly 

for higher-LTV mortgages, which 

historically have tended to be more 

likely to count for purposes of the 

housing goals. 

Increased role of FHA in the 

marketplace. Another factor that has 

had substantial marketplace impact is 

the increase in the share of mortgages 

insured by FHA and mortgages 

guaranteed by the VA. These loans 

generally are pooled into mortgagebacked securities guaranteed by the 

Government National Mortgage 

Association (GNMA). Purchases of 

mortgages insured by FHA and 

mortgages guaranteed by the VA 

ordinarily have not received goals credit 

in the past and will not generally 

receive credit going forward. In general, 

the impact of the FHA market on the 

percentage of loans in the conventional 

market that qualify for a particular goal 

depends on: (1) The goal-qualifying size 

of the overall market; (2) the share of the 

market accounted for by FHA 

mortgages; and (3) the extent to which 

FHA mortgages have goal-qualifying 

characteristics. 

The market share of mortgages 

insured by FHA and mortgages 

guaranteed by the VA has risen 

dramatically. Loans insured by FHA 

increased to 21 percent of single-family 

mortgages insured in 2009, up from 17 

percent in 2008, spurred by the 

continuation of favorable lending 

programs. VA’s share of originations 

also increased, rising to 4 percent in 

2009. Both types of mortgages backed by 

the federal government accounted for a 

combined 25 percent of single-family 

originations in 2009, up from just 4 

percent two years earlier.33 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. Borrowers without 

substantial down payments are 

increasingly utilizing government 

insurance and guaranty programs. 

Nearly 80 percent of FHA’s purchaseloan borrowers in 2009 were first-time 

homebuyers.34 To ensure long-term 

actuarial soundness, FHA announced 

several policy changes on January 20, 

2010 that could reduce borrower 

eligibility for FHA, including: (1) 

Reducing the maximum permissible 

seller concession from the current six 

percent to three percent, which is in 

line with marketplace norms; (2) 

requiring a minimum credit score of 580 

for new borrowers seeking to qualify for 

the 3.5 percent down payment program; 

and (3) increasing the up-front mortgage 

insurance premium by 50 basis points, 

to 2.25 percent. In addition, FHA asked 

for a change in the law to allow it the 

ability to increase the maximum annual 

mortgage insurance premium.35

Legislative changes which exempt 

FHA, VA and Rural Housing Service 

loans from certain risk retention 

requirements could have the effect of 

increasing the loan volume for these 

federally-insured and guaranteed 

mortgages.36

Collapse of private label securities 

market. In the middle part of the 

decade—the period covered by the prior 

HUD rule on the housing goals—Fannie 

Mae and Freddie Mac were major 


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37On August 10, 2007, OFHEO issued letters 

directing the Enterprises to apply the principles and 

practices of the interagency Statement on Subprime 

Mortgage Lending to their purchases of subprime 

loans in the regular flow of business, including bulk 

purchases. OFHEO directed that, not later than 

September 13, 2007, nontraditional and subprime 

loans purchased by Fannie Mae and Freddie Mac 

as part of PLS transactions comply with the 

Interagency Guidance on Nontraditional Mortgage 

Product Risks and the Statement on Subprime 

Mortgage Lending. This application to PLS 

conformed to the underwriting provisions of the 

guidance. Further, OFHEO directed that the 

Enterprises adopt such business practices and take 

such quality control steps as necessary to ensure the 

orderly and effective implementation of the 

guidance with respect to the purchase of PLS. 

OFHEO News Release (Sept. 10, 2007). 

38Bureau of Labor Statistics, News Release: The 

Employment Situation—July 2010. August 6, 2010. 

39NeighborWorks, National Foreclosure 

Mitigation Counseling Program, Congressional 

Update, Activity Through January 31, 2010. May 28, 

2010. 

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

Center for Housing Studies of Harvard University. 

41 12 U.S.C. 4502(14). 

purchasers of the AAA-rated tranches of 

PLS that contained substantial amounts 

of subprime mortgages. While the size 

and nature of the Enterprises’ subprime 

holdings differed, these purchases had 

an impact on the achievement of the 

housing goals for each Enterprise, 

particularly for the home purchase 

subgoals. Such loans were not a large 

factor in the mortgage marketplace in 

2008 or 2009. OFHEO provided 

guidance to the Enterprises in 2007 

incorporating interagency policy 

guidance from the Federal Deposit 

Insurance Corporation, the Office of the 

Comptroller of the Currency, the Federal 

Reserve Board and the National Credit 

Union Administration. The guidance 

restricted the purchase of such 

securities by the Enterprises when 

certain terms of mortgages backing those 

securities are harmful to the borrower.37

At year-end 2009, Freddie Mac’s 

$175.6 billion private label MBS and 

commercial MBS portfolio reflected 

deteriorating credit performance. 

Although substantially all of these 

securities were rated triple-A at 

purchase, $84.2 billion were rated 

below investment grade at year-end 

2009. In the same year, Fannie Mae’s 

$89.8 billion private label MBS, 

commercial MBS and mortgage revenue 

bond portfolios also reflected 

deteriorating credit performance. 

Although almost all of these securities 

were rated triple-A at purchase, $42.2 

billion were rated below investment 

grade at year-end 2009. 

Unemployment. Unemployment and 

underemployment have an effect on 

mortgage default rates, and on the 

number of borrowers seeking and 

obtaining a purchase money mortgage or 

a refinance mortgage. The civilian 

unemployment rate was 9.5 percent in 

June and July 2010, down from 9.7 

percent in May 2010 and a high of 10.1 

percent in October 2009.38 However, the 

unemployment rate is still historically 

high and will likely remain above eight 

percent in the 2010 to 2011 period. To 

the extent that lower-income jobs are 

affected more by unemployment than 

higher-income jobs, the affordable home 

purchase market is affected. 

NeighborWorks, a national network of 

community-based organizations actively 

involved in foreclosure mitigation 

counseling, has estimated that the two 

leading causes of mortgage default rates 

as of January 31, 2010 were a reduction 

in income (37 percent of defaults) and 

loss of income (21 percent of defaults).39

The high rates of unemployment and 

underemployment are likely to continue 

to have a significant impact on the size 

of the mortgage market going forward. 

Refinancings. Refinancing volumes 

are strongly influenced by mortgage 

interest rates and LTV ratios on existing 

mortgages. Under the umbrella of the 

Administration’s Making Home 

Affordable program, the Home 

Affordable Refinance Program (HARP) is 

an effort by the Enterprises to enhance 

the opportunity for owners to refinance. 

Under this program, homeowners whose 

mortgages are owned or guaranteed by 

Fannie Mae or Freddie Mae who are 

current on their mortgages have the 

opportunity to reduce their monthly 

mortgage payments to take advantage of 

low monthly mortgage interest rates, 

which Freddie Mac’s July 1, 2010 

Primary Mortgage Market Survey 

indicated had fallen to 4.58 percent for 

a 30-year, fixed-rate mortgage. Even 

under favorable interest rate conditions, 

however, refinancings may not mirror 

previous years. 

For homeowners with a current LTV 

ratio between 80 and 125 percent, the 

Enterprises will refinance mortgages 

without requiring additional mortgage 

insurance. Of the 2.5 million borrowers 

who refinanced their mortgages with 

Fannie Mae financing in 2009, 329,000 

refinanced through Fannie Mae’s 

streamlined process, including 105,000 

Fannie Mae borrowers who refinanced 

through HARP. Of the 1.7 million 

borrowers who refinanced their 

mortgages with Freddie Mac financing 

in 2009, 169,000 refinanced through 

Freddie Mac’s streamlined process, 

including 86,000 Freddie Mac 

borrowers who refinanced through 

HARP. 

Demographic conditions. In 

establishing the 2010 goals, FHFA 

analyzed current demographic trends 

for their possible effect on housing 

demand. Analysis of current trends 

reveals that by 2008, household 

formation rates were already on the 

decline. In addition, the recession and 

unemployment have reduced 

immigration, which in the past has been 

a driver of housing demand. It is still 

too early to assess the impact of the 

current economic downturn on housing 

demand, particularly given regional 

variations in impact and mitigating 

factors, such as increased affordability 

of housing ownership. In the long-term, 

housing demand is likely to increase as 

a result of population growth, 

immigration, and future household 

formation by the generation born 

between 1981 and 2000.40 However, the 

impact of long-term demographic 

conditions on short-term goals 

performance would be minimal. 

3. The Performance and Effort of the 

Enterprises Toward Achieving the 

Housing Goals in Previous Years 

Section 1332(a) of the Safety and 

Soundness Act, as amended by section 

1128 of HERA, requires FHFA to 

establish three single-family home 

purchase mortgage goals for the 

Enterprises: A goal for low-income 

families; a goal for families that reside 

in low-income areas; and a goal for very 

low-income families. Section 1332(a) 

also requires FHFA to establish a goal 

for single-family refinancing mortgages 

for low-income families. The following 

section reviews what performance 

would have been on these four singlefamily goals if they had been in effect 

over the 2001–09 period. 

Low-Income Families Housing Goal. 

The housing goals in the Safety and 

Soundness Act, as amended, apply to 

the Enterprises’ acquisitions of 

‘‘conventional, conforming, singlefamily, purchase money mortgages 

financing owner-occupied housing’’ for 

the targeted groups. Accordingly, they 

are similar in structure to the home 

purchase subgoals established by HUD 

for Fannie Mae and Freddie Mac for 

2005–08, and subsequently adjusted for 

2009 by FHFA. One difference is that 

the subgoals established by HUD 

applied only to mortgages on properties 

in metropolitan areas, while the new 

goals apply to mortgages on properties 

in all locations. 

The low-income families home 

purchase goal applies to mortgages 

made to ‘‘low-income families,’’ defined 

as families with incomes no greater than 

80 percent of AMI.41 Past performance 

on this goal, if it had been in effect in 

previous years, is shown in Table 1. 

Performance is shown excluding units 


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financed by Enterprise purchases of 

PLS; as discussed elsewhere in this final 

rule, FHFA has decided to exclude such 

units from the numerator and the 

denominator in calculating goal 

performance for 2010 and 2011, 

although the PLS market has declined 

markedly. As indicated, Fannie Mae’s 

performance (excluding PLS) would 

have risen markedly between 2001 and 

2003, and then, with the exception of 

2006, would have fallen steadily 

between 2003 and 2008. Its performance 

in 2008, at 23.1 percent, would have 

been the lowest of the period. Freddie 

Mac’s performance generally would 

have risen between 2001 and 2005, and 

then declined between 2005 and 2008. 

Its performance in 2008 would have 

been 24.3 percent, also the lowest of the 

period. 

Total Enterprise home purchase loan 

volume fell sharply in 2008 and 2009— 

for Fannie Mae, from 1.5 million 

mortgages in 2007 to 978,000 in 2008 

and 723,000 in 2009, and for Freddie 

Mac, from 1.0 million mortgages in 2007 

to 655,000 in 2008 and 482,000 in 2009, 

due to the turmoil and tightened 

underwriting standards in the mortgage 

market. However, the low-income share 

of home purchase loans rose for both 

Enterprises, from 23.1 percent in 2008 

to 25.5 percent in 2009 for Fannie Mae, 

and from 24.3 percent in 2008 to 25.4 

percent in 2009 for Freddie Mac. 

Possible explanations for this include 

the greater affordability of housing and 

a decrease in the role of investors in the 

home purchase market. 

In setting the goals for the Enterprises 

for 2010 and 2011, FHFA recognizes the 

impact that counting loan modifications 

of home purchase mortgages would 

have had on the home purchase goals in 

prior years. Data on the volume and 

shares of loan modifications counting 

toward the low-income home purchase 

goal in 2009 are also shown in Table 1. 

As indicated, 67.2 percent of Fannie 

Mae’s modifications of home purchase 

mortgages and 65.3 percent of Freddie 

Mac’s modifications were for lowerincome families. Combined performance 

on this goal, including both home 

purchase mortgages and modifications, 

would have been 33.5 percent for 

Fannie Mae and 30.9 percent for 

Freddie Mac in 2009, as shown in Table 

1. However, as discussed elsewhere in 

this final rule, modifications of 

mortgages will be treated differently for 

purposes of the housing goals in 2010– 

2011. Specifically, modifications of 

mortgages will be counted only under 

the refinancing housing goal, not under 

the housing goals for home purchase 

mortgages. This means that, in order to 

be comparable, the 2009 low-income 

home purchase goal performance figure 

in Table 1 reflects performance 

excluding loan modifications. 

BILLING CODE 8070–01–P 


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Very Low-Income Families Housing 

Goal. The Safety and Soundness Act, as 

amended by HERA, defines a ‘‘very lowincome’’ owner-occupied property as one occupied by a family with income 


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55904 Federal Register / Vol. 75, No. 177 / Tuesday, September 14, 2010 / Rules and Regulations 

42 12 U.S.C. 4502(24). 

no greater than 50 percent of AMI.42

Past performance on this home purchase 

goal, if it had been in effect in previous 

years, is shown in Table 2. As indicated, 

Fannie Mae’s performance would have 

risen from 6.1 percent in 2001 to 7.9 

percent in 2003, and then generally 

decreased, to 5.5 percent in 2008, the 

lowest in the period. With the exception 

of 2006, Freddie Mac’s performance on 

this goal would have changed little over 

the 2001–08 period, remaining in the 

range of 6.0 percent to 6.7 percent. 

The very low-income share of home 

purchase loans rose for both Enterprises, 

from 5.5 percent in 2008 to 7.3 percent 

in 2009 for Fannie Mae, and from 6.1 

percent in 2008 to 7.2 percent in 2009 

for Freddie Mac. 

Data on the volume and shares of 

modifications counting toward the very 

low-income home purchase goal are also 

shown in Table 2. As indicated, 27.5 

percent of Fannie Mae’s modifications 

of home purchase mortgages and 26.0 

percent of Freddie Mac’s modifications 

were for very low-income families. 

Thus, combined performance on this 

goal, including both home purchase 

mortgages and modifications, would 

have been 11.2 percent for Fannie Mae 

and 9.8 percent for Freddie Mac in 

2009, as shown in Table 2. However, as 

discussed above, modifications of 

mortgages will be counted only under 

the refinancing housing goal, not under 

the housing goals for home purchase 

mortgages. This means that, in order to 

be comparable, the 2009 very lowincome home purchase goal 

performance figure in Table 2 reflects 

performance excluding loan 

modifications. 


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Federal Register / Vol. 75, No. 177 / Tuesday, September 14, 2010 / Rules and Regulations 55905 

Low-Income Areas Housing Goal and 

Subgoal. The low-income areas housing 

goal targets the Enterprises’ purchases of 

mortgages in specified geographic areas, 

in a manner similar to the previous 

underserved areas goal. The Safety and 


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43 12 U.S.C. 4502(28). 44 12 U.S.C. 4502(29). 

Soundness Act, as amended by HERA, 

now defines a ‘‘low-income area’’ as a 

census tract or block numbering area in 

which the median income does not 

exceed 80 percent of AMI, and it 

includes families with incomes not 

greater than 100 percent of AMI who 

reside in minority census tracts or in 

designated disaster areas.43 It defines a 

‘‘minority census tract’’ as a census tract 

that has a minority population of at least 

30 percent and a median family income 

of less than 100 percent of AMI.44

According to the 2000 census, of the 

66,145 census tracts, there were 18,615 

low-income tracts. There were 25,254 

tracts with a minority population of at 

least 30 percent, of which 5,710 had a 

tract income greater than 80 percent of 

AMI but less than 100 percent of AMI. 

Accordingly, based on the 2000 census, 

there were 24,325 tracts that would be 

targeted by this goal, excluding tracts in 

designated disaster areas, but only 

families with incomes no greater than 

100 percent of AMI would be included 

in the 5,710 high-minority, moderateincome tracts. 

Past performance on the low-income 

areas housing goal, if it had been in 

effect in previous years, including 

designated disaster areas, is shown in 

Table 3A. This measurement 

corresponds to the overall low-income 

areas housing goal. The inclusion of 

designated disaster areas would have 

had a significant impact on the 

performance of each Enterprise under 

this goal. The impact of the designated 

disaster areas would also have changed 

significantly from year to year. As 

discussed above, modifications of 

mortgages will be counted only under 

the refinancing housing goal, not under 

the housing goals for home purchase 

mortgages. This means that, in order to 

be comparable, the 2009 low-income 

areas home purchase goal performance 

figure in Table 3A reflects performance 

excluding loan modifications. 

Past performance on the new lowincome areas housing subgoal if it had 

been in effect in previous years, 

excluding designated disaster areas, is 

shown in Table 3B. The exclusion of 

designated disaster areas corresponds to 

the new low-income areas housing 

subgoal. As indicated, Fannie Mae’s 

performance would have varied over 


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time. It would have reached its highest 

level, 19.1 percent, in 2002, and its 

lowest level, 15.1 percent, in 2008. 

Freddie Mac’s performance would have 

peaked at 18.6 percent in 2002, then 

fallen sharply to 12.1 percent in 2003, 

and would have been 15.2 percent in 

2008. As discussed above, modifications 

of mortgages will be counted only under 

the refinancing housing goal, not under 

the housing goals for home purchase 

mortgages. This means that, in order to 

be comparable, the 2009 low-income 

areas home purchase goal performance 

figure in Table 3B reflects performance 

excluding loan modifications. 


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55908 Federal Register / Vol. 75, No. 177 / Tuesday, September 14, 2010 / Rules and Regulations 

Refinancing Housing Goal. Under the 

Safety and Soundness Act, as amended 

by HERA, the refinancing housing goal 

is targeted to low-income families, i.e., 

families with incomes no greater than 

80 percent of AMI. It applies to 

mortgages that are given to pay off or 

prepay an existing loan secured by the 

same property. Thus, the goal would not 

apply to home equity or home purchase 

loans. 


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Past performance on this goal, if it 

had been in effect in previous years, is 

shown in Table 4. As indicated, Fannie 

Mae’s performance (again, excluding 

units financed by purchases of PLS) 

would have peaked in 2005 at 28.4 

percent, following the 2001–03 

refinance boom, and declined thereafter 

over the 2006–08 period to a low of 23.1 

percent in 2008. Freddie Mac’s 

performance would also have peaked in 

2005 at 26.3 percent, and then also 

declined to 26.0 percent in 2006, 25.2 

percent in 2007, and 23.2 percent in 

2008. 

Performance on the refinancing goal is 

also shown in Table 4 for 2009. As 

indicated, performance exclusive of 

loan modifications fell to the lowest 

levels of this period—19.9 percent for 

Fannie Mae and 19.1 percent for 

Freddie Mac. However, 67.9 percent of 

Fannie Mae’s modifications of refinance 

mortgages pursuant to HAMP and 67.7 

percent of Freddie Mac’s modifications 

of refinance mortgages pursuant to 

HAMP were for low-income families. As 

a result, total performance on the goal, 

including modifications pursuant to 

HAMP, would have been 23.0 percent 

for Fannie Mae and 21.7 percent for 

Freddie Mac. 

However, as discussed elsewhere in 

this rule, the treatment of loan 

modifications for purposes of the 

housing goals will be different in 2010– 

2011 than it was in 2009, in two 

respects. First, only permanent 

modifications of mortgages will be 

counted as mortgage purchases—that is, 

for 2010, only modifications initiated 

and made permanent in 2010 will be 

counted, and for 2011, only 

modifications made permanent in 2011 

will be counted. Second, loan 

modifications will be counted only 

under the refinancing housing goal, not 

under the housing goals for home 

purchase mortgages. This differs from 

the treatment of loan modifications in 

2009, when loan modifications were 

treated as either refinancing loans or 

home purchase loans, depending on the 

original purpose of the loan that was 

modified. The data in Table 4 indicate 

what performance under the lowincome refinancing housing goal would 

have been in 2009 under the 2009 

provisions for counting loan 

modifications. Performance excluding 

all loan modifications would have been 

19.9 percent for Fannie Mae and 19.1 

percent for Freddie Mac. Performance 

including initial loan modifications of 

low-income refinancing mortgages 

would have been 23.0 percent for 

Fannie Mae and 21.7 percent for 

Freddie Mac. FHFA estimates that 

approximately 25 percent of all loan 

modifications initiated by the 

Enterprises in 2009 were actually made 

permanent in 2009. Thus, 2009 

performance under the low-income 

refinancing housing goal, based on the 

2010 provisions for counting loan 

modifications, would have been less 

than the performance figures including 

initial loan modifications, but greater 

than the performance figures excluding 

all loan modifications. Assuming that 

the low-income shares of permanent 

modifications in 2009 were the same as 

the low-income shares of initial 

modifications in 2009, FHFA estimates 

that performance on the low-income 

refinancing housing goal in 2009 would 

have been approximately 21.3 percent 

for Fannie Mae and 20.2 percent for 

Freddie Mac. 


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55910 Federal Register / Vol. 75, No. 177 / Tuesday, September 14, 2010 / Rules and Regulations 

Interpreting Past Goal Performance 

Data. Past performance is not 

necessarily a good indicator of future 

goal performance, due to changes in 

mortgage interest rates, home prices, 

credit availability, and other factors. In 

recent years, for example, the 

Enterprises purchased PLS primarily 

due to anticipated profitability, to 

maintain market share, and because 

some PLS, especially those containing 

subprime mortgages, helped achieve the 

housing goals. Elsewhere in this final 

rule is a more detailed discussion 

regarding the exclusion of mortgages 

included in PLS from counting toward 

the housing goals in 2010–2011. The 

performance data in Tables 1–4 show 


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Federal Register / Vol. 75, No. 177 / Tuesday, September 14, 2010 / Rules and Regulations 55911 

45S. Rep. No. 102–282, at 10–11 (1992). 

46The combined purchase market share of Fannie 

Mae, Freddie Mac and Ginnie Mae was 98 percent, 

down slightly from 99 percent in the prior year. 

‘‘Fannie, Freddie GNMA At Nearly 100% Share.’’ 

National Mortgage News, May 31, 2010. 

47Statement of Edward DeMarco, Acting Director 

of the Federal Housing Finance Agency, U.S. House 

of Representatives House Financial Services 

Subcommittee on Capital Markets, Insurance and 

Government Sponsored Enterprises.’’ May 26, 2010. 

48http://www.moodys.com/. 

49http://www.mbaa.org/. 

50http://www.imfpubs.com/. 

51http://www.realtor.org/. 

52http://www.nahb.org/. 

53http://www.cmsaglobal.org/CMSA_Resources/ 

Research/Market_Statistics/Market_Statistics/. 

54http://www.fhfa.gov/Default.aspx?Page=250. 

55http://www.fedstats.gov/other.html. 

56 ‘‘The Federal Open Market Committee seeks 

monetary and financial conditions that will foster 

price stability and promote sustainable growth in 

output. To further its long-run objectives, the 

Committee seeks conditions in reserve markets 

consistent with federal funds trading in a range 

from 0 to 1⁄4 percent.’’ Minutes of the Federal Open 

Market Committee, June 22–23, 2010, p. 10. 

57Freddie Mac. Primary Mortgage Market Survey. 

August 19, 2010. 

performance excluding the effects of 

these PLS purchases. 

In response to the housing crisis and 

their financial difficulties, including the 

performance of PLS, the Enterprises 

have adopted more conservative 

underwriting guidelines. As previously 

discussed, those changes in 

underwriting standards will affect goal 

performance as compared to the past 

goal performance of the Enterprises. 

4. The Ability of the Enterprises To 

Lead the Industry in Making Mortgage 

Credit Available 

As background for the statutory 

requirement to consider the Enterprises’ 

‘‘ability * * * to lead the industry in 

making mortgage credit available,’’ a 

Senate committee report on legislation 

leading to the enactment of the Safety 

and Soundness Act in 1992 expressed 

concern that Enterprise purchases had 

not kept pace with market originations 

of mortgages to low- and moderateincome borrowers.45 FHFA shares that 

concern and has defined the Enterprise 

housing goals in part against that 

history. FHFA believes that, in fact, the 

Enterprises, directly supported by the 

Treasury Department, have played a 

leading role in sustaining the mortgage 

market during the recent crisis. 

Leading the industry in making 

mortgage credit available includes 

making mortgage credit available to 

primary market borrowers at different 

income levels. It also includes the 

ability of the Enterprises to respond to 

pressing mortgage needs in the current 

market, such as the threat of a loss of a 

home by the borrower, for example, by 

implementing the loan modification and 

refinance programs under the 

Administration’s Making Home 

Affordable (MHA) Program, and by 

supporting state and local housing 

finance agencies. The Enterprises’ 

ability to respond is reflected through 

the introduction of safe and sound 

innovative products, technology and 

process improvements. 

In the current market environment, 

the Enterprises, along with FHA and 

VA, lead the market. In the first quarter 

of 2010, they had a combined purchase 

market share of nearly 100 percent.46

From 1997–2003, the Enterprises’ 

share of purchases of mortgage 

originations grew to almost 55 percent. 

From 2004–2006, the private mortgage 

market predominated, and the 

Enterprises’ market share dropped to 

below 35 percent. After the private 

mortgage market began to deteriorate in 

2007, the Enterprises’ share of the 

mortgage purchase and guarantee 

activity represented more than 76 

percent of total conforming singlefamily originations in 2009.47

At the same time, the Enterprises have 

been severely stressed by the financial 

crisis. As described below, they have 

suffered losses that have depleted their 

capital, and they have been sustained 

only by multi-billion dollar infusions of 

capital from the U.S. Treasury under the 

Senior Preferred Stock Purchase 

Agreements. In this environment, with 

FHFA as conservator exercising a 

statutory mandate to conserve and 

preserve the Enterprises’ assets, it is 

especially important that the Enterprises 

not take on undue additional credit risk 

by purchasing mortgages in any defined 

segment in quantities beyond what 

market originations reasonably provide. 

FHFA has taken into account all of 

the foregoing considerations in 

assessing the Enterprises’ ability to lead 

the industry. 

5. Other Mortgage Data 

The primary source of reliable 

mortgage data for establishing the 

housing goals is the HMDA data 

reported by originators. Enterprise 

mortgage purchase data are compared to 

HMDA data to evaluate the Enterprises’ 

performance with respect to leading or 

lagging the housing market under 

specific housing goals. 

FHFA also uses other reliable data 

sources including the American 

Housing Survey (AHS), Census 

demographics, commercial sources such 

as Moody’s,48 and other industry and 

trade research sources, e.g., Mortgage 

Bankers Association (MBA),49 Inside 

Mortgage Finance Publications,50

NAR,51 National Association of Home 

Builders (NAHB),52 and the CRE 

Finance Council.53 The FHFA MIRS,54

previously administered by the Federal 

Housing Finance Board, a predecessor 

agency to FHFA, is used to complement 

forecast models for home purchase loan 

originations by making intra-annual 

adjustments prior to the public release 

of HMDA mortgage data. In the 

development of economic forecasts, 

FHFA uses data and information from 

Wells Fargo, PNC, Fannie Mae, Freddie 

Mac, The Wall Street Journal Survey, 

Standard and Poor’s, The Conference 

Board and the Federal Open Market 

Committee. In addition, FHFA uses 

market and economic data from the 

Bureau of Labor Statistics, the Federal 

Reserve Board, the Department of 

Commerce Bureau of Economic 

Analysis, and FedStats.55

6. Market Size 

In general, the single-family mortgage 

market environment of 2009 is expected 

to extend to 2010, with modest 

improvements in 2011. Quantifiable 

factors influencing FHFA’s outlook for 

the mortgage market include general 

growth in the economy, employment 

and inflation. Other factors that are less 

easily quantified include the effect of 

the homebuyer tax credit on the 

mortgage market. Also, activity in the 

subprime market is expected to be 

minimal through 2011. 

In particular, the following factors 

have a direct or indirect impact on the 

affordability of home purchases or the 

refinancing of mortgages: 

Interest Rates. To a large extent, 

FHFA’s estimates of affordability in the 

mortgage market rely on a continuing 

low interest rate environment. Interest 

rates are expected to remain low in the 

near future and possibly through 2011 

as the Federal Reserve expects to 

continue its low interest rate policy.56

Mortgage interest rates reached an alltime low in August 2010, with the 

national average interest rate on a 30- 

year fixed-rate mortgage reaching 4.42 

percent.57 Lower interest rates directly 

affect the affordability of buying a home 

or refinancing a mortgage. 

Unemployment. In addition to being 

an indicator of the health of the 

economy in general, the employment 

situation impacts the housing market 

more directly in that buying a house is 

a large investment and a long-term 

commitment of mortgage payments. 

Private-sector payroll employment 

edged up by 71,000 and the 

unemployment rate remained at 9.5 


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55912 Federal Register / Vol. 75, No. 177 / Tuesday, September 14, 2010 / Rules and Regulations 

58Bureau of Labor Statistics, News Release: The 

Employment Situation—July 2010. August 8, 2010. 

59S&P/Case Shiller. Press Release, July 27, 2010. 

60Wells Fargo Securities Economics Group. 

Existing Home Sales Slip in June, July 22, 2010, 

p. 1. 61Wells Fargo Securities Economics Group. 

Existing Home Sales Slip in June. July 22, 2010, 

p. 1. 

62See FHA Outlook, a monthly statistical 

summary of application insurance endorsement, 

delinquency and claim information on FHA single 

family programs. Available at http://www.hud.gov/ 

offices/hsg/comp/rpts/ooe/olmenu.cfm. 

percent in July.58 The unemployment 

rate is still historically high and will 

likely remain above eight percent in the 

2010 to 2011 period. To the extent that 

lower-income jobs are affected more by 

the employment situation, the 

affordable home purchase market is 

affected. 

House Prices. The price of housing 

has a direct impact on the affordability 

of home mortgages. The housing and 

mortgage markets are also influenced by 

trends in house prices. In periods of 

house price appreciation, home sales 

and mortgage originations increase as 

the expected return on investment rises. 

In periods of price depreciation or price 

uncertainty, home sales and mortgage 

originations decrease as risk-adverse 

homebuyers are reluctant to enter the 

market. Between May 2009 and May 

2010, FHFA’s purchase-only House 

Price Index shows prices down 1.2 

percent, compared to a 5.8 percent price 

decline between May 2008 and May 

2009. While price declines appear to be 

moderating, and while the S&P/Case 

Shiller Home Price Index actually 

shows prices increased 5.4 percent over 

the May 2009 to May 2010 period, 

prices are expected to decline further 

during the third quarter of 2010.59 An 

analysis by Wells Fargo Securities 

Economics Group states that ‘‘[t]he 

combination of high inventories and 

declining home sales means prices 

should turn down again this 

summer.’’ 60

Housing Market. A robust housing 

market is generally good for the 

affordable home market. Home sales, 

after increasing 8.4 percent in March 

and 8.2 percent in April, have decreased 

4.6 percent in June and another 3.8 

percent in July. Both the increase and 

the subsequent decrease in home sales 

may be attributed to the homebuyers’ 

tax credit program and its expiration. 

Many industry observers expect that 

home sales will remain near recent lows 

during the remainder of 2010. 

According to an analysis by Wells Fargo 

Securities Economics Group, ‘‘[s]ales of 

existing homes fell 5.1 percent in June 

to a still relatively robust 5.37 millionunit pace. Sales continue to be 

supported by tax credits. Delays in the 

closing process have led to an extension 

of the closing deadline which will likely 

smooth the adjustment to the post-tax 

credit environment.’’ 61

The additional first-time homebuyers 

taking advantage of the $8,000 tax credit 

will likely have a positive impact on the 

housing goals. The additional repeat 

homebuyers who qualify for the $6,500 

tax credit (there is a five-year occupancy 

requirement) will likely have a negative 

impact on the housing goals. The repeat 

homebuyers who qualify for the tax 

credit include a greater proportion of 

older and thus higher income 

borrowers. 

FHA Market Share. The composition 

of the affordable conventional mortgage 

market is also influenced by FHA’s 

market share, which rose significantly 

in 2008–2009 and continues to be high. 

Mortgages insured by FHA are likely to 

continue to represent a significant share 

of the mortgage market in 2010 and 

2011. These loans generally are pooled 

into mortgage-backed securities 

guaranteed by GNMA. Purchases of 

mortgages insured by FHA and VA 

ordinarily do not receive housing goals 

credit. 

As shown in Figure 1, the market 

share of all mortgages insured by FHA 

has increased 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. Borrowers 

without substantial down payments are 

increasingly utilizing government 

insurance programs. Since FHA’s 

market share increase appears to 

coincide with the demise of the 

subprime market, it would be easy to 

conclude that FHA loans are now 

assisting the types of borrowers who 

previously were served by subprime 

products. However, FHA’s internal data 

indicate that the average riskiness of the 

loans they insure has actually 

decreased, i.e., credit scores increased, 

since late 2007.62


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Federal Register / Vol. 75, No. 177 / Tuesday, September 14, 2010 / Rules and Regulations 55913 

Refinance Rate. The share of the 

mortgage market that is from refinancing 

existing mortgages has an impact on the 

share of affordable refinance mortgages. 

Specifically, when the refinancing of 

mortgages is motivated by low interest 

rates, the market is dominated by higher 

income borrowers. In addition, a 

combination of depressed housing 

prices and high LTV ratios could 

disproportionately decrease the number 


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55914 Federal Register / Vol. 75, No. 177 / Tuesday, September 14, 2010 / Rules and Regulations 

63These forecasts include those by the Mortgage 

Bankers Association, Fannie Mae, Freddie Mac, the 

National Association of Realtors, Wells Fargo, Wall 

Street Journal Forecast Survey, PNC Financial, 

National Association of Home Builders, Standard 

and Poor’s, The Conference Board and The Federal 

Reserve Board’s Federal Open Market Committee. 

64National Association of Home Builders. Eye on 

the Economy—Private Sector Job Growth Slows in 

May, June 10, 2010. 

65Board of Governors of the Federal Reserve 

System. Press Release of the Federal Open Market 

Committee, June 23, 2010. 

of low-income homeowners refinancing 

their mortgages. 

Manufactured Housing Loans. During 

2004 to 2008, 57 percent of 

manufactured housing loans were 

higher cost, according to the HMDA 

data. Only 8.5 percent of manufactured 

housing loans, with most being 

refinance loans, were from lenders who 

specialized in serving riskier borrowers. 

To adjust the market estimates of the 

housing goals to account for the effect 

from chattel loans on manufactured 

housing, FHFA weighted the average 

2004 to 2008 manufactured housing 

contribution to the goals market 

estimates by 60 percent for the home 

purchase mortgage goals and 50 percent 

for the refinance mortgage goal. The 

market estimates were adjusted 

downward by that amount. This 

resulted in the market estimate for the 

low-income home purchase housing 

goal being adjusted by ¥0.9 percent, the 

very low-income home purchase 

housing goal by ¥0.3 percent, the lowincome areas home purchase housing 

goal by ¥0.4 percent, and the lowincome borrower refinance housing goal 

by ¥0.3 percent. The projected market 

estimates in Table 6 reflect these 

adjustments. 

Given all of the influences on the 

housing and mortgage markets, the 

outlook for the 2010–2011 period 

remains guarded. In developing its 

Economic and Mortgage Outlook (see 

Table 5, below), FHFA uses an average 

of forecasted values for key economic 

indicators drawn from several industry 

sources.63 On average, industry 

forecasters project the economy to 

rebound in 2010 and 2011, with real 

Gross Domestic Product (GDP) growing 

at a rate of 3.0 and 2.7 percent, 

respectively. Industry assessments of 

housing markets generally are 

conservative. The unemployment rate is 

expected to remain above eight percent 

during 2010 and 2011. As uncertainty in 

the job market remains, it will continue 

to have a negative impact on the 

housing market. ‘‘Employment stability 

and job growth are keys to a housing 

recovery. In addition to alleviating 

worker’s fears about their next 

paycheck, improving employment 

measures help boost the confidence of 

households that are considering buying 

a home.’’ 64 Mortgage interest rates are 

currently dependent on federal policies, 

somewhat independent of the federal 

funds rate and influenced by the 

economic situation in Europe. The 

Federal Open Market Committee is 

committed to a low federal funds rate 

policy (at 0 to 0.25 percent) as it 

‘‘continues to anticipate that economic 

conditions, including low rates of 

resource utilization, subdued inflation 

trends, and stable inflation expectations, 

are likely to warrant exceptionally low 

levels of the federal funds rate for an 

extended period.’’ 65 For the 2010 and 

2011 period, the forecasts polled by 

FHFA show that interests rates will 

remain near recent levels. 


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Federal Register / Vol. 75, No. 177 / Tuesday, September 14, 2010 / Rules and Regulations 55915 

66The average industry January forecast for home 

sales during 2010 and 2011 was 5.9 and 6.5 million 

units respectively. This is compared to the 5.5 and 

6.0 million units from Table 5. 

FHFA’s estimates of the market 

performance for the two single-family 

owner-occupied home purchase housing 

goals and one subgoal, and the 

refinancing mortgage housing goal, are 

provided in Table 6. For 2010 and 2011, 

FHFA estimates that the low-income 

and very low-income borrower shares of 

the home purchase mortgage market 

will be 27 percent and 8 percent, 

respectively. Comparing these market 

estimates in Table 6 with the 

corresponding estimates in Table 6 of 

the proposed rule shows that the 

estimates have not changed. The 

estimated share of goal-qualifying 

mortgages in low-income areas in the 

home purchase mortgage market, 

excluding designated disaster areas, in 

2010 and 2011, remained at the 13 

percent of home purchase mortgages 

estimate that was published in the 

proposed rule. While changes in 

expected economic conditions had an 

impact on the market for these three 

housing goals, that impact is 

insignificant. The market for the lowincome areas housing goal is influenced 

by the level of home sales. During 

periods when home sales are increasing, 

a smaller share of the additional home 

sales take place in low-income areas. 

Home sales are expected to fall slightly 

in 2010 and then rebound in 2011.66

The refinance share of the market, as 

measured by the Mortgage Bankers 

Association, was 65 percent during the 

first quarter of 2010. With interest rates 

projected to be at historical lows during 

the remainder of 2010, there is real 

potential for refinance rates to be higher 

than currently anticipated. With a 

projected refinance rate of 62 percent in 

2010 (down from 65 percent in 2009), 

FHFA estimates that 18 percent of 

refinance mortgages will be made to 

low-income borrowers in 2010. The 

refinance rate is expected to fall to 40 

percent in 2011, resulting in an estimate 

that the low-income borrower mortgage 

share of the refinance mortgage market 

will be 20 percent in 2011. 

To arrive at these estimates, FHFA 

used econometric methods to extend the 

trends of the market performance for 

each goal, based on a monthly time 

series database provided by the Federal 

Financial Institutions Examination 

Council (FFIEC) and the Federal Reserve 

Board. For the low-income areas goal, 

this model produced only the market 

estimates for the subgoal. The remainder 

of the market estimates for this goal 

relates to the designated disaster areas. 

FHFA estimates that 11 percent of home 

purchase mortgages originated in 2010 

will qualify for the low-income areas 

goal because the properties associated 

with these mortgages are located in 

designated disaster areas that are not 

already classified as low-income or high 

minority. The methodology used in 

FHFA’s analysis of the mortgage market 

for 2010 and 2011 is contained in a 

document entitled ‘‘Market Estimation 

Model for the 2010 and 2011 Enterprise 

Single-Family Housing Goals,’’ which is 

available at http://www.fhfa.gov. 

FHFA used all relevant information 

when determining the benchmark levels 

for the 2010 and 2011 housing goals. 

While the tightening of underwriting 

standards is not included in the market 

estimates calculation, it was considered 

in the determination of the benchmark 

levels. FHFA attempts to use the most 

current data possible when estimating 

market size, including information from 

the Monthly Interest Rate Survey (MIRS) 

to extend HMDA goal performance data. 

To extend the series for the three singlefamily home purchase goals through 

2009, FHFA supplements the HMDA 

series with estimated market series of 

goal-qualifying shares provided by 

Freddie Mac that are based on MIRS 

data. Guidance for calculating market 


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55916 Federal Register / Vol. 75, No. 177 / Tuesday, September 14, 2010 / Rules and Regulations 

67 12 U.S.C. 4563(a)(4). 

68Source: FHA Multifamily Data Base available 

at: http://www.hud.gov/offices/hsg/mfh/fhamie/ 

iecompiled10.pdf. 

69FHA permits LTVs up to 85 percent and DSCR 

ratios as low as 1.176 on its primary market rent 

refinance program Section 223(f). This compares to 

Enterprise maximum LTVs of 80 percent and a 

minimum DSCR of 1.25. Earlier in 2010, FHA 

announced plans to raise the DSCR for Section 

223(f) loans to 1.2 from 1.176. 

size using historical HMDA data is 

provided in the ‘‘Market Estimation 

Model for the 2010 and 2011 Enterprise 

Single-Family Housing Goals’’ published 

by FHFA. The market estimation 

methodology for estimating current and 

future market size is provided in that 

market estimation model document. As 

noted above, FHFA will use the Federal 

Reserve Board’s new guidelines of 150 

basis points or more above APOR to 

identify higher-cost loans. 

7. Financial Condition of the Enterprises 

The financial performance of both 

Enterprises is dominated by creditrelated expenses and losses stemming 

principally from purchases of PLS and 

purchases and guarantees of mortgages 

originated in 2006 and 2007. Since the 

establishment of the conservatorship for 

the Enterprises in September 2008, the 

combined losses of the two Enterprises 

depleted their capital and required them 

to draw from the U.S. Treasury under 

the Senior Preferred Stock Purchase 

Agreements. Fannie Mae has drawn 

$85.1 billion and Freddie Mac has 

drawn $63.1 billion in Treasury support 

under the Senior Preferred Stock 

Purchase Agreements, over $148 billion 

in total. 

As discussed above, FHFA’s duties as 

conservator require the conservation 

and preservation of the assets of the two 

Enterprises. While reliance on the 

Treasury Department’s backing will 

continue until legislation produces a 

final resolution to the Enterprises’ 

future, FHFA is monitoring the 

activities of the Enterprises to: (a) Limit 

their risk exposure by avoiding new 

lines of business; (b) ensure profitability 

in the new book of business without 

deterring market participation or 

hindering market recovery; and (c) 

minimize losses on the mortgages 

already on the books. Given the 

importance of the Enterprises to the 

housing market, any goal-setting must 

be closely linked to putting the 

Enterprises in sound and solvent 

condition. Over the long term, such 

actions will assist homeowners and 

neighborhoods while saving the 

Enterprises money. In 2009, FHFA 

adjusted the Enterprises’ housing goal 

levels to align them with safe and sound 

practices and market reality, and the 

housing goals requirements for 2010 and 

2011 must be similarly aligned. 

D. Single-Family Housing Goal Levels 

Based on the factors described above, 

§ 1282.12 of the final rule establishes 

the benchmark levels for the singlefamily housing goals for 2010 and 2011 

as follows: 

Housing goal for low-income families. 

The benchmark level of the annual goal 

for each Enterprise’s purchases of 

purchase money mortgages on owneroccupied single-family housing for lowincome families is 27 percent of the 

total number of such mortgages 

purchased by that Enterprise, as in the 

proposed rule. 

Housing goal and subgoal for families 

in low-income areas. The benchmark 

level of the annual goal for each 

Enterprise’s purchases of purchase 

money mortgages on owner-occupied 

single-family housing for families in 

low-income areas will be set annually 

by notice from FHFA. The benchmark 

level will be based on the benchmark 

level for the low-income areas subgoal, 

plus an adjustment factor that reflects 

the incremental percentage share that 

mortgages for low- and moderateincome families in designated disaster 

areas had in the most recent year for 

which data is available. The benchmark 

level of the annual subgoal for each 

Enterprise’s purchases of purchase 

money mortgages on owner-occupied 

single-family housing for families in 

low-income census tracts and for lowand moderate-income families in 

minority census tracts is 13 percent of 

the total number of such mortgages 

purchased by that Enterprise. 

Housing goal for very low-income 

families. The benchmark level of the 

annual goal for each Enterprise’s 

purchases of purchase money mortgages 

on owner-occupied single-family 

housing for very low-income families is 

8 percent of the total number of such 

mortgages purchased by that Enterprise, 

as in the proposed rule. 

Housing goal for refinancing 

mortgages. The benchmark level of the 

annual goal for each Enterprise’s 

purchases of refinancing mortgages on 

owner-occupied single-family housing 

for low-income families is 21 percent of 

the total number of such mortgages 

purchased by that Enterprise, an 

adjustment downward from the 25 

percent level in the proposed rule to 

reflect current market conditions. 

E. Analysis of Factors for Multifamily 

Housing Goals 

Section 1333(a)(4) of the Safety and 

Soundness Act, as amended by HERA, 

requires FHFA to consider the following 

six factors in setting multifamily special 

affordable housing goals: 

(1) National multifamily mortgage 

credit needs and the ability of the 

Enterprise to provide additional 

liquidity and stability for the 

multifamily mortgage market; 

(2) The performance and effort of the 

Enterprise in making mortgage credit 

available for multifamily housing in 

previous years; 

(3) The size of the multifamily 

mortgage market for housing affordable 

to low-income and very low-income 

families, including the size of the 

multifamily markets for housing of a 

smaller or limited size; 

(4) The ability of the Enterprise to 

lead the market in making multifamily 

mortgage credit available, especially for 

multifamily housing affordable to lowincome and very low-income families; 

(5) The availability of public 

subsidies; and 

(6) The need to maintain the sound 

financial condition of the Enterprise.67

FHFA’s analysis of each of the factors, 

which has been updated since the 

proposed rulemaking, is set forth below. 

1. National Multifamily Mortgage Credit 

Needs 

At the onset of the mortgage credit 

crisis, traditional sources of multifamily 

credit, primarily commercial mortgagebacked securities (CMBS), life insurance 

companies, commercial banks, and 

thrifts, significantly reduced lending or 

stopped lending completely. This 

contraction left Freddie Mac and Fannie 

Mae as the principal sources of 

financing for most multifamily owners 

and investors. Although FHA has 

increased significantly its nonhealthcare, non-new construction 

endorsements in fiscal year 2010 as 

compared to fiscal year 2009, it remains 

a relatively small player in the 

multifamily refinance market. Data on 

initial endorsements for the first eight 

months of fiscal year 2010 show more 

than a four-fold increase in initial FHA 

endorsements of non-healthcare, nonnew construction multifamily loans to 

over $3.7 billion.68 While this number is 

much less than Enterprise purchases 

over the same period, FHA has managed 

to increase its business, in part, because 

its underwriting parameters are less 

stringent than those of the Enterprises.69

Life insurance companies appear to be 

returning to the multifamily market. 

According to data from the MBA, life 

insurance companies have increased 

originations of commercial property 

loans, including multifamily loans, by 


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Federal Register / Vol. 75, No. 177 / Tuesday, September 14, 2010 / Rules and Regulations 55917 

68Source: FHA Multifamily Data Base available 

at: http://www.hud.gov/offices/hsg/mfh/fhamie/ 

iecompiled10.pdf. 69FHA permits LTVs up to 85 percent and DSCR 

ratios as low as 1.176 on its primary market rent 

refinance program Section 223(f). This compares to 

Enterprise maximum LTVs of 80 percent and a 

minimum DSCR of 1.25. Earlier in 2010, FHA 

announced plans to raise the DSCR for Section 

223(f) loans to 1.2 from 1.176. 

70 ‘‘MBA Study: First Quarter 2010 Commercial/ 

Multifamily Mortgage Originations Increase from 

Year Earlier, Though Levels Remain Low, 5/18/ 

2010’’, available at: http://www.mbaa.org/ 

NewsandMedia/PressCenter/72890.htm. 

71Moody’s/Real CPPI Report May 2010, available 

at: http://web.mit.edu/cre/research/credl/rca.html. 

74Fannie Mae: Monthly Summary, April 2010, 

Table 9. 

75Freddie Mac: Monthly Volume Summary: April 

2010, Table 6. 

131 percent in the first quarter of 2010, 

compared to the same period in 2009.70

With multifamily property prices 

having fallen by almost 31 percent from 

the third quarter of 2008 to the first 

quarter of 2010,71 many properties that 

would have been eligible for refinance 

through Enterprise programs lack 

enough equity to meet Enterprise loan 

underwriting standards. The decline in 

multifamily property prices will 

adversely affect owners who financed 

with interest-only loans over the past 

decade. As these loans become due, 

properties with non-amortizing loans 

may not have sufficient equity to 

counter the effects of declining property 

values. 

Demand for new multifamily housing 

credit has also waned due to the credit 

crunch and the existing oversupply of 

multifamily units. According to the U.S. 

Census Bureau, multifamily housing 

starts plummeted by two-thirds from 

April 2008 to April 2010.72 Sales of 

multifamily properties are far below 

normal levels in part because owners 

are waiting for property values to 

stabilize. Many other multifamily 

property owners, unable to refinance, 

have been granted extensions by 

lenders, or in the case of loans 

securitized through CMBS, by the 

servicer. On the positive side, the 

maturations of multifamily loans 

acquired by the Enterprises and backing 

CMBS issuances are unlikely to begin to 

increase significantly until after 2010. 

In the CMBS portion of the 

multifamily market, while the 

Enterprises have primarily purchased 

the highest-rated CMBS tranches, they 

may be indirectly affected by increasing 

CMBS delinquency rates. According to 

May 2010 data released by TREPP,73

delinquencies on multifamily properties 

financed by CMBS issuances rose to 

13.34 percent from 5.17 percent a year 

earlier. As properties collateralizing 

CMBS issuances become delinquent, 

foreclosures and workouts will increase, 

further depressing prices of all 

commercial properties, including 

multifamily properties. This will make 

refinancing maturing multifamily loans 

more challenging for the Enterprises. 

While multifamily delinquencies 

remain relatively low for both Fannie 

Mae 74 and Freddie Mac,75 there is 

growing concern among multifamily 

property owners and investors about 

properties that are overleveraged or 

generating negative cash flows. 

2. Past Performance 

HUD established dollar-based 

multifamily housing subgoals for the 

Enterprises for the years 1996 through 

2008. HERA extended the 2008 subgoals 

through 2009, subject to review by 

FHFA, and FHFA increased these 2009 

subgoals modestly, from $5.49 billion to 

$6.56 billion for Fannie Mae, and from 

$3.92 billion to $4.60 billion for Freddie 

Mac. 

HERA changed the structure of the 

multifamily goals for 2010 and beyond. 

The multifamily housing subgoals for 

2009 were set in terms of units for very 

low-income families and low-income 

families in low-income areas. The scope 

of the goals is broader for 2010–11, 

covering units affordable to all lowincome families (those with incomes no 

greater than 80 percent of AMI), 

regardless of property location. 

Section 1333(a)(2) of the Safety and 

Soundness Act, as amended by HERA, 

requires the Director to establish 

‘‘additional requirements for the 

purchase by each enterprise of 

mortgages on multifamily housing that 

finance dwelling units affordable to very 

low-income families,’’ with ‘‘very lowincome families’’ defined as those with 

incomes no greater than 50 percent of 

AMI. To implement this provision, 

consistent with the proposed rule, 

FHFA is establishing a multifamily 

subgoal for very low-income families. 

Section 1333(a)(3) of the Safety and 

Soundness Act, as amended by HERA, 

provides that the Director shall require 

each Enterprise to report on its 

purchases of mortgages on multifamily 

housing ‘‘of a smaller or limited size that 

is affordable to low-income families.’’ 

The provision defines small multifamily 

projects as those containing 5 to 50 

units or as those with mortgages of up 

to $5,000,000. The Director may adjust 

the definition to include projects 

containing different numbers of units or 

with mortgages of different amounts. 

The provision further states that the 

Director may establish additional 

requirements related to such units by 

regulation. 

As in the proposed rule, FHFA is 

defining smaller multifamily properties 

as those containing 5 to 50 units, which 

is consistent with industry standards. 

FHFA already requires reporting by the 

Enterprises on purchases of mortgages 

on such properties. 

Multifamily special affordable 

housing goals. Both Enterprises played 

major roles in funding multifamily units 

for low-income families between 2001 

and 2009, as shown in Table 7. Fannie 

Mae financed an average of 410,000 

such units over this period, peaking at 

599,000 units in 2003, while Freddie 

Mac financed an average of 331,000 

units, peaking at 493,000 units in 2007. 

However, as discussed elsewhere in the 

final rule, the Enterprises followed 

different approaches to the multifamily 

market, with Freddie Mac relying to a 

significant extent on the purchase of 

CMBS, while Fannie Mae depended to 

a greater extent on the direct purchase 

of multifamily loans originated by its 

Delegated Underwriting and Servicing 

(DUS) lenders. Data on low-income 

multifamily units financed, excluding 

CMBS purchases, are shown in the last 

two columns of Table 7. 

As indicated in Table 7, Fannie Mae’s 

financing of low-income multifamily 

units fell by 16 percent in 2008, from 

542,000 units in 2007 to 456,000 units 

in 2008, and by an additional 46 percent 

in 2009, to 235,000 units. Such 

financing fell more sharply at Freddie 

Mac, by 44 percent, from 493,000 units 

in 2007 to 276,000 units in 2008, and by 

an additional 40 percent in 2009, to 

167,000 units. This difference reflects 

the drop in CMBS purchases by Freddie 

Mac. As a result, Freddie Mac’s 

financing of such units was 61 percent 

of Fannie Mae’s financing in 2008, the 

lowest ratio of the period. 


jdjones on DSK8KYBLC1PROD with RULES_2
55918 Federal Register / Vol. 75, No. 177 / Tuesday, September 14, 2010 / Rules and Regulations 

Very low-income multifamily 

subgoals. HERA revised the definition 

of ‘‘very low-income’’ families as it 

pertains to the Enterprises’ housing 

goals. Under the housing goals 

established by HUD for 1993–2008 and 

as revised by FHFA for 2009, ‘‘very lowincome’’ referred to borrowers with 

incomes no greater than 60 percent of 

AMI, or for rental units, to units 

affordable to families with incomes in 

this range, with adjustments for family 

size. This definition was changed by 

HERA to refer to borrowers with 

incomes no greater than 50 percent of 

AMI, or for rental units, to units 

affordable to families with incomes in 

this range, with adjustments for family 

size. The new definition of ‘‘very lowincome families’’ is consistent with that 

used in some other housing programs. 

Enterprise financing of rental units for 

very low-income families over the 

2001–09 period is reported in Table 8. 

On average, Fannie Mae funded 92,000 

such units each year and Freddie Mac 

funded 74,000 such units. The same 

general pattern prevailed over time as 

that shown in Table 7 between 2007 and 

2009, with a significant drop in funding 

by Fannie Mae (49 percent) and a 

substantial drop by Freddie Mac (80 

percent). As a result, the number of such 

units financed by Freddie Mac in 2009 

was only 33 percent of the number 

financed by Fannie Mae, the lowest 

ratio of this period. 


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Federal Register / Vol. 75, No. 177 / Tuesday, September 14, 2010 / Rules and Regulations 55919 

76American Housing Survey for the United 

States: 2007, U.S. Department of Housing and 

Urban Development and U.S. Department of 

Commerce, Bureau of the Census, September 2008, 

Table 1A–1, page 1. 

Financing of low-income units in 

small multifamily properties. As 

discussed above, HERA recognizes the 

important role played by small 

multifamily housing as a source of 

affordable rental housing. According to 

the 2007 American Housing Survey 

(AHS), multifamily properties 

containing 5–49 units constituted 77 

percent of all multifamily units and 74 

percent of multifamily units constructed 

in the previous 4 years. Other sources 

indicate that a smaller, but still 

significant, share of multifamily units 

are located in small multifamily 

properties.76 HERA requires reporting of 

the Enterprises’ role in this market with 

regard to units affordable to low-income 

families, and such data is reported in 

Table 9. 

Both Enterprises increased their 

financing of low-income small 

multifamily units between 2001 and 

2003, from 24,000 units to 155,000 units 

for Fannie Mae, and from 44,000 units 

to 139,000 units for Freddie Mac. This 

increase was motivated at least in part 

by the ‘‘bonus points’’ that HUD gave for 

financing goal-qualifying units in small 

multifamily properties over the 2001–03 

period. Under these ‘‘bonus points,’’ 

each goal-qualifying unit counted twice 

in the numerator and once in the 

denominator in calculating goal 

performance. 

As indicated in Table 9, both 

Enterprises decreased their roles in the 

small multifamily market after the 

expiration of HUD’s ‘‘bonus points’’ in 

2004. Fannie Mae financed an average 

of 49,000 units for 2004–07, while the 

comparable average for Freddie Mac 

was 24,000 such units. 

Since 2007, both Enterprises’ roles in 

this market have fallen significantly. 

Fannie Mae’s purchases of mortgages 

financing low-income units in small 

multifamily properties fell from 65,000 

units in 2007 to 44,000 units in 2008 

and 13,000 units in 2009, a combined 

decrease of 79 percent. The decline was 

even sharper for Freddie Mac, from 

24,000 units in 2007 to 2,100 units in 

2008 and only 528 units in 2009, a 

combined decrease of 98 percent. 

Although the Safety and Soundness 

Act requires FHFA to consider the past 

performance of the Enterprises in 

establishing the multifamily housing 

goals, current market conditions suggest 

that many fewer units are likely to be 

readily available for purchase in a safe 

and sound manner in 2010 and 2011. 

Measuring the multifamily goals as was 


jdjones on DSK8KYBLC1PROD with RULES_2ER14SE10.017</GPH>
55920 Federal Register / Vol. 75, No. 177 / Tuesday, September 14, 2010 / Rules and Regulations 

done previously would ignore the steep fall in multifamily property values and 

high vacancy rates, among other factors. 

BILLING CODE 8070–01–P 

BILLING CODE 8070–01–C 

3. Market size 

The size of the overall multifamily 

mortgage market is likely to remain 

relatively unchanged in 2010 as 

compared to 2009, and the dollar 

amount of multifamily loans financed in 

2010 will likely be similar to that of 

2009, approximately $40–45 billion. 

Poor property fundamentals, especially 

declines in property value, will affect 

the type of properties and owners that 

can access multifamily credit. If the 

multifamily market begins to recover in 

2011, multifamily originations may 

increase. Projections of such activity, 

however, are uncertain. For purposes of 

this rulemaking, the multifamily goals 

for both 2010 and 2011 are based on the 

overall multifamily market for 2009 and 

Enterprise multifamily performance in 

recent years, and on current multifamily 

market conditions. As in prior years, the 

multifamily goals are set separately for 

each Enterprise. Unlike prior years, the 

multifamily goals are measured in units 

rather than dollar volume. 

The proportion of multifamily 

affordable units available for financing 

in 2010 and 2011 will likely be below 

historical levels due to weakness in the 

multifamily housing market. Steep 

declines in multifamily property prices 

since mid-2007 have caused a 

significant loss of equity for owners, 

many of whom can no longer qualify for 

Enterprise financing without placing 

substantial cash into the property. The 

loss of equity for most owners has 

meant that only financially strong 

properties and borrowers will qualify 

for Enterprise financing. These 

properties often have a much lower 

proportion of affordable units. 


jdjones on DSK8KYBLC1PROD with RULES_2ER14SE10.018</GPH>
Federal Register / Vol. 75, No. 177 / Tuesday, September 14, 2010 / Rules and Regulations 55921 

77Multifamily Housing News: Special Report: 

MBA Says Large Amounts of Multifamily Loans Will 

Mature in 2011 and After, Feb. 11, 2009. 

Another factor that will likely 

constrain Enterprise multifamily loan 

production in 2010 and 2011 will be the 

relatively small dollar amount of loans 

maturing in the Enterprise portfolios in 

2010 and 2011. The MBA expects only 

$26 billion in total maturing 

multifamily mortgages in 2010. 

However, the volume of maturing loans 

is expected to increase from 2011 

onward.77

For well over a decade, Freddie Mac 

relied upon purchases of CMBS and 

structured deals involving large 

portfolios of affordable multifamily 

loans to meet applicable affordable 

housing goals. Beginning in 2006 and 

2007, CMBS made up a significant 

portion of Fannie Mae’s affordable 

multifamily purchases. These sources of 

affordable units are now either 

unavailable or do not meet Enterprise 

standards. Therefore, based on the 

factors discussed above, multifamily 

affordable purchases in the very lowincome category are near historical lows 

in 2009 overall. The effect, though, will 

be more pronounced at Freddie Mac. 

The percentage of very low-income 

multifamily purchases in 2010 for 

Freddie Mac will likely be below its 

average for 2004 to 2008, while Fannie 

Mae will likely have a very low-income 

purchase volume near its average for the 

past several years. As discussed 

elsewhere in this final rule, CMBS units 

will no longer receive credit towards the 

housing goals. 

4. Ability of the Enterprise To Lead the 

Market in Making Multifamily Mortgage 

Credit Available 

As described above in the context of 

the single-family goals, Congress in 

enacting the Safety and Soundness Act 

was concerned that the Enterprises were 

lagging behind market originations of 

mortgages for the benefit of low- and 

moderate-income households. FHFA 

has been cognizant of that concern in 

setting goals for the Enterprises. 

With the current credit crisis 

negatively affecting the commercial real 

estate market, the Enterprises became 

market leaders by default. The 

disciplined underwriting and credit 

standards they bring to the industry 

have contributed to relatively low 

delinquency rates. Compared to the 

industry, the Enterprises have relatively 

conservative multifamily underwriting 

parameters. Although showing signs of 

improvement, the fundamentals of the 

multifamily real estate market are still 

weak (e.g., high vacancy rates, stagnant 

rents and falling property values). As a 

result, the Enterprises have enhanced 

their credit standards to reduce risk 

exposure, which has meant that owners 

of the strongest performing properties 

are more likely to obtain credit from 

lenders selling to the Enterprises. As 

noted previously, Fannie Mae and 

Freddie Mac have recently composed a 

larger than usual portion of the 

multifamily market. For example, while 

Fannie Mae estimates that its share of 

the multifamily market ranged from 21– 

28 percent in the period from 2004 to 

2007, its multifamily market share was 

47 percent in 2009. In the years 2010– 

2011, the Enterprises’ share of the 

market will likely not be as large 

because of renewed competition from 

other multifamily market players, 

including life insurance companies and 

banks, and declining multifamily 

market fundamentals. 

5. Availability of Public Subsidies 

Public subsidies for multifamily 

housing have been affected by the 

mortgage credit crisis. Low-income 

housing tax credits (LIHTCs), an 

important source of equity for new lowincome housing, have fallen in value. 

However, on October 19, 2009, FHFA 

announced, in conjunction with the 

Treasury Department and HUD, an 

initiative to support state and local 

housing finance agencies (HFAs) 

through a new bond purchase program 

to support new lending by HFAs, and a 

temporary credit and liquidity program 

to improve the access of HFAs to 

liquidity for outstanding HFA bonds. 

Fannie Mae and Freddie Mac each 

played critical roles in this program, 

which helped support low mortgage 

rates and expand resources for low- and 

middle-income borrowers who want to 

purchase or rent homes that are 

affordable over the long term. 

The Enterprises actively purchase 

mortgages on properties with HUD 

Section 8 Housing Assistance Plan 

(HAP) contracts. Newly constructed or 

rehabilitated properties usually receive 

forward commitments from the 

Enterprises with part of the new equity 

coming from LIHTCs. The remaining 

properties are refinancings where the 

property owners sign long-term use 

agreements with HUD and receive a 

HAP contract in return. The Enterprises 

can also assist state and local HFAs by 

credit enhancing HFA bonds, and by 

offering permanent financing for 

properties rehabilitated through the 

Neighborhood Stabilization Program 

and other HUD grants. 

6. Financial Condition of Enterprises 

The financial performance of both 

Enterprises, including the establishment 

of the conservatorship for the 

Enterprises in September 2008, is 

discussed in more detail above. FHFA 

has considered the multifamily housing 

goals in light of the importance of the 

Enterprises to the housing market and in 

light of FHFA’s duties as conservator to 

conserve and preserve the assets of the 

Enterprises. FHFA has aligned the 

multifamily housing goal levels for 2010 

and 2011 with safe and sound practices 

and market reality. 

F. Multifamily Housing Goal Levels 

As a result of the changes in HERA, 

the final rule establishes the multifamily 

affordable housing goals for each 

Enterprise separately from the singlefamily housing goals beginning in 2010. 

Qualifying multifamily units previously 

had been included with single-family 

affordable purchases in the overall 

goals. Additional requirements for 

multifamily housing were imposed 

under a multifamily special affordable 

subgoal. Consistent with the proposed 

rule, the multifamily affordable goals for 

each Enterprise in the final rule are 

established in terms of low-income and 

very low-income units financed 

annually. 

Regarding the setting of multifamily 

goals, one commenter noted that there 

does not appear to be a convenient 

measure of the market, particularly for 

very-low income families. The 

commenter suggested using HMDA data 

to calculate the size of the small 

multifamily property market, and 

estimating the size of the large 

multifamily property market. The 

overall size of the market could then be 

estimated in dollars. FHFA received 

four comments generally supporting the 

multifamily housing goal levels in the 

proposed rule. One policy advocacy 

group supported the goal levels, but 

cautioned that increasing the 

Enterprises’ performance for very-low 

income families may be difficult 

without a significant increase in the 

availability of housing subsidies 

through which rents can be made 

affordable to such families. 

Eight commenters opposed the 

proposed multifamily goal levels. Two 

not-for-profit organizations stated that 

rather than focus on multifamily goal 

targets, the Enterprises should address 

the unmet demand for affordable 

multifamily financing by focusing on 

the overall quality and effectiveness of 

project-specific efforts, prototypes and 

market-wide coverage. One trade 

association commented that the 


jdjones on DSK8KYBLC1PROD with RULES_2
55922 Federal Register / Vol. 75, No. 177 / Tuesday, September 14, 2010 / Rules and Regulations 

78 ‘‘Why do Small Multifamily Properties Bedevil 

Us?’’ Shekar Narasimhan, The Brookings Institution, 

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

11metropolitanpolicy_narasimhan.aspx. 

multifamily goals should continue to be 

measured as previously, stating that the 

proposed goals were too precise for 

these uncertain times. Two other trade 

associations commented that the 

proposed goal levels were too low, 

based on previous Enterprise 

performance. One trade association 

added that the Enterprises are now the 

principal source of financing for 

affordable rental housing, and FHFA 

should push them to remain as market 

leaders. Both Enterprises stated that the 

multifamily goal levels were too high, 

and that the demand for multifamily 

financing is too weak to support such 

levels. 

The final rule lowers the multifamily 

goal levels by approximately 25 percent 

from those in the proposed rule. The 

lower goal levels reflect the uncertain 

state of the overall multifamily market, 

the anticipation that the Enterprises will 

play a less dominant role in that market 

through 2011 as competition for market 

share increases from such traditional 

players as life insurance companies and 

banks, the decrease in properties 

qualifying for Enterprise multifamily 

financing as a result of steep declines in 

multifamily property prices and 

declining fundamentals in the market 

(e.g. debt service ratios and LTV ratios, 

deteriorating property conditions), and 

the adverse impact on multifamily 

production as a result of decreased 

LIHTC investment. 

As noted earlier, Freddie Mac’s 

multifamily volume has not kept pace 

with Fannie Mae’s multifamily volume 

since the beginning of the credit crisis 

in 2008, especially for very low-income 

units, due in part to Freddie Mac’s 

reliance on CMBS and structured 

purchases from banks and thrifts. 

Structured purchases are not readily 

available and are likely to reappear in 

only limited volumes in the near term. 

Pursuant to this final rule, CMBS units 

will no longer count toward the housing 

goals. 

Fannie Mae, on the other hand, is 

better positioned than Freddie Mac to 

finance affordable units through its flow 

business. For example, Fannie Mae has 

a division dedicated to purchasing 

mortgages on small multifamily 

properties (5 to 50 units). Smaller 

properties, in general, have higher 

percentages of affordable units than 

larger properties. Furthermore, Fannie 

Mae’s DUS program allows it to share 

credit losses with lenders. Mortgages on 

small multifamily properties, however, 

are often more at risk of delinquency 

and default than other multifamily 

mortgage property types. Mortgages on 

small multifamily properties are usually 

more expensive to originate and 

underwrite than mortgages on large 

properties because the costs, mostly 

fixed, are spread over fewer units.78 The 

DUS program helps Fannie Mae mitigate 

some of the credit risk of financing 

affordable multifamily units. 

Since Fannie Mae will likely finance 

significantly more multifamily units in 

2010 than Freddie Mac, consistent with 

the proposed rule, the final rule sets 

distinct goals for each of the Enterprises, 

as was done in previous years. FHFA 

anticipates that for low-income units 

and very low-income units, multifamily 

mortgages acquired by Freddie Mac will 

finance fewer units than multifamily 

mortgages acquired by Fannie Mae in 

2010 and 2011. The disparity will be 

even greater for very low-income units. 

Freddie Mac will likely purchase 

multifamily loans that finance about 

half as many very low-income units as 

will be financed by multifamily loans 

acquired by Fannie Mae in 2010 and 

2011. 

Unlike with the dual approach for the 

single-family goals described above, 

FHFA has not defined the multifamily 

goals as prospective market-based 

targets, with a provision to be measured 

retrospectively against actual market 

data. The availability of the necessary 

market data to measure affordability of 

rents in the multifamily market, 

prospectively or retrospectively, is less 

certain. As a result, consistent with the 

proposed rule, the final rule sets the 

multifamily goals in the traditional 

prospective volume of business manner. 

However, these goals remain subject to 

the statutory provisions enabling them 

to be adjusted, or providing relief from 

enforcement, if multifamily market 

conditions so require. 

FHFA considered previous 

multifamily performance and the 

current market in setting the 

multifamily goals in the final rule as 

well as revisions in the final rule which 

disallow counting CMBS toward 

multifamily goals in setting these 

revised goals. 

Multifamily low-income housing goal. 

Under the final rule, the annual goal for 

Fannie Mae’s purchases of mortgages on 

multifamily residential housing 

affordable to low-income families is at 

least 177,750 dwelling units for each of 

2010 and 2011, a decrease from the 

237,000 units set in the proposed rule. 

The annual goal for Freddie Mac’s 

purchases of mortgages on multifamily 

residential housing affordable to lowincome families is at least 161,250 such 

dwelling units for each of 2010 and 

2011, a decrease from the 215,000 units 

set in the proposed rule. 

Multifamily very low-income housing 

subgoal. Under the final rule, the annual 

subgoal for Fannie Mae’s purchases of 

mortgages on multifamily residential 

housing affordable to very low-income 

families is at least 42,750 dwelling units 

for each of 2010 and 2011, a decrease 

from the 57,000 units set in the 

proposed rule. The annual subgoal for 

Freddie Mac’s purchases of mortgages 

on multifamily residential housing 

affordable to very low-income families 

is at least 21,000 such dwelling units for 

each of 2010 and 2011, a decrease from 

the 28,000 units set in the proposed 

rule. 

G. Small Multifamily Properties 

HERA requires the Enterprises to 

report on purchases of mortgages 

secured by small multifamily properties. 

In the proposed rule, FHFA invited 

comment on whether additional 

requirements for small multifamily 

properties should be considered. 

Five commenters supported the 

establishment of small multifamily 

housing goals. They stated that this is an 

underserved market segment and should 

be a focus for the Enterprises. One 

policy advocacy group stated that a 

small multifamily housing goal would 

recognize the vast majority of renters 

who live in small multifamily 

properties. However, the commenter 

added that this still would not address 

the significant number of single-family 

rentals. A governmental entity stated 

that the goal should be expanded to 

include mixed-use residential properties 

that include one- to four-family 

buildings with ground floor commercial 

space. 

Three commenters opposed 

establishing a small multifamily 

housing goal. One trade association 

supported reporting requirements for 

small multifamily properties rather than 

establishing a goal, and recommended 

that FHFA meet with industry and 

banking representatives to explore small 

multifamily options. Both Enterprises 

stated that small multifamily housing 

requirements were not necessary at this 

time, citing the current state of the 

multifamily market and the financial 

condition of the Enterprises. 

FHFA has considered these comments 

and determined that the Enterprises 

should not be subject to small 

multifamily housing subgoals while in 

conservatorship. Such new subgoals 

could be viewed as encouraging 

substantial new activity in an area in 

which the Enterprises have limited 

operational capacity. Accordingly, the 


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Federal Register / Vol. 75, No. 177 / Tuesday, September 14, 2010 / Rules and Regulations 55923 

79 12 U.S.C. 4564. 80See 12 CFR 1282.16(b)(10). 

final rule does not establish such 

subgoals but, as provided by HERA, the 

Enterprises will be required to continue 

to report on their activity in this area. 

H. Discretionary Adjustment of Housing 

Goals—§ 1282.14 

Consistent with the requirements of 

section 1334 of the Safety and 

Soundness Act, as amended by HERA, 

and the proposed rule, § 1282.14 of the 

final rule provides for an Enterprise to 

petition the Director to reduce the level 

of any goal or subgoal,79 and sets forth 

the standards and procedures for 

consideration by the Director in 

determining whether to reduce a goal or 

subgoal level. 

One trade association supported the 

discretionary authority of the Director to 

adjust the housing goals upon petition 

by the Enterprises. However, this 

commenter requested that any such 

petitions and adjustments be made 

public to ensure transparent 

consideration of the full implications of 

any such request. 

FHFA considered this comment and 

determined that the final rule should 

not make any changes to this section of 

the proposed rule, because it already 

provides for public comment on such 

adjustments, consistent with the process 

required under section 1334 of the 

Safety and Soundness Act, as amended 

by HERA. 

I. General Counting Requirements— 

§ 1282.15 

In the final rule, § 1282.15 sets forth 

general requirements for the counting of 

Enterprise mortgage purchases toward 

the achievement of the housing goals. 

Except as described below, these 

requirements are unchanged from the 

general requirements set forth in the 

proposed rule. Performance under the 

single-family housing goals will be 

evaluated based on the percentage of all 

single-family, owner-occupied 

mortgages purchased by an Enterprise 

that meet a particular goal. Performance 

under the multifamily housing goals 

will be evaluated based on the total 

number of units that meet a particular 

goal and are financed by mortgages 

purchased by an Enterprise. 

The data estimation methodologies in 

this section have been revised to reflect 

changes in the housing goals for 2010 

and 2011. The methodology for 

estimating affordability for single-family 

rental properties has been eliminated as 

unnecessary because the single-family 

housing goals are measured in terms of 

mortgages rather than units. The option 

to exclude single-family owneroccupied units with missing data up to 

one percent of the total number of 

single-family owner-occupied units 

backing mortgages purchased by an 

Enterprise has been removed because it 

is no longer in use by either Enterprise. 

The option to request approval of 

alternative methodologies has also been 

removed. In light of the shorter time 

period for which the housing goals are 

being established, it should not be 

necessary to make changes to the rules 

for missing data prior to FHFA’s 

proposal of new housing goals for later 

years. 

Contract rent. Under the proposed 

rule, the definition of ‘‘contract rent’’ 

would clarify that market rent would be 

used as the anticipated rent for 

unoccupied units. 

Freddie Mac recommended that 

effective rent, not market rent, be used 

to determine affordability. Freddie Mac 

and other industry participants use 

effective rent, which averages nearly six 

percent below market rent, when 

underwriting multifamily loans and 

determining property value. The use of 

effective rent would align goals 

qualification rules with these market 

standards. 

FHFA understands that it is industry 

practice when estimating cash flow for 

underwriting purposes to use rents net 

of rent concessions. FHFA also 

understands that when rent concessions 

are given, the tenants pay less than the 

contract rent for that given period of 

time. However, since FHFA does not 

have sufficient information to project 

when and where rent concessions will 

be available to tenants or prospective 

tenants, FHFA uses contract rents as the 

basis for establishing affordability and 

the multifamily housing goal and 

subgoal targets. Since the affordability 

of units in properties associated with 

the Enterprises’ mortgage acquisitions 

will be scored against a housing goal 

based on contract rents, § 1282.15(d) of 

the final rule continues to require the 

Enterprises to use contract rents when 

calculating affordability. 

J. Special Counting Requirements— 

§ 1282.16 

Section 1282.16 of the final rule sets 

forth special counting requirements for 

the receipt of full, partial or no credit for 

a transaction toward achievement of the 

housing goals. A number of clarifying 

and conforming changes were proposed 

for this section to ensure consistent 

application of the counting rules among 

the Enterprises. The final rule adopts 

most of the changes from the proposed 

rule, except as described in more detail 

below. 

As in the proposed rule, § 1282.16(b) 

of the final rule makes clear that where 

a mortgage falls within one of the 

categories excluded from consideration 

under the housing goals, the mortgage is 

excluded even if it otherwise falls 

within one of the special counting rules 

in § 1282.16(c). For example, a nonconventional mortgage that is excluded 

from consideration pursuant to 

§ 1282.16(b)(3) could not be counted 

even if it otherwise would be counted 

as a seasoned mortgage under 

§ 1282.16(c)(6). Section 1282.16(c) also 

makes clear that where a transaction 

falls under more than one of the special 

counting rules in § 1282.16(c), all of the 

applicable requirements must be 

satisfied in order for the loan to be 

counted for purposes of the housing 

goals. 

Consistent with the proposed rule, 

§ 1282.16(b) of the final rule does not 

include the provision that excluded 

jumbo conforming loans from 

consideration for purposes of the 

housing goals.80 These loans had been 

excluded from consideration in the past 

because the goals had been established 

based on market estimates that preceded 

the increases in the conforming loan 

limits. Because the higher loan limits 

have been considered in the evaluation 

of the market for this final rule, it is no 

longer necessary to exclude such loans 

from consideration for purposes of the 

housing goals. 

Equity investments in low-income 

housing tax credits. Consistent with the 

proposed rule, § 1282.16(b)(1) of the 

final rule clarifies the existing rule to 

refer more specifically to equity 

investments in LIHTCs as being 

excluded from counting toward the 

housing goals. 

Four commenters supported the 

exclusion of Enterprise equity 

investments in LIHTCs from counting 

for purposes of the housing goals, and 

one commenter opposed such 

exclusion. One policy advocacy group 

commented that the lack of LIHTC 

investments is one reason for the short 

supply of affordable housing for very 

low-, low- and moderate-income 

families. Another policy advocacy group 

commented that the Enterprises should 

invest in LIHTCs but refrain from selling 

these investments in a manner that 

would destabilize the market. One trade 

association agreed that investments in 

LIHTCs should be a non-qualifying 

activity, but recommended that 

subordinate debt be allowed to fill the 

financing gap. 

FHFA recognizes that LIHTCs are an 

important component of the affordable 


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55924 Federal Register / Vol. 75, No. 177 / Tuesday, September 14, 2010 / Rules and Regulations 

81 12 U.S.C. 4562(a). 

housing financing structure. However, 

investments in LIHTCs have never been 

counted for purposes of the housing 

goals, and the final rule does not make 

any changes to that policy. 

Home Equity Conversion Mortgages. 

Consistent with the proposed rule, 

§ 1282.16(b)(3) of the final rule excludes 

all purchases of non-conventional 

single-family mortgages, including 

mortgages insured under HUD’s HECM 

insurance program, from counting for 

purposes of the housing goals. Certain 

non-conventional mortgages, including 

HECMs, have been counted for purposes 

of the goals in the past. HERA, however, 

amended section 1332(a) of the Safety 

and Soundness Act to restrict the singlefamily housing goals to include only 

conventional mortgages.81 This 

restriction does not preclude the 

Enterprises’ purchase of Chartercompliant non-conventional singlefamily mortgages, including HECMs, but 

such purchases will not count toward 

the housing goals—that is, such 

purchases are excluded from both the 

numerator and denominator in 

calculating goal performance. The final 

rule also clarifies that the existing 

exception that permitted certain nonconventional multifamily mortgages to 

count, continues to apply. 

Subordinate liens. Proposed 

§ 1282.16(b)(10) would have excluded 

purchases of subordinate lien mortgages 

(second mortgages) from counting for 

purposes of the housing goals, as does 

the final rule. This excludes ‘‘piggyback’’ liens that may be acquired by an 

Enterprise along with the corresponding 

first lien mortgage and subordinate lien 

mortgages, such as home equity loans, 

acquired separately by an Enterprise 

where the Enterprise does not also 

acquire the corresponding first lien 

mortgage. The proceeds of a home 

equity loan are not used for the 

purchase price of a property, and the 

mortgage does not satisfy or replace an 

existing mortgage and so does not count 

toward the housing goals. FHFA 

excluded piggy-back loans from 

counting toward the housing goals 

because such loans are not easily 

distinguishable from home equity loans. 

One trade association supported the 

general exclusion of subordinate or 

second lien mortgages, as well as first 

lien mortgages accompanied by 

simultaneous second lien mortgages, 

from counting for purposes of the 

housing goals. Four commenters 

supported providing housing goals 

credit for purchases of subordinate lien 

mortgages on multifamily properties. A 

trade association and a policy advocacy 

group stated that the Enterprises should 

be allowed to count subordinate liens 

on multifamily mortgages because it 

would help make low-cost capital 

available to support affordable lending. 

Fannie Mae commented that 

subordinate liens allow multifamily 

owners to tap additional equity for 

property rehabilitation without 

requiring refinancing or payment of a 

lockout waiver fee. Fannie Mae noted 

that subordinate liens could comprise 

five to ten percent of low- and very lowincome multifamily units. Freddie Mac 

commented that subordinate financing 

is an efficient and standard industry 

practice that is beneficial to both owners 

and residents of multifamily rental 

housing. Freddie Mac stated that the 

exclusion of subordinate multifamily 

loans from housing goal-eligibility 

would reduce the availability of capital 

for multifamily properties, including for 

property repairs, improvements and 

upgrades. 

Section 1282.16(b)(10) of the final 

rule excludes both single-family and 

multifamily subordinate liens from 

counting for purposes of the housing 

goals. This provision does not preclude 

the Enterprises’ purchase of Chartercompliant subordinate lien mortgages, 

but as with HECMs, such purchases do 

not count for purposes of the housing 

goals. Although multifamily mortgages 

that finance dwelling units affordable to 

low-income families generally count 

toward the housing goals, it is not clear 

whether all subordinate lien 

multifamily mortgages are for the 

purpose of financing dwelling units 

affordable to low-income families. 

Accordingly, the final rule does not 

allow credit for subordinate lien 

multifamily mortgages. FHFA may 

solicit further public comment on 

whether such mortgages, entered into in 

a manner that is safe and sound, and 

which finance repairs, upgrades and 

rehabilitation that benefit low-income 

residents, should be counted for 

purposes of the housing goals. 

Mortgages previously counted. 

Proposed § 1282.16(b)(11) would have 

made explicit the existing prohibition 

on counting mortgages for purposes of 

the housing goals if the mortgages had 

previously been counted for purposes of 

the performance of either Enterprise 

under the housing goals for a previous 

year. To limit excessively burdensome 

recordkeeping that could result, the 

proposed rule would have made clear 

that this limitation only extends back 

for five years. 

The Enterprises opposed this 

provision, commenting that compliance 

would be burdensome and operationally 

challenging. They stated that only a 

small number of loans would be 

identified, but the cost of compliance 

would be very high and inter-Enterprise 

cooperation in data sharing could 

impact the competitive structure 

between the Enterprises. 

In response to these comments and in 

view of the operational concerns 

expressed, the final rule retains the 

restriction on counting an Enterprise’s 

own mortgages more than once, which 

shall only extend back for five years. 

The final rule does not extend this 

general restriction to mortgages the 

other Enterprise may have counted in a 

previous year. 

Certificate of occupancy. Proposed 

§ 1282.16(b)(12) would have excluded 

purchases of mortgages secured by 

properties that have not been certified 

as ready for occupancy from 

consideration for purposes of the 

housing goals. 

Fannie Mae requested clarification on 

this counting issue for large multifamily 

properties that may be completed and 

certified for occupancy in stages. In 

particular, Fannie Mae stated that the 

rule should clarify whether the entire 

project is excluded if any part is not yet 

certified, or if the certified units may be 

counted. Fannie Mae also stated that the 

rule should clarify whether housing 

goals credit would be received in the 

year of certification or in the year of 

purchase. 

In the final rule, to avoid splitting 

mortgage acquisitions across calendar 

reporting years, mortgages will be 

reported by an Enterprise, and receive 

housing goals credit where applicable, 

in the calendar year that all units are 

certified for occupancy. This may result 

in a delay in the reporting of a mortgage 

where not all units are certified for 

occupancy at the time of mortgage 

acquisition by the Enterprise. Mortgages 

with a reporting delay due to lack of full 

certification for occupancy will be 

excluded from both the numerator and 

denominator of the multifamily housing 

goals calculations for the year of 

acquisition. 

Private Label Securities. As in the 

proposed rule, § 1282.16(b)(13) of the 

final rule excludes PLS from counting 

for purposes of the housing goals. 

As discussed in the proposed 

rulemaking, historically, the 

Enterprises—particularly Freddie Mac— 

relied on PLS purchases to help them 

achieve certain affordable housing goals. 

Freddie Mac met the 2005 and 2006 

affordable housing goals and subgoals in 

part through its purchases of AAA-rated 

tranches of PLS backed by subprime 

mortgages that were targeted to satisfy 

goals and subgoals. As house price 

appreciation and rising interest rates 


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82See 12 U.S.C. 4568, 4569. 

reduced housing affordability, PLS 

proliferated as the subprime share of the 

market grew to more than 20 percent. 

Fannie Mae and Freddie Mac began to 

follow suit in response to declining 

market share and in pursuit of higher 

profits. The Enterprises not only 

modified their own underwriting 

standards, but also bought hundreds of 

billions of dollars’ worth of AAA-rated 

tranches of subprime and Alt-A PLS for 

the yield and, in certain instances, to 

satisfy specific housing goals and 

subgoals. 

The results of providing large-scale 

funding for such loans were adverse for 

borrowers who entered into mortgages 

that did not sustain homeownership and 

for the Enterprises themselves. 

Although Fannie Mae and Freddie Mac 

have a combined 57 percent share of 

mortgages outstanding in their 

guaranteed portfolio, the mortgages in 

that portfolio account for only 25 

percent of serious delinquencies. 

However, while PLS account for 12 

percent of all mortgages outstanding, 

PLS account for 34 percent of serious 

delinquencies. As delinquencies in PLS 

portfolios triggered downgrades, 90 

percent of the PLS holdings of the 

Enterprises experienced a downgrade. 

In light of that record, the final rule, like 

the proposed rule, excludes PLS from 

consideration under the housing goals. 

In addition to the recent dismal 

performance of PLS, it is reasonable to 

separate any future growth of the PLS 

market from the Enterprises’ housing 

goals. The housing goals reflect 

Congress’ concern that the Enterprises’ 

charter mission to support the stability, 

liquidity and affordability of the 

secondary market not be managed to the 

detriment or neglect of goal-eligible 

mortgages. In this way the goals may be 

seen as a mechanism to ensure that each 

Enterprise serves all segments of the 

mortgage market available to it. 

Accordingly, even to the extent that a 

non-GSE secondary mortgage market 

returns, loans backing new or seasoned 

PLS will not count in either the 

numerator or the denominator for 

purposes of the housing goals. 

As in the proposed rule, the final rule 

also excludes CMBS from counting 

towards the housing goals. 

FHFA invited comments in the 

proposed rulemaking on the proposed 

exclusion of PLS, and on alternatives to 

not counting PLS mortgages for 

purposes of the housing goals. One 

alternative discussed was to allow PLS 

mortgages to be counted if an 

appropriate senior Enterprise official 

certified that the mortgages are 

compliant with all existing regulations 

regarding good mortgage practices, and 

with the interagency guidance on 

subprime lending and non-traditional 

loans. FHFA also requested comments 

on whether CMBS should be treated 

differently from other PLS for purposes 

of the housing goals. 

Five commenters supported excluding 

PLS, while Freddie Mac favored 

inclusion of PLS in the housing goals if 

due diligence on the characteristics of 

the loans backing the securities is 

conducted. The MBA supported 

excluding CMBS for goals credit, while 

three other commenters favored 

including CMBS. One trade association 

commented that Enterprise participation 

in the market has expanded liquidity to 

the apartment sector, and supported 

housing goals credit for the purchase of 

CMBS for multifamily properties. The 

commenter recommended that a 

reduced percentage of units be allocated 

to CMBS. Both Enterprises opposed the 

exclusion of purchases of CMBS for 

housing goals purposes. Fannie Mae 

stated that maturing loans in CMBS 

securities are being extended by special 

servicers, reducing the number of loans 

available for refinancing or for sale. 

Freddie Mac commented that it has 

accomplished small multifamily 

financing through structured pool deals 

and CMBS purchases to mitigate the 

higher risk of small multifamily finance. 

Freddie Mac also commented that these 

avenues of finance are not available in 

the current market, but they bring 

liquidity to the CMBS market and 

should receive goals credit. 

Consistent with the exclusion of 

single-family PLS from the housing 

goals, the final rule does not count 

CMBS for purposes of the housing goals. 

While CMBS historically have helped 

the Enterprises to meet multifamily 

housing goals, purchases of CMBS do 

not add liquidity to the multifamily 

market in the same way as the direct 

purchase and securitization of 

multifamily mortgages by the 

Enterprises. 

Housing Trust Fund and Capital 

Magnet Fund. As in the proposed rule, 

and pursuant to HERA, § 1282.16(b)(14) 

of the final rule provides that Enterprise 

contributions to the Housing Trust Fund 

and the Capital Magnet Fund and 

mortgage purchases funded with such 

grant amounts shall not be counted for 

purposes of the housing goals.82

REMICs. Consistent with the proposed 

rule, § 1282.16(c) of the final rule no 

longer includes real estate mortgage 

investment conduits (REMICs) as 

mortgage purchases for purposes of the 

housing goals, consistent with the 

general exclusion of PLS under 

§ 1282.16(b)(13). In addition, 

§ 1282.16(c) eliminates consideration of 

expiring assistance contracts, reflecting 

the changes under HERA to the former 

special affordable housing goal. 

Risk-sharing. The proposed rule 

would not have changed existing 

§ 1282.16(c)(3), which provides that a 

mortgage purchase under a risk-sharing 

arrangement between an Enterprise and 

a Federal agency counts for purposes of 

the housing goals if the Enterprise was 

responsible for a substantial amount of 

the risk, specified as at least 50 percent 

of the risk. Section 1282.16(c)(3) of the 

final rule does not include a specific 

percent that would constitute a 

‘‘substantial amount.’’ The change is not 

intended to affect the substantive 

requirement that an Enterprise hold a 

substantial portion of the risk in order 

for units to be counted for purposes of 

the housing goals, but is intended to 

provide more flexibility in determining 

on a case-by-case basis whether a 

particular risk-sharing program meets 

that requirement. 

Cooperative housing and 

condominiums. Section 1282.16(c)(5) is 

unchanged from the proposed rule and 

amends the existing provisions 

regarding cooperative housing and 

condominiums to reflect HERA’s 

treatment of single-family housing and 

multifamily housing under separate 

goals. 

Mortgage revenue bonds. As in the 

proposed rule, § 1282.16(c)(8) of the 

final rule removes current limitations on 

counting mortgage revenue bonds 

related to the source of funds for 

repayment and the presence of 

additional credit enhancements. An 

Enterprise is required to have sufficient 

information available to determine the 

eligibility of any underlying mortgages 

before counting such mortgages or units 

for purposes of the housing goals. 

Two policy advocacy groups and the 

Enterprises supported these proposed 

changes to the counting rules. One 

policy advocacy group supported 

Enterprise investment in housing bonds 

as a means to stabilize and improve 

pricing in the market. The other policy 

advocacy group commented that the 

inclusion of eligible mortgage revenue 

bonds is important and helpful, because 

these bonds are often a major source of 

lower-cost capital for the preservation 

and construction of affordable rental 

housing units. Fannie Mae supported 

the inclusion of mortgage revenue 

bonds, and recommended that the rule 

be modified to provide full credit for 

dwellings financed by tax exempt or 

taxable bonds issued by state and local 

HFAs. Freddie Mac commented that the 

proposed provision will encourage the 


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Enterprises to continue to support state 

and local HFAs through the purchase of 

single-family and multifamily mortgage 

revenue bonds. 

FHFA does not believe that a further 

broadening of the mortgage revenue 

bond counting rules is appropriate 

while the Enterprises are in 

conservatorship. 

Loan modifications. Proposed 

§ 1282.16(c)(10) would have treated 

certain modifications of single-family 

loans held in an Enterprise’s portfolio or 

in a pool backing a security guaranteed 

by an Enterprise as mortgage purchases 

for purposes of the housing goals. Only 

modifications undertaken under the 

Making Home Affordable (MHA) 

program would have been eligible for 

inclusion. 

Two commenters recommended that 

this counting treatment be expanded to 

include non-MHA single-family loan 

modifications and multifamily loan 

modifications. One trade association 

recommended the inclusion of 

multifamily loan modifications, and 

stated that as a result of falling property 

values and stress on rental income due 

to the extreme economic and 

employment issues faced by multifamily 

property owners, many owners will not 

be able to refinance their loans. Freddie 

Mac recommended that multifamily 

loan modifications, as well as singlefamily loan modifications outside of 

MHA, be eligible to count toward the 

housing goals. 

The final rule adjusting the levels of 

the housing goals for 2009, which 

generally lowered the housing goal 

levels, allowed credit for MHA 

modifications. See 74 FR 39873, 39898 

(Aug. 10, 2009). Proposed 

§ 1282.16(c)(10) would have retained 

this provision. Loan modifications, 

however, are not readily incorporated 

into market estimates, which makes it 

difficult to set housing goals that reflect 

the actual market. Accordingly, the final 

rule provides that only permanent MHA 

loan modifications will be counted as 

mortgage purchases for purposes of the 

housing goals. For 2010, only 

modifications that were both initiated 

and made permanent in 2010 will be 

counted for purposes of the housing 

goals. For 2011, only modifications that 

were initiated in 2010 or 2011 and made 

permanent in 2011 will be counted for 

purposes of the housing goals. 

Modifications that were opened on a 

trial basis but not made permanent in 

2010 or 2011 will not be given credit 

toward the goals. 

In addition, all such permanent MHA 

loan modifications will be treated as 

refinance mortgages in 2010 and 2011, 

rather than being treated in accordance 

with the original purpose of the loan. 

Loan modifications are more similar to 

refinancing mortgages than to purchase 

money mortgages. A loan modification 

changes the terms of the loan but 

involves the same property and the 

same borrower. A loan modification 

does not involve a new home purchase. 

Thus, it is more appropriate to treat loan 

modifications as refinancing mortgages 

than as home purchase mortgages. 

Accordingly, a modification of a lowincome home purchase mortgage will 

not be counted toward the low-income 

home purchase goal, as it was in 2009. 

Rather, it will be counted in calculating 

performance on the low-income 

refinance goal. As a result, performance 

on the three home purchase goals for 

2010–11 will not be affected by loan 

modifications, but performance on the 

low-income refinance goal will be 

affected. That is, all permanent MHA 

loan modifications will be included in 

the denominator, and all permanent 

MHA loan modifications for low-income 

families will be included in the 

numerator in calculating performance 

on the low-income refinance goal in 

2010 and 2011. 

FHFA will consider providing credit 

for MHA loan modifications in the final 

rulemaking on the Duty to Serve 

requirements of HERA. 

HOEPA mortgages and mortgages 

with unacceptable terms or conditions. 

Consistent with the proposed rule, 

§ 1282.16(d) of the final rule relocates 

existing provisions regarding HOEPA 

mortgages and mortgages with 

unacceptable terms or conditions from 

current § 1282.16(c). Placing these 

provisions in a separate paragraph 

reflects the fact that unlike other types 

of mortgage purchases, HOEPA 

mortgages and mortgages with 

unacceptable terms and conditions must 

be counted in the denominator as 

mortgage purchases but can never be 

counted in the numerator, regardless of 

whether the mortgages would otherwise 

qualify based on the affordability and 

other counting criteria. 

Multifamily property conversion. 

Some commenters suggested that FHFA 

revise the counting rules to deny 

housing goal credit for multifamily 

loans that aid the conversion of 

properties from being affordable to 

market rate properties, at which point 

the units, although initially scored as 

affordable, would no longer be 

affordable. FHFA expects to address this 

issue in a separate rulemaking following 

the implementation of this final rule. 

K. Affordability Definitions—§§ 1282.17 

Through 1282.19 

Consistent with the proposed rule, 

§ 1282.17 of the final rule sets forth 

definitions and establishes cutoff points 

or boundaries for the statutory and 

traditionally defined levels of 

affordability based on AMI for owners 

and tenants of rental units where the 

family size and income are known to the 

Enterprise. In addition to the levels of 

affordability that currently appear at 

§ 1282.17, this section includes an 

additional paragraph (e) for extremely 

low-income borrowers and tenants with 

income at or below 30 percent of AMI 

with adjustments for family size. 

Although the Enterprise housing goals 

do not specifically target extremely lowincome borrowers or tenants, the final 

rule establishes cutoffs for determining 

such affordability to facilitate any 

reporting or analysis of such data that is 

required. 

As in the proposed rule, § 1282.18 of 

the final rule sets forth definitions and 

establishes cutoff points or boundaries 

for the statutory and traditionally 

defined levels of affordability based on 

AMI for tenants of rental units where 

the family size is not known to the 

Enterprise. In addition to the levels of 

affordability that currently appear at 

§ 1282.18, this section includes an 

additional paragraph (e) for extremely 

low-income tenants with income at or 

below 30 percent of AMI with 

adjustments for unit size. 

As in the proposed rule, § 1282.19 of 

the final rule sets forth definitions and 

establishes cutoff points or boundaries 

for the statutory and traditionally 

defined levels of affordability based on 

AMI for tenants of rental units where 

tenant income is not known to the 

Enterprise. In addition to the levels of 

affordability that currently appear at 

§ 1282.19, this section includes an 

additional paragraph (e) for extremely 

low-income tenants with income at or 

below 30 percent of AMI with 

adjustments for unit size. 

L. Housing Goals Enforcement— 

§§ 1282.20 and 1282.21 

Consistent with the proposed rule, 

§ 1282.20 of the final rule provides that 

the Director shall determine whether an 

Enterprise has met the housing goals, in 

accordance with the standards 

established under the Safety and 

Soundness Act, as amended by HERA 

and this final rule. 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 provide 

notice, in writing, to the Enterprise of 


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such preliminary determination in 

accordance with 12 U.S.C. 4566(b). 

As in the proposed rule, § 1282.21 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 

requirement to submit a housing plan is 

at the discretion of the Director. 

M. Reporting Requirements—Subpart D 

As in the proposed rule, subpart D of 

the final rule relocates existing 

Enterprise reporting requirements from 

part 81, subpart E of title 24 of the Code 

of Federal Regulations. Section 1282.65 

relocates an existing regulatory 

provision on data certification from 24 

CFR 81.102. These provisions have 

continued in effect pursuant to section 

1302 of HERA. Upon the effective date 

of the final housing goals rule, the 

reporting requirement and Enterprise 

data integrity provisions in 24 CFR part 

81 will no longer be in effect. 

The proposed rule included various 

conforming changes throughout subpart 

D. Proposed § 1282.62(b) would have 

included a requirement for the 

Enterprises to submit loan-level 

mortgage data on a quarterly basis. 

Previously, such submissions were 

required only semi-annually. Proposed 

§ 1282.62(c) would have revised the due 

date for submission to FHFA of the 

required quarterly Mortgage Reports 

from 60 days after the end of the quarter 

to 45 days. Proposed § 1282.63 would 

have revised the due date for fourth 

quarter Annual Mortgage Report and the 

Annual Housing Activities Reports 

(AHARs) from 75 days after the end of 

the calendar year to 60 days. 

In its comment letter, Fannie Mae 

requested that the due dates for the 

quarterly and Annual Mortgage Reports 

and loan-level data submissions remain 

unchanged. Fannie Mae stated that 

shortening the time period would 

adversely impact its quarterly data 

quality reviews and prevent 

reconciliation with its annual Form 10– 

K, which is due within 60 days of the 

end of the calendar year. 

FHFA acknowledges Fannie Mae’s 

concerns and, accordingly, the final rule 

retains the current due dates for the 

quarterly and Annual Mortgage Reports 

and AHARs. Consistent with the 

proposed rule, the final rule requires 

that the loan-level data be submitted on 

a quarterly basis. 

As in the proposed rule, § 1282.63 of 

the final rule requires that the 

Enterprises make their AHARs available 

to the public online. FHFA does not 

expect that the requirement to make 

available online information that is 

already publicly available will be 

burdensome to the Enterprises. As in 

the proposed rule, § 1282.64 of the final 

rule eliminates the requirement for the 

Enterprises to submit information that is 

typically made available to the public 

by each Enterprise. The Director may 

continue to request such reports, 

information and data as the Director 

deems necessary. Consistent with the 

proposed rule, subpart D of the final 

rule does not include the provisions 

regarding submission of additional data 

or reports and the addresses for 

submission of information that were 

formerly found at 24 CFR 81.65 and 

81.66. Section 1282.64 is sufficiently 

broad to encompass any requests for 

additional data or reports that the 

Director deems necessary. 

Consistent with the proposed rule, 

§ 1282.65 of the final rule simplifies the 

detailed procedures laid out in the 

previous data integrity provision found 

at 24 CFR 81.102. FHFA will implement 

the data integrity process pursuant to its 

general regulatory authority over the 

Enterprises. FHFA expects that the 

Enterprises will continue to work 

cooperatively with FHFA to identify 

and resolve any discrepancies or errors 

in the housing goals data reported to 

FHFA. Section 1282.65 maintains the 

most important aspects of the data 

integrity process in the regulation, 

including the requirement that the 

Enterprises certify the accuracy of their 

submissions. 

One trade association requested that 

FHFA consider clarifying the 

procedures for certification of 

submissions, and recommended that 

measures should be established to 

ensure the Enterprises submit accurate, 

truthful and complete information. 

FHFA currently requires data submitted 

for the calendar year housing goals to be 

certified as true, correct and complete 

by a corporate officer with the authority 

to sign for the Enterprise. This 

certification was required beginning 

with the submission of 2005 mortgage 

data to align with the customary 

practice of regulators of financial 

institutions, which require certification 

as a means of ensuring corporate 

accuracy in, and accountability for, the 

financial information provided by a 

corporation to its regulators. 

N. Book-Entry Procedures—Part 1249 

As in the proposed rule, part 1249 of 

the final rule relocates existing 

regulatory provisions on book-entry 

procedures from part 81, subpart H of 

title 24 of the Code of Federal 

Regulations. These provisions have 

continued in effect pursuant to section 

1302 of HERA. Upon the effective date 

of the final housing goals rule, the bookentry procedures in 24 CFR part 81 will 

no longer be in effect. 

As in the proposed rule, the final rule 

also relocates definitions that are 

currently found in § 1282.2 and that are 

applicable only to the book-entry 

procedures in part 1249 to a new section 

1249.10 in that part. The final rule 

makes conforming changes throughout 

the part, including a clarification that 

the waiver provision in § 1249.17 

applies only to the book-entry 

provisions in part 1249. Section 1249.15 

has been amended to reflect the transfer 

of authority from the Secretary of HUD 

to the Director. The final rule also 

corrects several typographical errors 

that were present in the proposed rule. 

The final rule does not make any 

changes to the substance of the bookentry provisions. 

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 entities 

because the regulation is applicable 

only to the Enterprises, which are not 

small entities for purposes of the 

Regulatory Flexibility Act. 

List of Subjects 

12 CFR Part 1249 

Federal Reserve System, Securities. 

12 CFR Part 1282 

Mortgages, Reporting and 

recordkeeping requirements. 

■ Accordingly, for the reasons stated in 

the preamble, under the authority of 12 

U.S.C. 4511, 4513, 4526, FHFA amends 

chapter XII of title 12 of the Code of 

Federal Regulations as follows: 


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55928 Federal Register / Vol. 75, No. 177 / Tuesday, September 14, 2010 / Rules and Regulations 

■ 1. Part 1249 is added to subchapter C 

to read as follows: 

CHAPTER XII—FEDERAL HOUSING 

FINANCE AGENCY 

SUBCHAPTER C—ENTERPRISES 

PART 1249—BOOK–ENTRY 

PROCEDURES 

Sec. 

1249.10 Definitions. 

1249.11 Maintenance of Enterprise 

Securities. 

1249.12 Law governing rights and 

obligations of United States, Federal 

Reserve Banks, and Enterprises; rights of 

any person against United States, Federal 

Reserve Banks, and Enterprises; law 

governing other interests. 

1249.13 Creation of Participant’s Security 

Entitlement; security interests. 

1249.14 Obligations of Enterprises; no 

adverse claims. 

1249.15 Authority of Federal Reserve 

Banks. 

1249.16 Withdrawal of Eligible Book-entry 

Enterprise Securities for conversion to 

definitive form. 

1249.17 Waiver of regulations. 

1249.18 Liability of Enterprises and Federal 

Reserve Banks. 

1249.19 Additional provisions. 

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

4513, 4526. 

§ 1249.10 Definitions. 

(a) General. Unless the context 

requires otherwise, terms used in this 

part that are not defined in this part, 

have the meanings as set forth in 31 CFR 

357.2 and in 12 CFR 1282.1. Definitions 

and terms used in 31 CFR part 357 

should read as though modified to 

effectuate their application to the 

Enterprises. 

(b) Other terms. As used in this part, 

the term: 

Book-entry Enterprise Security means 

an Enterprise Security issued or 

maintained in the Book-entry System. 

Book-entry Enterprise Security also 

means the separate interest and 

principal components of a Book-entry 

Enterprise Security if such security has 

been designated by the Enterprise as 

eligible for division into such 

components and the components are 

maintained separately on the books of 

one or more Federal Reserve Banks. 

Book-entry System means the 

automated book-entry system operated 

by the Federal Reserve Banks acting as 

the fiscal agent for the Enterprises, on 

which Book-entry Enterprise Securities 

are issued, recorded, transferred and 

maintained in book-entry form. 

Definitive Enterprise Security means 

an Enterprise Security in engraved or 

printed form, or that is otherwise 

represented by a certificate. 

Eligible Book-entry Enterprise 

Security means a Book-entry Enterprise 

Security issued or maintained in the 

Book-entry System which by the terms 

of its Securities Documentation is 

eligible to be converted from book-entry 

form into definitive form. 

Enterprise Security means any 

security or obligation of Fannie Mae or 

Freddie Mac issued under its respective 

Charter Act in the form of a Definitive 

Enterprise Security or a Book-entry 

Enterprise Security. 

Entitlement Holder means a Person or 

an Enterprise to whose account an 

interest in a Book-entry Enterprise 

Security is credited on the records of a 

Securities Intermediary. 

Federal Reserve Bank Operating 

Circular means the publication issued 

by each Federal Reserve Bank that sets 

forth the terms and conditions under 

which the Reserve Bank maintains 

Book-entry Securities accounts 

(including Book-entry Enterprise 

Securities) and transfers Book-entry 

Securities (including Book-entry 

Enterprise Securities). 

Participant means a Person or 

Enterprise that maintains a Participant’s 

Securities Account with a Federal 

Reserve Bank. 

Person, as used in this part, means 

and includes an individual, corporation, 

company, governmental entity, 

association, firm, partnership, trust, 

estate, representative, and any other 

similar organization, but does not mean 

or include the United States, an 

Enterprise, or a Federal Reserve Bank. 

Revised Article 8 has the same 

meaning as in 31 CFR 357.2. 

Securities Documentation means the 

applicable statement of terms, trust 

indenture, securities agreement or other 

documents establishing the terms of a 

Book-entry Enterprise Security. 

Security means any mortgage 

participation certificate, note, bond, 

debenture, evidence of indebtedness, 

collateral-trust certificate, transferable 

share, certificate of deposit for a 

security, or, in general, any interest or 

instrument commonly known as a 

‘‘security’’. 

Transfer message means an 

instruction of a Participant to a Federal 

Reserve Bank to effect a transfer of a 

Book-entry Security (including a Bookentry Enterprise Security) maintained in 

the Book-entry System, as set forth in 

Federal Reserve Bank Operating 

Circulars. 

§ 1249.11 Maintenance of Enterprise 

Securities. 

An Enterprise Security may be 

maintained in the form of a Definitive 

Enterprise Security or a Book-entry 

Enterprise Security. A Book-entry 

Enterprise Security shall be maintained 

in the Book-entry System. 

§ 1249.12 Law governing rights and 

obligations of United States, Federal 

Reserve Banks, and Enterprises; rights of 

any person against United States, Federal 

Reserve Banks, and Enterprises; law 

governing other interests. 

(a) Except as provided in paragraph 

(b) of this section, the following rights 

and obligations are governed solely by 

the book-entry regulations contained in 

this part, the Securities Documentation, 

and Federal Reserve Bank Operating 

Circulars (but not including any choice 

of law provisions in the Securities 

Documentation to the extent such 

provisions conflict with the Book-entry 

regulations contained in this part): 

(1) The rights and obligations of an 

Enterprise and the Federal Reserve 

Banks with respect to: 

(i) A Book-entry Enterprise Security 

or Security Entitlement; and 

(ii) The operation of the Book-entry 

System as it applies to Enterprise 

Securities; and 

(2) The rights of any Person, including 

a Participant, against an Enterprise and 

the Federal Reserve Banks with respect 

to: 

(i) A Book-entry Enterprise Security 

or Security Entitlement; and 

(ii) The operation of the Book-entry 

System as it applies to Enterprise 

Securities; 

(b) A security interest in a Security 

Entitlement that is in favor of a Federal 

Reserve Bank from a Participant and 

that is not recorded on the books of a 

Federal Reserve Bank pursuant to 

§ 1249.13(c)(1), is governed by the law 

(not including the conflict-of-law rules) 

of the jurisdiction where the head office 

of the Federal Reserve Bank maintaining 

the Participant’s Securities Account is 

located. A security interest in a Security 

Entitlement that is in favor of a Federal 

Reserve Bank from a Person that is not 

a Participant, and that is not recorded 

on the books of a Federal Reserve Bank 

pursuant to § 1249.13(c)(1), is governed 

by the law determined in the manner 

specified in paragraph (d) of this 

section. 

(c) If the jurisdiction specified in the 

first sentence of paragraph (b) of this 

section is a State that has not adopted 

Revised Article 8, then the law specified 

in paragraph (b) of this section shall be 

the law of that State as though Revised 

Article 8 had been adopted by that 

State. 

(d) To the extent not otherwise 

inconsistent with this part, and 

notwithstanding any provision in the 

Securities Documentation setting forth a 


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choice of law, the provisions set forth in 

31 CFR 357.11 regarding law governing 

other interests apply and shall be read 

as though modified to effectuate the 

application of 31 CFR 357.11 to the 

Enterprises. 

§ 1249.13 Creation of Participant’s 

Security Entitlement; security interests. 

(a) A Participant’s Security 

Entitlement is created when a Federal 

Reserve Bank indicates by book-entry 

that a Book-entry Enterprise Security 

has been credited to a Participant’s 

Securities Account. 

(b) A security interest in a Security 

Entitlement of a Participant in favor of 

the United States to secure deposits of 

public money, including without 

limitation deposits to the Treasury tax 

and loan accounts, or other security 

interest in favor of the United States that 

is required by Federal statute, 

regulation, or agreement, and that is 

marked on the books of a Federal 

Reserve Bank is thereby effected and 

perfected, and has priority over any 

other interest in the securities. Where a 

security interest in favor of the United 

States in a Security Entitlement of a 

Participant is marked on the books of a 

Federal Reserve Bank, such Federal 

Reserve Bank may rely, and is protected 

in relying, exclusively on the order of an 

authorized representative of the United 

States directing the transfer of the 

security. For purposes of this paragraph, 

an ‘‘authorized representative of the 

United States’’ is the official designated 

in the applicable regulations or 

agreement to which a Federal Reserve 

Bank is a party, governing the security 

interest. 

(c)(1) An Enterprise and the Federal 

Reserve Banks have no obligation to 

agree to act on behalf of any Person or 

to recognize the interest of any 

transferee of a security interest or other 

limited interest in favor of any Person 

except to the extent of any specific 

requirement of Federal law or regulation 

or to the extent set forth in any specific 

agreement with the Federal Reserve 

Bank on whose books the interest of the 

Participant is recorded. To the extent 

required by such law or regulation or set 

forth in an agreement with a Federal 

Reserve Bank, or the Federal Reserve 

Bank Operating Circular, a security 

interest in a Security Entitlement that is 

in favor of a Federal Reserve Bank, an 

Enterprise, or a Person may be created 

and perfected by a Federal Reserve Bank 

marking its books to record the security 

interest. Except as provided in 

paragraph (b) of this section, a security 

interest in a Security Entitlement 

marked on the books of a Federal 

Reserve Bank shall have priority over 

any other interest in the securities. 

(2) In addition to the method 

provided in paragraph (c)(1) of this 

section, a security interest, including a 

security interest in favor of a Federal 

Reserve Bank, may be perfected by any 

method by which a security interest 

may be perfected under applicable law 

as described in § 1249.12(b) or (d). The 

perfection, effect of perfection or nonperfection and priority of a security 

interest are governed by such applicable 

law. A security interest in favor of a 

Federal Reserve Bank shall be treated as 

a security interest in favor of a clearing 

corporation in all respects under such 

law, including with respect to the effect 

of perfection and priority of such 

security interest. A Federal Reserve 

Bank Operating Circular shall be treated 

as a rule adopted by a clearing 

corporation for such purposes. 

§ 1249.14 Obligations of Enterprises; no 

adverse claims. 

(a) Except in the case of a security 

interest in favor of the United States or 

a Federal Reserve Bank or otherwise as 

provided in § 1249.13(c)(1), for the 

purposes of this part, each Enterprise 

and the Federal Reserve Banks shall 

treat the Participant to whose Securities 

Account an interest in a Book-entry 

Enterprise Security has been credited as 

the person exclusively entitled to issue 

a Transfer Message, to receive interest 

and other payments with respect thereof 

and otherwise to exercise all the rights 

and powers with respect to such 

Security, notwithstanding any 

information or notice to the contrary. 

Neither the Federal Reserve Banks nor 

an Enterprise shall be liable to a Person 

asserting or having an adverse claim to 

a Security Entitlement or to a Bookentry Enterprise Security in a 

Participant’s Securities Account, 

including any such claim arising as a 

result of the transfer or disposition of a 

Book-entry Enterprise Security by a 

Federal Reserve Bank pursuant to a 

Transfer Message that the Federal 

Reserve Bank reasonably believes to be 

genuine. 

(b) The obligation of the Enterprise to 

make payments (including payments of 

interest and principal) with respect to 

Book-entry Enterprise Securities is 

discharged at the time payment in the 

appropriate amount is made as follows: 

(1) Interest or other payments on 

Book-entry Enterprise Securities is 

either credited by a Federal Reserve 

Bank to a Funds Account maintained at 

such Federal Reserve Bank or otherwise 

paid as directed by the Participant. 

(2) Book-entry Enterprise Securities 

are redeemed in accordance with their 

terms by a Federal Reserve Bank 

withdrawing the securities from the 

Participant’s Securities Account in 

which they are maintained and by either 

crediting the amount of the redemption 

proceeds, including both redemption 

proceeds, where applicable, to a Funds 

Account at such Federal Reserve Bank 

or otherwise paying such redemption 

proceeds as directed by the Participant. 

No action by the Participant ordinarily 

is required in connection with the 

redemption of a Book-entry Enterprise 

Security. 

§ 1249.15 Authority of Federal Reserve 

Banks. 

(a) Each Federal Reserve Bank is 

hereby authorized as fiscal agent of the 

Enterprises to perform the following 

functions with respect to the issuance of 

Book-entry Enterprise Securities offered 

and sold by an Enterprise to which this 

part applies, in accordance with the 

Securities Documentation, Federal 

Reserve Bank Operating Circulars, this 

part, and any procedures established by 

the Director consistent with these 

authorities: 

(1) To service and maintain Bookentry Enterprise Securities in accounts 

established for such purposes; 

(2) To make payments with respect to 

such securities, as directed by the 

Enterprise; 

(3) To effect transfer of Book-entry 

Enterprise Securities between 

Participants’ Securities Accounts as 

directed by the Participants; 

(4) To effect conversions between 

Book-entry Enterprise Securities and 

Definitive Enterprise Securities with 

respect to those securities as to which 

conversion rights are available pursuant 

to the applicable Securities 

Documentation; and 

(5) To perform such other duties as 

fiscal agent as may be requested by the 

Enterprise. 

(b) Each Federal Reserve Bank may 

issue Federal Reserve Bank Operating 

Circulars not inconsistent with this part, 

governing the details of its handling of 

Book-entry Enterprise Securities, 

Security Entitlements, and the operation 

of the Book-entry System under this 

part. 

§ 1249.16 Withdrawal of Eligible Bookentry Enterprise Securities for conversion 

to definitive form. 

(a) Eligible Book-entry Enterprise 

Securities may be withdrawn from the 

Book-entry System by requesting 

delivery of like Definitive Enterprise 

Securities. 

(b) A Federal Reserve Bank shall, 

upon receipt of appropriate instructions 

to withdraw Eligible Book-entry 


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Enterprise Securities from book-entry in 

the Book-entry System, convert such 

securities into Definitive Enterprise 

Securities and deliver them in 

accordance with such instructions. No 

such conversion shall affect existing 

interests in such Enterprise Securities. 

(c) All requests for withdrawal of 

Eligible Book-entry Enterprise Securities 

must be made prior to the maturity or 

date of call of the securities. 

(d) Enterprise Securities which are to 

be delivered upon withdrawal may be 

issued in either registered or bearer 

form, to the extent permitted by the 

applicable Securities Documentation. 

§ 1249.17 Waiver of regulations. 

The Director reserves the right, in the 

Director’s discretion, to waive any 

provision(s) of this part in any case or 

class of cases for the convenience of an 

Enterprise, the United States, or in order 

to relieve any person(s) of unnecessary 

hardship, if such action is not 

inconsistent with law, does not 

adversely affect any substantial existing 

rights, and the Director is satisfied that 

such action will not subject an 

Enterprise or the United States to any 

substantial expense or liability. 

§ 1249.18 Liability of Enterprises and 

Federal Reserve Banks. 

An Enterprise and the Federal Reserve 

Banks may rely on the information 

provided in a Transfer Message, and are 

not required to verify the information. 

An Enterprise and the Federal Reserve 

Banks shall not be liable for any action 

taken in accordance with the 

information set out in a Transfer 

Message, or evidence submitted in 

support thereof. 

§ 1249.19 Additional provisions. 

(a) Additional requirements. In any 

case or any class of cases arising under 

this part, an Enterprise may require 

such additional evidence and a bond of 

indemnity, with or without surety, as 

may in the judgment of the Enterprise 

be necessary for the protection of the 

interests of the Enterprise. 

(b) Notice of attachment for Enterprise 

Securities in Book-entry System. The 

interest of a debtor in a Security 

Entitlement may be reached by a 

creditor only by legal process upon the 

Securities Intermediary with whom the 

debtor’s securities account is 

maintained, except where a Security 

Entitlement is maintained in the name 

of a secured party, in which case the 

debtor’s interest may be reached by legal 

process upon the secured party. These 

regulations do not purport to establish 

whether a Federal Reserve Bank is 

required to honor an order or other 

notice of attachment in any particular 

case or class of cases. 

■ 2. Part 1282 is revised to read as 

follows: 

SUBCHAPTER E—HOUSING GOALS AND 

MISSION 

PART 1282—ENTERPRISE HOUSING 

GOALS AND MISSION 

Sec. 

Subpart A—General 

1282.1 Definitions. 

Subpart B—Housing Goals 

1282.11 General. 

1282.12 Single-family housing goals. 

1282.13 Multifamily special affordable 

housing goal and subgoal. 

1282.14 Discretionary adjustment of 

housing goals. 

1282.15 General counting requirements. 

1282.16 Special counting requirements. 

1282.17 Affordability—Income level 

definitions—family size and income 

known (owner-occupied units, actual 

tenants, and prospective tenants). 

1282.18 Affordability—Income level 

definitions—family size not known 

(actual or prospective tenants). 

1282.19 Affordability—Rent level 

definitions—tenant income is not 

known. 

1282.20 Determination of compliance with 

housing goals; notice of determination. 

1282.21 Housing plans. 

Subpart C—[Reserved] 

Subpart D—Reporting Requirements 

1282.61 General. 

1282.62 Mortgage reports. 

1282.63 Annual Housing Activities Report. 

1282.64 Periodic reports. 

1282.65 Enterprise data integrity. 

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

4513, 4526, 4561–4566, 4603. 

Subpart A—General 

§ 1282.1 Definitions. 

(a) Statutory terms. All terms defined 

in the Safety and Soundness Act are 

used in accordance with their statutory 

meaning unless otherwise defined in 

paragraph (b) of this section. 

(b) Other terms. As used in this part, 

the term: 

AHAR means the Annual Housing 

Activities Report that an Enterprise 

submits to the Director under section 

309(n) of the Fannie Mae Charter Act or 

section 307(f) of the Freddie Mac Act. 

AHAR information means data or 

information contained in the AHAR. 

AHS means the American Housing 

Survey published by HUD and the 

Department of Commerce. 

Balloon mortgage means a mortgage 

providing for payments at regular 

intervals, with a final payment (‘‘balloon 

payment’’) that is at least 5 percent more 

than the periodic payments. The 

periodic payments may cover some or 

all of the periodic principal or interest. 

Typically, the periodic payments are 

level monthly payments that would 

fully amortize the mortgage over a stated 

term and the balloon payment is a single 

payment due after a specified period 

(but before the mortgage would fully 

amortize) and pays off or satisfies the 

outstanding balance of the mortgage. 

Borrower income means the total 

gross income relied on in making the 

credit decision. 

Charter Act means the Fannie Mae 

Charter Act, as amended, or the Freddie 

Mac Act, as amended. 

Contract rent means the total rent that 

is, or is anticipated to be, specified in 

the rental contract as payable by the 

tenant to the owner for rental of a 

dwelling unit, including fees or charges 

for management and maintenance 

services and those utility charges that 

are included in the rental contract. In 

determining contract rent, rent 

concessions shall not be considered, i.e., 

contract rent is not decreased by any 

rent concessions. Contract rent is rent 

net of rental subsidies. Anticipated rent 

for unoccupied units may be the market 

rent for similar units in the 

neighborhood as determined by the 

lender or appraiser for underwriting 

purposes. 

Conventional mortgage means a 

mortgage other than a mortgage as to 

which an Enterprise has the benefit of 

any guaranty, insurance or other 

obligation by the United States or any of 

its agencies or instrumentalities. 

Day means a calendar day. 

Designated disaster area means any 

census tract that is located in a county 

designated by the federal government as 

adversely affected by a declared major 

disaster administered by FEMA, where 

individual assistance payments were 

authorized by FEMA. A census tract 

shall be treated as a ‘‘designated disaster 

area’’ for purposes of this part beginning 

on the January 1 after the FEMA 

designation of the county, or such 

earlier date as determined by FHFA, and 

continuing through December 31 of the 

third full calendar year following the 

FEMA designation. This time period 

may be adjusted for a particular disaster 

area by notice from FHFA to the 

Enterprises. 

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. 


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Enterprise means Fannie Mae or 

Freddie Mac (Enterprises means, 

collectively, Fannie Mae and Freddie 

Mac). 

Extremely low-income means: 

(i) In the case of owner-occupied 

units, income not in excess of 30 

percent of area median income; and 

(ii) In the case of rental units, income 

not in excess of 30 percent of area 

median income, with adjustments for 

smaller and larger families in 

accordance with this part. 

Families in low-income areas means: 

(i) Any family that resides in a census 

tract or block numbering area in which 

the median income does not exceed 80 

percent of the area median income; 

(ii) Any family with an income that 

does not exceed area median income 

that resides in a minority census tract; 

and 

(iii) Any family with an income that 

does not exceed area median income 

that resides in a designated disaster 

area. 

Family means one or more 

individuals who occupy the same 

dwelling unit. 

Fannie Mae means the Federal 

National Mortgage Association and any 

affiliate thereof. 

Fannie Mae Charter Act means the 

Federal National Mortgage Association 

Charter Act, as amended (12 U.S.C. 1715 

et seq.). 

FEMA means the Federal Emergency 

Management Agency. 

FHFA means the Federal Housing 

Finance Agency. 

FOIA means the Freedom of 

Information Act, as amended (5 U.S.C. 

552). 

Freddie Mac means the Federal Home 

Loan Mortgage Corporation and any 

affiliate thereof. 

Freddie Mac Act means the Federal 

Home Loan Mortgage Corporation Act, 

as amended (12 U.S.C. 1451 et seq.). 

Ginnie Mae means the Government 

National Mortgage Association. 

HMDA means the Home Mortgage 

Disclosure Act (12 U.S.C. 2801 et seq.). 

HOEPA mortgage means a mortgage 

covered by section 103(aa) of the Home 

Ownership and Equity Protection Act 

(HOEPA) (15 U.S.C. 1602(aa)), as 

implemented by the Board of Governors 

of the Federal Reserve System. 

HUD means the United States 

Department of Housing and Urban 

Development. 

Lender means any entity that makes, 

originates, sells, or services mortgages, 

and includes the secured creditors 

named in the debt obligation and 

document creating the mortgage. 

Low-income means: 

(i) In the case of owner-occupied 

units, income not in excess of 80 

percent of area median income; and 

(ii) In the case of rental units, income 

not in excess of 80 percent of area 

median income, with adjustments for 

smaller and larger families in 

accordance with this part. 

Median income means, with respect 

to an area, the unadjusted median 

family income for the area as most 

recently determined by HUD. FHFA will 

provide the Enterprises annually with 

information specifying how the median 

family income estimates for 

metropolitan areas are to be applied for 

the purposes of determining median 

family income. 

Metropolitan area means a 

metropolitan statistical area (MSA), or a 

portion of such an area, including 

Metropolitan Divisions, for which 

median family income estimates are 

determined by HUD. 

Minority means any individual who is 

included within any one or more of the 

following racial and ethnic categories: 

(i) American Indian or Alaskan 

Native—a person having origins in any 

of the original peoples of North and 

South America (including Central 

America), and who maintains Tribal 

affiliation or community attachment; 

(ii) Asian—a person having origins in 

any of the original peoples of the Far 

East, Southeast Asia, or the Indian 

subcontinent, including, for example, 

Cambodia, China, India, Japan, Korea, 

Malaysia, Pakistan, the Philippine 

Islands, Thailand, and Vietnam; 

(iii) Black or African American—a 

person having origins in any of the 

black racial groups of Africa; 

(iv) Hispanic or Latino—a person of 

Cuban, Mexican, Puerto Rican, South or 

Central American, or other Spanish 

culture or origin, regardless of race; and 

(v) Native Hawaiian or Other Pacific 

Islander—a person having origins in any 

of the original peoples of Hawaii, Guam, 

Samoa, or other Pacific Islands. 

Minority census tract means a census 

tract that has a minority population of 

at least 30 percent and a median income 

of less than 100 percent of the area 

median income. 

Moderate-income means: 

(i) In the case of owner-occupied 

units, income not in excess of area 

median income; and 

(ii) In the case of rental units, income 

not in excess of area median income, 

with adjustments for smaller and larger 

families in accordance with this part. 

Mortgage means a member of such 

classes of liens, including subordinate 

liens, as are commonly given or are 

legally effective to secure advances on, 

or the unpaid purchase price of, real 

estate under the laws of the State in 

which the real estate is located, together 

with the credit instruments, if any, 

secured thereby, and includes interests 

in mortgages. ‘‘Mortgage’’ includes a 

mortgage, lien, including a subordinate 

lien, or other security interest on the 

stock or membership certificate issued 

to a tenant-stockholder or residentmember by a cooperative housing 

corporation, as defined in section 216 of 

the Internal Revenue Code of 1986, and 

on the proprietary lease, occupancy 

agreement, or right of tenancy in the 

dwelling unit of the tenant-stockholder 

or resident-member in such cooperative 

housing corporation. 

Mortgage data means data obtained by 

the Director from the Enterprises under 

section 309(m) of the Fannie Mae 

Charter Act and section 307(e) of the 

Freddie Mac Act. 

Mortgage purchase means a 

transaction in which an Enterprise 

bought or otherwise acquired a mortgage 

or an interest in a mortgage for portfolio, 

resale, or securitization. 

Mortgage revenue bond means a taxexempt bond or taxable bond issued by 

a State or local government or agency 

where the proceeds from the bond issue 

are used to finance residential housing. 

Mortgage with unacceptable terms or 

conditions means a single-family 

mortgage, including a reverse mortgage, 

or a group or category of such 

mortgages, with one or more of the 

following terms or conditions: 

(i) Excessive fees, where the total 

points and fees charged to a borrower 

exceed the greater of 5 percent of the 

loan amount or a maximum dollar 

amount of $1000, or an alternative 

amount requested by an Enterprise and 

determined by the Director as 

appropriate for small mortgages. 

(A) For purposes of this definition, 

points and fees include: 

(1) Origination fees; 

(2) Underwriting fees; 

(3) Broker fees; 

(4) Finder’s fees; and 

(5) Charges that the lender imposes as 

a condition of making the loan, whether 

they are paid to the lender or a third 

party; 

(B) For purposes of this definition, 

points and fees do not include: 

(1) Bona fide discount points; 

(2) Fees paid for actual services 

rendered in connection with the 

origination of the mortgage, such as 

attorneys’ fees, notary’s fees, and fees 

paid for property appraisals, credit 

reports, surveys, title examinations and 

extracts, flood and tax certifications, 

and home inspections; 

(3) The cost of mortgage insurance or 

credit-risk price adjustments; 


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(4) The costs of title, hazard, and 

flood insurance policies; 

(5) State and local transfer taxes or 

fees; 

(6) Escrow deposits for the future 

payment of taxes and insurance 

premiums; and 

(7) Other miscellaneous fees and 

charges that, in total, do not exceed 0.25 

percent of the loan amount; 

(ii) An annual percentage rate that 

exceeds by more than 8 percentage 

points the yield on Treasury securities 

with comparable maturities as of the 

fifteenth day of the month immediately 

preceding the month in which the 

application for the extension of credit 

was received; 

(iii) Prepayment penalties, except 

where: 

(A) The mortgage provides some 

benefit to the borrower (e.g., a rate or fee 

reduction for accepting the prepayment 

premium); 

(B) The borrower is offered the choice 

of another mortgage that does not 

contain payment of such a premium; 

(C) The terms of the mortgage 

provision containing the prepayment 

penalty are adequately disclosed to the 

borrower; and 

(D) The prepayment penalty is not 

charged when the mortgage debt is 

accelerated as the result of the 

borrower’s default in making his or her 

mortgage payments; 

(iv) The sale or financing of prepaid 

single-premium credit life insurance 

products in connection with the 

origination of the mortgage; 

(v) Underwriting practices contrary to 

the Interagency Guidance on 

Nontraditional Mortgage Product Risks 

(71 FR 58609) (Oct. 4, 2006), the 

Interagency Statement on Subprime 

Mortgage Lending (72 FR 37569) (July 

10, 2007), or similar guidance 

subsequently issued by Federal banking 

agencies; 

(vi) Failure to comply with fair 

lending requirements; or 

(vii) Other terms or conditions that 

are determined by the Director to be an 

unacceptable term or condition of a 

mortgage. 

Multifamily housing means a 

residence consisting of more than four 

dwelling units. The term includes 

cooperative buildings and 

condominium projects. 

Non-metropolitan area means a 

county, or a portion of a county, 

including those counties that comprise 

Micropolitan Statistical Areas, located 

outside any metropolitan area for which 

median family income estimates are 

published annually by HUD. 

Owner-occupied housing means 

single-family housing in which a 

mortgagor resides, including two- to 

four-unit owner-occupied properties 

where one or more units are used for 

rental purposes. 

Participation means a fractional 

interest in the principal amount of a 

mortgage. 

Private label security means any 

mortgage-backed security that is neither 

issued nor guaranteed by Fannie Mae, 

Freddie Mac, Ginnie Mae, or any other 

government agency. 

Proprietary information means all 

mortgage data and all AHAR 

information that the Enterprises submit 

to the Director in the AHARs that 

contain trade secrets or privileged or 

confidential, commercial, or financial 

information that, if released, would be 

likely to cause substantial competitive 

harm. 

Public data means all mortgage data 

and all AHAR information that the 

Enterprises submit to the Director in the 

AHARs that the Director determines are 

not proprietary and may appropriately 

be disclosed consistent with other 

applicable laws and regulations. 

Purchase money mortgage means a 

mortgage given to secure a loan used for 

the purchase of a single-family 

residential property. 

Refinancing mortgage means a 

mortgage undertaken by a borrower that 

satisfies or replaces an existing mortgage 

of such borrower. The term does not 

include: 

(i) A renewal of a single payment 

obligation with no change in the 

original terms; 

(ii) A reduction in the annual 

percentage rate of the mortgage as 

computed under the Truth in Lending 

Act (15 U.S.C. 1601 et seq.), with a 

corresponding change in the payment 

schedule; 

(iii) An agreement involving a court 

proceeding; 

(iv) 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; 

(v) The renewal of optional insurance 

purchased by the mortgagor and added 

to an existing mortgage; 

(vi) 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 

(vii) A conversion of a balloon 

mortgage note on a single-family 

property to a fully amortizing mortgage 

note where the Enterprise already owns 

or has an interest in the balloon note at 

the time of the conversion. 

Rent means, for a dwelling unit: 

(i) When the contract rent includes all 

utilities, the contract rent; or 

(ii) When the contract rent does not 

include all utilities, the contract rent 

plus: 

(A) The actual cost of utilities not 

included in the contract rent; or 

(B) A utility allowance. 

Rental housing means dwelling units 

in multifamily housing and dwelling 

units that are not owner-occupied in 

single-family housing. 

Rental unit means a dwelling unit that 

is not owner-occupied and is rented or 

available to rent. 

Residence means a property where 

one or more families reside. 

Residential mortgage means a 

mortgage on single-family or 

multifamily housing. 

Safety and Soundness Act means the 

Federal Housing Enterprises Financial 

Safety and Soundness Act of 1992, as 

amended (12 U.S.C. 4501 et seq.). 

Seasoned mortgage means a mortgage 

on which the date of the mortgage note 

is more than 1 year before the Enterprise 

purchased the mortgage. 

Second mortgage means any mortgage 

that has a lien position subordinate only 

to the lien of the first mortgage. 

Secondary residence means a 

dwelling where the mortgagor maintains 

(or will maintain) a part-time place of 

abode and typically spends (or will 

spend) less than the majority of the 

calendar year. A person may have more 

than one secondary residence at a time. 

Single-family housing means a 

residence consisting of one to four 

dwelling units. Single-family housing 

includes condominium dwelling units 

and dwelling units in cooperative 

housing projects. 

Utilities means charges for electricity, 

piped or bottled gas, water, sewage 

disposal, fuel (oil, coal, kerosene, wood, 

solar energy, or other), and garbage and 

trash collection. Utilities do not include 

charges for cable or telephone service. 

Utility allowance means either: 

(i) The amount to be added to contract 

rent when utilities are not included in 

contract rent (also referred to as the 

‘‘AHS-derived utility allowance’’), as 

issued periodically by FHFA; or 

(ii) The utility allowance established 

under the HUD Section 8 Program (42 

U.S.C. 1437f) for the area where the 

property is located. 

Very low-income means: 

(i) In the case of owner-occupied 

units, income not in excess of 50 

percent of area median income; and 

(ii) In the case of rental units, income 

not in excess of 50 percent of area 


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median income, with adjustments for 

smaller and larger families in 

accordance with this part. 

Working day means a day when FHFA 

is officially open for business. 

Subpart B—Housing Goals 

§ 1282.11 General. 

(a) General. Pursuant to the 

requirements of the Safety and 

Soundness Act (12 U.S.C. 4561–4564, 

4566), this subpart establishes: 

(1) Three single-family owneroccupied purchase money mortgage 

housing goals, a single-family owneroccupied purchase money mortgage 

housing subgoal, a single-family 

refinancing mortgage housing goal, a 

multifamily special affordable housing 

goal and a multifamily special 

affordable housing subgoal; 

(2) Requirements for measuring 

performance under the goals; and 

(3) Procedures for monitoring and 

enforcing the goals. 

(b) Annual goals. Each housing goal 

shall be established by regulation no 

later than December 1 of the preceding 

year, except that any housing goal may 

be adjusted by regulation to reflect 

subsequent available data and market 

developments. 

§ 1282.12 Single-family housing goals. 

(a) Single-family housing goals. An 

Enterprise shall be in compliance with 

a single-family housing goal if its 

performance under the housing goal 

meets or exceeds either: 

(1) The share of the market that 

qualifies for the goal; or 

(2) The benchmark level for the goal. 

(b) Size of market. The size of the 

market for each goal shall be established 

annually by FHFA based on data 

reported pursuant to the Home Mortgage 

Disclosure Act for a given year. Unless 

otherwise adjusted by FHFA, the size of 

the market shall be determined based on 

the following criteria: 

(1) Only owner-occupied, 

conventional loans shall be considered; 

(2) Purchase money mortgages and 

refinancing mortgages shall only be 

counted for the applicable goal or goals; 

(3) All mortgages flagged as HOEPA 

loans or subordinate lien loans shall be 

excluded; 

(4) All mortgages with original 

principal balances above the conforming 

loan limits for single unit properties for 

the year being evaluated (rounded to the 

nearest $1,000) shall be excluded; 

(5) All mortgages with rate spreads of 

150 basis points or more above the 

applicable average prime offer rate as 

reported in the Home Mortgage 

Disclosure Act data shall be excluded; 

and 

(6) All mortgages that are missing 

information necessary to determine 

appropriate counting under the housing 

goals shall be excluded. 

(c) Low-income families housing goal. 

The percentage share of each 

Enterprise’s total purchases of purchase 

money mortgages on owner-occupied 

single-family housing that consists of 

mortgages for low-income families shall 

meet or exceed either: 

(1) The share of such mortgages in the 

market as defined in paragraph (b) of 

this section in each year; or 

(2) The benchmark level, which for 

2010 and 2011 shall be 27 percent of the 

total number of purchase money 

mortgages purchased by that Enterprise 

in each year that finance owneroccupied single-family properties. 

(d) Very low-income families housing 

goal. The percentage share of each 

Enterprise’s total purchases of purchase 

money mortgages on owner-occupied 

single-family housing that consists of 

mortgages for very low-income families 

shall meet or exceed either: 

(1) The share of such mortgages in the 

market as defined in paragraph (b) of 

this section in each year; or 

(2) The benchmark level, which for 

2010 and 2011 shall be 8 percent of the 

total number of purchase money 

mortgages purchased by that Enterprise 

in each year that finance owneroccupied single-family properties. 

(e) Low-income areas housing goal. 

The percentage share of each 

Enterprise’s total purchases of purchase 

money mortgages on owner-occupied 

single-family housing that consists of 

mortgages for families in low-income 

areas shall meet or exceed either: 

(1) The share of such mortgages in the 

market as defined in paragraph (b) of 

this section in each year; or 

(2) A benchmark level which shall be 

set annually by FHFA notice based on 

the benchmark level for the low-income 

areas housing subgoal, plus an 

adjustment factor reflecting the 

additional incremental share of 

mortgages for moderate-income families 

in designated disaster areas in the most 

recent year for which such data is 

available. 

(f) Low-income areas housing subgoal. 

The percentage share of each 

Enterprise’s total purchases of purchase 

money mortgages on owner-occupied 

single-family housing that consists of 

mortgages for families in low-income 

census tracts or for moderate-income 

families in minority census tracts shall 

meet or exceed either: 

(1) The share of such mortgages in the 

market as defined in paragraph (b) of 

this section in each year; or 

(2) The benchmark level, which for 

2010 and 2011 shall be 13 percent of the 

total number of purchase money 

mortgages purchased by that Enterprise 

in each year that finance owneroccupied single-family properties. 

(g) Refinancing housing goal. The 

percentage share of each Enterprise’s 

total purchases of refinancing mortgages 

on owner-occupied single-family 

housing that consists of refinancing 

mortgages for low-income families shall 

meet or exceed either: 

(1) The share of such mortgages in the 

market as defined in paragraph (b) of 

this section in each year; or 

(2) The benchmark level, which for 

2010 and 2011 shall be 21 percent of the 

total number of refinancing mortgages 

purchased by that Enterprise in each 

year that finance owner-occupied 

single-family properties. 

§ 1282.13 Multifamily special affordable 

housing goal and subgoal. 

(a) Multifamily housing goal and 

subgoal. An Enterprise shall be in 

compliance with a multifamily housing 

goal or subgoal if its performance under 

the housing goal or subgoal meets or 

exceeds the benchmark level for the 

goal. 

(b) Multifamily low-income housing 

goal. For the years 2010 and 2011, the 

goal for each Enterprise’s purchases of 

mortgages on multifamily residential 

housing affordable to low-income 

families shall be, for Fannie Mae, at 

least 177,750 dwelling units affordable 

to low-income families in multifamily 

residential housing financed by 

mortgages purchased by that Enterprise 

in each year, and for Freddie Mac, at 

least 161,250 such dwelling units in 

each year. 

(c) Multifamily very low-income 

housing subgoal. For the years 2010 and 

2011, the subgoal for each Enterprise’s 

purchases of mortgages on multifamily 

residential housing affordable to very 

low-income families shall be, for Fannie 

Mae, at least 42,750 dwelling units 

affordable to very low-income families 

in multifamily residential housing 

financed by mortgages purchased by 

that Enterprise in each year, and for 

Freddie Mac, at least 21,000 such 

dwelling units in each year. 

§ 1282.14 Discretionary adjustment of 

housing goals. 

(a) An Enterprise may petition the 

Director in writing during any year to 

reduce any goal or subgoal for that year. 

(b) The Director shall seek public 

comment on any such petition for a 

period of 30 days. 

(c) The Director shall make a 

determination regarding the petition 


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within 30 days after the end of the 

public comment period. If the Director 

requests additional information from the 

Enterprise after the end of the public 

comment period, the Director may 

extend the period for a final 

determination for a single additional 15- 

day period. 

(d) The Director may reduce a goal or 

subgoal pursuant to a petition for 

reduction only if: 

(1) Market and economic conditions 

or the financial condition of the 

Enterprise require such a reduction; or 

(2) Efforts to meet the goal or subgoal 

would result in the constraint of 

liquidity, over-investment in certain 

market segments, or other consequences 

contrary to the intent of the Safety and 

Soundness Act or the purposes of the 

Charter Acts (12 U.S.C. 1716; 12 U.S.C. 

1451 note). 

§ 1282.15 General counting requirements. 

(a) Calculating the numerator and 

denominator for single-family housing 

goals. Performance under each of the 

single-family housing goals shall be 

measured using a fraction that is 

converted into a percentage. Neither the 

numerator nor the denominator shall 

include Enterprise transactions or 

activities that are not mortgage 

purchases as defined by FHFA or that 

are specifically excluded as ineligible 

under § 1282.16(b). 

(1) The numerator. The numerator of 

each fraction is the number of mortgage 

purchases of an Enterprise in a 

particular year that finance owneroccupied single-family properties that 

count toward achievement of a 

particular single-family housing goal. 

(2) The denominator. The 

denominator of each fraction is the total 

number of mortgage purchases of an 

Enterprise in a particular year that 

finance owner-occupied single-family 

properties. A separate denominator 

shall be calculated for purchase money 

mortgages and for refinancing 

mortgages. 

(b) Missing data or information for 

single-family housing goals. When an 

Enterprise lacks sufficient data or 

information to determine whether the 

purchase of a mortgage originated after 

1992 counts toward achievement of a 

particular single-family housing goal, 

that mortgage purchase shall be 

included in the denominator for that 

housing goal, except under the 

circumstances described in this 

paragraph (b). 

(1) Mortgage purchases financing 

owner-occupied single-family properties 

shall be evaluated based on the income 

of the mortgagors and the area median 

income at the time the mortgage was 

originated. To determine whether 

mortgages may be counted under a 

particular family income level, i.e., lowor very low-income, the income of the 

mortgagors is compared to the median 

income for the area at the time of the 

mortgage application, using the 

appropriate percentage factor provided 

under § 1282.17. 

(2) When the income of the 

mortgagor(s) is not available to 

determine whether a mortgage purchase 

counts toward achievement of a 

particular single-family housing goal, an 

Enterprise’s performance with respect to 

such mortgage purchase may be 

evaluated using estimated affordability 

information by multiplying the number 

of mortgage purchases with missing 

borrower income information in each 

census tract by the percentage of all 

single-family owner-occupied mortgage 

originations in the respective tracts that 

would count toward achievement of 

each goal, as determined by FHFA based 

on the most recent Home Mortgage 

Disclosure Act data available. 

(3) The estimation methodology in 

paragraph (b)(2) of this section may be 

used up to a nationwide maximum that 

shall be calculated by multiplying, for 

each census tract, the percentage of all 

single-family owner-occupied mortgage 

originations with missing borrower 

incomes (as determined by FHFA based 

on the most recent Home Mortgage 

Disclosure Act data available for home 

purchase and refinance mortgages, 

respectively) by the number of 

Enterprise mortgage purchases secured 

by single-family owner-occupied 

properties for each census tract, 

summed up over all census tracts. 

Separate nationwide maximums shall be 

calculated for purchase money 

mortgages and for refinancing 

mortgages. If the nationwide maximum 

is exceeded, then the estimated number 

of goal-qualifying mortgages will be 

adjusted by the ratio of the applicable 

nationwide maximum to the total 

number of mortgage purchases secured 

by single-family owner-occupied 

properties for the Enterprise in that 

year. Mortgage purchases in excess of 

the nationwide maximum, and any 

units for which estimation information 

is not available, shall remain in the 

denominator of the respective goal 

calculation. 

(c) Counting dwelling units for 

multifamily housing goal and subgoal. 

Performance under the multifamily 

housing goal and subgoal shall be 

measured by counting the number of 

dwelling units that count toward 

achievement of a particular housing goal 

or subgoal in all multifamily properties 

financed by mortgages purchased by an 

Enterprise in a particular year. Only 

dwelling units that are financed by 

mortgage purchases, as defined by 

FHFA, and that are not specifically 

excluded as ineligible under 

§ 1282.16(b), may be counted for 

purposes of the multifamily housing 

goal and subgoal. 

(d) Counting rental units. For 

purposes of counting rental units 

toward achievement of the multifamily 

housing goal and subgoal, mortgage 

purchases financing such units shall be 

evaluated based on the income of actual 

or prospective tenants where such data 

is available, i.e., known to a lender, and 

the area median income at the time the 

mortgage was acquired. 

(1) Use of income. Each Enterprise 

shall require lenders to provide to the 

Enterprise tenant income information, 

but only when such information is 

known to the lender. When the income 

of actual tenants is available, the income 

of the tenant shall be compared to the 

median income for the area, adjusted for 

family size as provided in § 1282.17, or 

as provided in § 1282.18 if family size 

is not known. 

(i) When such tenant income 

information is available for all occupied 

units, the Enterprise’s performance shall 

be based on the income of the tenants 

in the occupied units. For unoccupied 

units that are vacant and available for 

rent and for unoccupied units that are 

under repair or renovation and not 

available for rent, the Enterprise shall 

use rent levels for comparable units in 

the property to determine affordability, 

except as provided in paragraph 

(d)(1)(ii) of this section. 

(ii) When income for tenants is 

available to a lender because a project 

is subject to a Federal housing program 

that establishes the maximum income 

for a tenant or a prospective tenant in 

rental units, the income of prospective 

tenants may be counted at the maximum 

income level established under such 

housing program for that unit. In 

determining the income of prospective 

tenants, the income shall be projected 

based on the types of units and market 

area involved. Where the income of 

prospective tenants is projected, each 

Enterprise must determine that the 

income figures are reasonable 

considering the rents (if any) on the 

same units in the past and considering 

current rents on comparable units in the 

same market area. 

(2) Use of rent. When the income of 

the prospective or actual tenants of a 

dwelling unit is not available, 

performance under the multifamily 

housing goal and subgoal will be 

evaluated based on rent and whether the 

rent is affordable to the income group 


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targeted by the housing goal and 

subgoal. A rent is affordable if the rent 

does not exceed the maximum income 

levels as provided in § 1282.19. In 

determining contract rent for a dwelling 

unit, the actual rent or average rent by 

unit type shall be used. 

(3) Model units and rental offices. A 

model unit or rental office in a 

multifamily property may be counted 

for purposes of the multifamily housing 

goal and subgoal only if an Enterprise 

determines that the number of such 

units is reasonable and minimal 

considering the size of the multifamily 

property. 

(4) Timeliness of information. In 

evaluating affordability under the 

multifamily housing goal and subgoal, 

each Enterprise shall use tenant and 

rental information as of the time of 

mortgage acquisition. 

(e) Missing data or information for 

multifamily housing goal and subgoal.— 

(1) When an Enterprise lacks sufficient 

information to determine whether a 

rental unit in a property securing a 

multifamily mortgage purchased by an 

Enterprise counts toward achievement 

of the multifamily housing goal or 

subgoal because neither the income of 

prospective or actual tenants, nor the 

actual or average rental data, are 

available, an Enterprise’s performance 

with respect to such unit may be 

evaluated using estimated affordability 

information by multiplying the number 

of rental units with missing affordability 

information in properties securing 

multifamily mortgages purchased by the 

Enterprise in each census tract by the 

percentage of all rental dwelling units in 

the respective tracts that would count 

toward achievement of each goal and 

subgoal, as determined by FHFA based 

on the most recent decennial census. 

(2) The estimation methodology in 

paragraph (e)(1) of this section may be 

used up to a nationwide maximum of 

ten percent of the total number of rental 

units in properties securing multifamily 

mortgages purchased by the Enterprise 

in the current year. Multifamily rental 

units in excess of this maximum, and 

any units for which estimation 

information is not available, shall not be 

counted for purposes of the multifamily 

housing goal and subgoal. 

(f) Credit toward multiple goals. A 

mortgage purchase (or dwelling unit 

financed by such purchase) by an 

Enterprise in a particular year shall 

count toward the achievement of each 

housing goal for which such purchase 

(or dwelling unit) qualifies in that year. 

(g) Application of median income.— 

(1) For purposes of determining an 

area’s median income under §§ 1282.17 

through 1282.19 and the definitions in 

§ 1282.1, the area is: 

(i) The metropolitan area, if the 

property which is the subject of the 

mortgage is in a metropolitan area; and 

(ii) In all other areas, the county in 

which the property is located, except 

that where the State non-metropolitan 

median income is higher than the 

county’s median income, the area is the 

State non-metropolitan area. 

(2) When an Enterprise cannot 

precisely determine whether a mortgage 

is on dwelling unit(s) located in one 

area, the Enterprise shall determine the 

median income for the split area in the 

manner prescribed by the Federal 

Financial Institutions Examination 

Council for reporting under the Home 

Mortgage Disclosure Act, if the 

Enterprise can determine that the 

mortgage is on dwelling unit(s) located 

in: 

(i) A census tract; 

(ii) A census place code; 

(iii) A block-group enumeration 

district; 

(iv) A nine-digit zip code; or 

(v) Another appropriate geographic 

segment that is partially located in more 

than one area (‘‘split area’’). 

(h) Sampling not permitted. 

Performance under the housing goals for 

each year shall be based on a complete 

tabulation of mortgage purchases (or 

dwelling units) for that year; a sampling 

of such purchases (or dwelling units) is 

not acceptable. 

(i) Newly available data. When an 

Enterprise uses data to determine 

whether a mortgage purchase (or 

dwelling unit) counts toward 

achievement of any goal and new data 

is released after the start of a calendar 

quarter, the Enterprise need not use the 

new data until the start of the following 

quarter. 

§ 1282.16 Special counting requirements. 

(a) General. FHFA shall determine 

whether an Enterprise shall receive full, 

partial, or no credit toward achievement 

of any of the housing goals for a 

transaction that otherwise qualifies 

under this part. In this determination, 

FHFA will consider whether a 

transaction or activity of the Enterprise 

is substantially equivalent to a mortgage 

purchase and either creates a new 

market or adds liquidity to an existing 

market, provided however that such 

mortgage purchase actually fulfills the 

Enterprise’s purposes and is in 

accordance with its Charter Act. 

(b) Not counted. The following 

transactions or activities shall not be 

counted for purposes of the housing 

goals and shall not be included in the 

numerator or the denominator in 

calculating either Enterprise’s 

performance under the housing goals, 

even if the transaction or activity would 

otherwise be counted pursuant to 

paragraph (c) of this section: 

(1) Equity investments in low-income 

housing tax credits; 

(2) Purchases of State and local 

government housing bonds except as 

provided in paragraph (c)(8) of this 

section; 

(3) Purchases of single-family nonconventional mortgages and multifamily 

non-conventional mortgages, except: 

(i) Multifamily mortgages acquired 

under a risk-sharing arrangement with a 

Federal agency; 

(ii) Multifamily mortgages under other 

multifamily 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; 

(4) Commitments to buy mortgages at 

a later date or time; 

(5) Options to acquire mortgages; 

(6) Rights of first refusal to acquire 

mortgages; 

(7) Any interests in mortgages that the 

Director determines, in writing, shall 

not be treated as interests in mortgages; 

(8) Mortgage purchases to the extent 

they finance any dwelling units that are 

secondary residences; 

(9) Single-family refinancing 

mortgages that result from conversion of 

balloon notes to fully amortizing notes, 

if the Enterprise already owns or has an 

interest in the balloon note at the time 

conversion occurs; 

(10) Purchases of subordinate lien 

mortgages (second mortgages); 

(11) Purchases of mortgages or 

interests in mortgages that were 

previously counted by the Enterprise 

under any current or previous housing 

goal within the five years immediately 

preceding the current performance year; 

(12) Purchases of mortgages where the 

property, or any units within the 

property, have not been approved for 

occupancy; 

(13) Purchases of private label 

securities; 

(14) Enterprise contributions to the 

Housing Trust Fund (12 U.S.C. 4568) or 

the Capital Magnet Fund (12 U.S.C. 

4569), and mortgage purchases funded 

with such grant amounts; and 

(15) Any combination of factors in 

paragraphs (b)(1) through (b)(14) of this 

section. 

(c) Other special rules. Subject to 

FHFA’s determination of whether an 

Enterprise shall receive full, partial, or 


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no credit for a transaction toward 

achievement of any of the housing goals 

as provided in paragraph (a) of this 

section, the transactions and activities 

identified in this paragraph (c) shall be 

treated as mortgage purchases as 

described. A transaction or activity that 

is covered by more than one paragraph 

below must satisfy the requirements of 

each such paragraph. The mortgages (or 

dwelling units, for the multifamily 

housing goals) from each such 

transaction or activity shall be included 

in the denominator in calculating the 

Enterprise’s performance under the 

housing goals, and shall be included in 

the numerator, as appropriate. 

(1) Credit enhancements.—(i) 

Mortgages (or dwelling units) financed 

under a credit enhancement entered 

into by an Enterprise shall be treated as 

mortgage purchases for purposes of the 

housing goals only when: 

(A) The Enterprise provides a specific 

contractual obligation to ensure timely 

payment of amounts due under a 

mortgage or mortgages financed by the 

issuance of housing bonds (such bonds 

may be issued by any entity, including 

a State or local housing finance agency); 

and 

(B) The Enterprise assumes a credit 

risk in the transaction substantially 

equivalent to the risk that would have 

been assumed by the Enterprise if it had 

securitized the mortgages financed by 

such bonds. 

(ii) When an Enterprise provides a 

specific contractual obligation to ensure 

timely payment of amounts due under 

any mortgage originally insured by a 

public purpose mortgage insurance 

entity or fund, the Enterprise may, on a 

case-by-case basis, seek approval from 

the Director for such activities to count 

toward achievement of the housing 

goals. 

(2) [Reserved.] 

(3) Risk-sharing. Mortgages purchased 

under risk-sharing arrangements 

between an Enterprise and any Federal 

agency under which the Enterprise is 

responsible for a substantial amount of 

the risk shall be treated as mortgage 

purchases for purposes of the housing 

goals. 

(4) Participations. Participations 

purchased by an Enterprise shall be 

treated as mortgage purchases for 

purposes of the housing goals only 

when the Enterprise’s participation in 

the mortgage is 50 percent or more. 

(5) Cooperative housing and 

condominiums.—(i) The purchase of a 

mortgage on a cooperative housing unit 

(‘‘a share loan’’) or a mortgage on a 

condominium unit shall be treated as a 

mortgage purchase for purposes of the 

housing goals. Such a purchase shall be 

counted in the same manner as a 

mortgage purchase of single-family 

owner-occupied units. 

(ii) The purchase of a mortgage on a 

cooperative building (‘‘a blanket loan’’) 

or a mortgage on a condominium project 

shall be treated as a mortgage purchase 

for purposes of the housing goals. The 

purchase of a blanket loan or a 

condominium project mortgage shall be 

counted in the same manner as a 

mortgage purchase of a multifamily 

rental property. 

(iii) Where an Enterprise purchases 

both a blanket loan on a cooperative 

building and share loans for units in the 

same building, both the blanket loan 

and the share loan(s) shall be treated as 

mortgage purchases for purposes of the 

housing goals. Where an Enterprise 

purchases both a condominium project 

mortgage and mortgages on 

condominium dwelling units in the 

same project, both the condominium 

project mortgages and the mortgages on 

condominium dwelling units shall be 

treated as mortgage purchases for 

purposes of the housing goals. 

(6) Seasoned mortgages. An 

Enterprise’s purchase of a seasoned 

mortgage shall be treated as a mortgage 

purchase for purposes of the housing 

goals, except where the Enterprise has 

already counted the mortgage under any 

current or previous housing goal within 

the five years immediately preceding 

the current performance year. 

(7) Purchase of refinancing mortgages. 

The purchase of a refinancing mortgage 

by an Enterprise shall be treated as a 

mortgage purchase for purposes of the 

housing goals only if the refinancing is 

an arms-length transaction that is 

borrower-driven. 

(8) Mortgage revenue bonds. The 

purchase or guarantee by an Enterprise 

of a mortgage revenue bond issued by a 

State or local housing finance agency 

shall be treated as a purchase of the 

underlying mortgages for purposes of 

the housing goals only to the extent the 

Enterprise has sufficient information to 

determine whether the underlying 

mortgages or mortgage-backed securities 

qualify for inclusion in the numerator 

for one or more housing goal. 

(9) [Reserved.] 

(10) Loan modifications. An 

Enterprise’s permanent modification, in 

accordance with the Making Home 

Affordable program announced on 

March 4, 2009, of a loan 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. Each such permanent 

loan modification shall be counted in 

the same manner as a purchase of a 

refinancing mortgage. 

(11) [Reserved.] 

(12) [Reserved.] 

(13) [Reserved.] 

(14) Seller dissolution option.—(i) 

Mortgages acquired through transactions 

involving seller dissolution options 

shall be treated as mortgage purchases 

for purposes of the housing goals, only 

when: 

(A) The terms of the transaction 

provide for a lockout period that 

prohibits the exercise of the dissolution 

option for at least one year from the date 

on which the transaction was entered 

into by the Enterprise and the seller of 

the mortgages; and 

(B) The transaction is not dissolved 

during the one-year minimum lockout 

period. 

(ii) The Director may grant an 

exception to the one-year minimum 

lockout period described in paragraphs 

(c)(14)(i)(A) and (B) of this section, in 

response to a written request from an 

Enterprise, if the Director determines 

that the transaction furthers the 

purposes of the Safety and Soundness 

Act and the Enterprise’s Charter Act. 

(iii) For purposes of this paragraph 

(c)(14), ‘‘seller dissolution option’’ 

means an option for a seller of 

mortgages to the Enterprises to dissolve 

or otherwise cancel a mortgage purchase 

agreement or loan sale. 

(d) HOEPA mortgages and mortgages 

with unacceptable terms or conditions. 

HOEPA mortgages and mortgages with 

unacceptable terms or conditions, as 

defined in § 1282.1, shall be treated as 

mortgage purchases for purposes of the 

housing goals and shall be included in 

the denominator for each applicable 

single-family housing goal, but such 

mortgages shall not be counted in the 

numerator for any housing goal. 

(e) FHFA review of transactions. 

FHFA may determine whether and how 

any transaction or class of transactions 

shall be counted for purposes of the 

housing goals, including treatment of 

missing data. FHFA will notify each 

Enterprise in writing of any 

determination regarding the treatment of 

any transaction or class of transactions 

under the housing goals. 

§ 1282.17 Affordability—Income level 

definitions—family size and income known 

(owner-occupied units, actual tenants, and 

prospective tenants). 

In determining whether a dwelling 

unit is affordable where income 

information (and family size, for rental 

housing) is known to the Enterprise, the 

affordability of the unit shall be 

determined as follows: 

(a) Moderate-income means: 


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(1) In the case of owner-occupied 

units, income not in excess of 100 

percent of area median income; and 

(2) In the case of rental units, where 

the income of actual or prospective 

tenants is available, income not in 

excess of the following percentages of 

area median income corresponding to 

the following family sizes: 

Number of persons in family 

Percentage of 

area 

median income 

1 ............................................ 70 

2 ............................................ 80 

3 ............................................ 90 

4 ............................................ 100 

5 or more .............................. * 

*100% plus (8% multiplied by the number of 

persons in excess of 4). 

(b) Low-income (80%) means: 

(1) In the case of owner-occupied 

units, income not in excess of 80 

percent of area median income; and 

(2) In the case of rental units, where 

the income of actual or prospective 

tenants is available, income not in 

excess of the following percentages of 

area median income corresponding to 

the following family sizes: 

Number of persons in family 

Percentage of 

area 

median income 

1 ............................................ 56 

2 ............................................ 64 

3 ............................................ 72 

4 ............................................ 80 

5 or more .............................. * 

*80% plus (6.4% multiplied by the number 

of persons in excess of 4). 

(c) Low-income (60%) means: 

(1) In the case of owner-occupied 

units, income not in excess of 60 

percent of area median income; and 

(2) In the case of rental units, where 

the income of actual or prospective 

tenants is available, income not in 

excess of the following percentages of 

area median income corresponding to 

the following family sizes: 

Number of persons in family 

Percentage of 

area 

median income 

1 ............................................ 42 

2 ............................................ 48 

3 ............................................ 54 

4 ............................................ 60 

5 or more .............................. * 

*60% plus (4.8% multiplied by the number 

of persons in excess of 4). 

(d) Very low-income means: 

(1) In the case of owner-occupied 

units, income not in excess of 50 

percent of area median income; and 

(2) In the case of rental units, where 

the income of actual or prospective 

tenants is available, income not in 

excess of the following percentages of 

area median income corresponding to 

the following family sizes: 

Number of persons in family 

Percentage of 

area 

median income 

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

2 ............................................ 40 

3 ............................................ 45 

4 ............................................ 50 

5 or more .............................. * 

*50% plus (4.0% multiplied by the number 

of persons in excess of 4). 

(e) Extremely low-income means: 

(1) In the case of owner-occupied 

units, income not in excess of 30 

percent of area median income; and 

(2) In the case of rental units, where 

the income of actual or prospective 

tenants is available, income not in 

excess of the following percentages of 

area median income corresponding to 

the following family sizes: 

Number of persons in family 

Percentage of 

area 

median income 

1 ............................................ 21 

2 ............................................ 24 

3 ............................................ 27 

4 ............................................ 30 

5 or more .............................. * 

*30% plus (2.4% multiplied by the number 

of persons in excess of 4). 

§ 1282.18 Affordability—Income level 

definitions—family size not known (actual 

or prospective tenants). 

In determining whether a rental unit 

is affordable where family size is not 

known to the Enterprise, income will be 

adjusted using unit size, and 

affordability determined as follows: 

(a) For moderate-income, the income 

of prospective tenants shall not exceed 

the following percentages of area 

median income with adjustments, 

depending on unit size: 

Unit size 

Percentage of 

area median 

income 

Efficiency .............................. 70 

1 bedroom ............................ 75 

2 bedrooms ........................... 90 

3 bedrooms or more ............. * 

*104% plus (12% multiplied by the number 

of bedrooms in excess of 3). 

(b) For low-income (80%), income of 

prospective tenants shall not exceed the 

following percentages of area median 

income with adjustments, depending on 

unit size: 

Unit size 

Percentage of 

area median 

income 

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

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

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

3 bedrooms or more ............. * 

*83.2% plus (9.6% multiplied by the number 

of bedrooms in excess of 3). 

(c) For low-income (60%), income of 

prospective tenants shall not exceed the 

following percentages of area median 

income with adjustments, depending on 

unit size: 

Unit size 

Percentage of 

area median 

income 

Efficiency .............................. 42 

1 bedroom ............................ 45 

2 bedrooms ........................... 54 

3 bedrooms or more ............. * 

*62.4% plus (7.2% multiplied by the number 

of bedrooms in excess of 3). 

(d) For very low-income, income of 

prospective tenants shall not exceed the 

following percentages of area median 

income with adjustments, depending on 

unit size: 

Unit size 

Percentage of 

area median income 

Efficiency ............................ 35 

1 bedroom .......................... 37 .5 

2 bedrooms ......................... 45 

3 bedrooms or more ........... * 

*52% plus (6.0% multiplied by the number 

of bedrooms in excess of 3). 

(e) For extremely low-income, income 

of prospective tenants shall not exceed 

the following percentages of area 

median income with adjustments, 

depending on unit size: 

Unit size 

Percentage of 

area median income 

Efficiency ............................ 21 

1 bedroom .......................... 22 .5 

2 bedrooms ......................... 27 

3 bedrooms or more ........... * 

*31.2% plus (3.6% multiplied by the number 

of bedrooms in excess of 3). 

§ 1282.19 Affordability—Rent level 

definitions—tenant income is not known. 

For purposes of determining whether 

a rental unit is affordable where the 

income of the family in the dwelling 

unit is not known to the Enterprise, the 


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55938 Federal Register / Vol. 75, No. 177 / Tuesday, September 14, 2010 / Rules and Regulations 

affordability of the unit is determined 

based on unit size as follows: 

(a) For moderate-income, maximum 

affordable rents to count as housing for 

moderate-income families shall not 

exceed the following percentages of area 

median income with adjustments, 

depending on unit size: 

Unit size 

Percentage of 

area median income 

Efficiency ............................ 21 

1 bedroom .......................... 22 .5 

2 bedrooms ......................... 27 

3 bedrooms or more ........... * 

*31.2% plus (3.6% multiplied by the number 

of bedrooms in excess of 3). 

(b) For low-income (80%), maximum 

affordable rents to count as housing for 

low-income (80%) families shall not 

exceed the following percentages of area 

median income with adjustments, 

depending on unit size: 

Unit size 

Percentage of 

area median income 

Efficiency ............................ 16 .8 

1 bedroom .......................... 18 

2 bedrooms ......................... 21 .6 

3 bedrooms or more ........... * 

*24.96% plus (2.88% multiplied by the number of bedrooms in excess of 3). 

(c) For low-income (60%), maximum 

affordable rents to count as housing for 

low-income (60%) families shall not 

exceed the following percentages of area 

median income with adjustments, 

depending on unit size: 

Unit size 

Percentage of 

area median income 

Efficiency ............................ 12 .6 

1 bedroom .......................... 13 .5 

2 bedrooms ......................... 16 .2 

3 bedrooms or more ........... * 

*18.72% plus (2.16% multiplied by the number of bedrooms in excess of 3). 

(d) For very low-income, maximum 

affordable rents to count as housing for 

very low-income families shall not 

exceed the following percentages of area 

median income with adjustments, 

depending on unit size: 

Unit size 

Percentage of 

area median income 

Efficiency .......................... 10 .5 

1 bedroom ........................ 11 .25 

2 bedrooms ....................... 13 .5 

3 bedrooms or more ......... * 

*15.6% plus (1.8% multiplied by the number 

of bedrooms in excess of 3). 

(e) For extremely low-income, 

maximum affordable rents to count as 

housing for extremely low-income 

families shall not exceed the following 

percentages of area median income with 

adjustments, depending on unit size: 

Unit size 

Percentage of 

area 

median income 

Efficiency ............................ 6 .3 

1 bedroom .......................... 6 .75 

2 bedrooms ......................... 8 .1 

3 bedrooms or more ........... * 

* 9.36% plus (1.08% multiplied by the number of bedrooms in excess of 3). 

(f) Missing Information. Each 

Enterprise shall make every effort to 

obtain the information necessary to 

make the calculations in this section. If 

an Enterprise makes such efforts but 

cannot obtain data on the number of 

bedrooms in particular units, in making 

the calculations on such units, the units 

shall be assumed to be efficiencies 

except as provided in § 1282.15(e)(1). 

§ 1282.20 Determination of compliance 

with housing goals; notice of determination. 

(a) Single-family housing goals. The 

Director shall evaluate each Enterprise’s 

performance under the low-income 

families housing goal, the very lowincome families housing goal, the lowincome areas housing goal, the lowincome areas housing subgoal, and the 

refinancing mortgages housing goal on 

an annual basis. If the Director 

determines that an Enterprise has failed, 

or there is a substantial probability that 

an Enterprise will fail, to meet a singlefamily housing goal established by this 

subpart, the Director shall notify the 

Enterprise in writing of such 

preliminary determination. 

(b) Multifamily housing goal and 

subgoal. The Director shall evaluate 

each Enterprise’s performance under the 

multifamily low-income housing goal 

and the multifamily very low-income 

housing subgoal on an annual basis. If 

the Director determines that an 

Enterprise has failed, or there is a 

substantial probability that an 

Enterprise will fail, to meet a 

multifamily housing goal or subgoal 

established by this subpart, the Director 

shall notify the Enterprise in writing of 

such preliminary determination. 

(c) Any notification to an Enterprise 

of a preliminary determination under 

this section shall provide the Enterprise 

with an opportunity to respond in 

writing in accordance with the 

procedures at 12 U.S.C. 4566(b). 

§ 1282.21 Housing plans. 

(a) General. If the Director determines 

that an Enterprise has failed, or there is 

a substantial probability that an 

Enterprise will fail, to meet any housing 

goal and that the achievement of the 

housing goal was or is feasible, the 

Director may require the Enterprise to 

submit a housing plan for approval by 

the Director. 

(b) Nature of plan. If the Director 

requires a housing plan, the housing 

plan shall: 

(1) Be feasible; 

(2) Be sufficiently specific to enable 

the Director to monitor compliance 

periodically; 

(3) Describe the specific actions that 

the Enterprise will take: 

(i) To achieve the goal for the next 

calendar year; and 

(ii) If the Director determines that 

there is a substantial probability that the 

Enterprise will fail to meet a housing 

goal in the current year, to make such 

improvements and changes in its 

operations as are reasonable in the 

remainder of the year; and 

(4) Address any additional matters 

relevant to the plan as required, in 

writing, by the Director. 

(c) Deadline for submission. The 

Enterprise shall submit the housing plan 

to the Director within 45 days after 

issuance of a notice requiring the 

Enterprise to submit a housing plan. 

The Director may extend the deadline 

for submission of a plan, in writing and 

for a time certain, to the extent the 

Director determines an extension is 

necessary. 

(d) Review of housing plans. The 

Director shall review and approve or 

disapprove housing plans in accordance 

with 12 U.S.C. 4566(c)(4) and (c)(5). 

(e) Resubmission. If the Director 

disapproves an initial housing plan 

submitted by an Enterprise, the 

Enterprise shall submit an amended 

plan acceptable to the Director not later 

than 15 days after the Director’s 

disapproval of the initial plan; the 

Director may extend the deadline if the 

Director determines an extension is in 

the public interest. If the amended plan 

is not acceptable to the Director, the 

Director may afford the Enterprise 15 

days to submit a new plan. 

Subpart C—[Reserved] 

Subpart D—Reporting Requirements 

§ 1282.61 General. 

This subpart establishes data 

submission and reporting requirements 

to carry out the requirements of the 

Enterprises’ Charter Acts and the Safety 

and Soundness Act. 

§ 1282.62 Mortgage reports. 

(a) Loan-level data elements. To 

implement the data collection and 


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Federal Register / Vol. 75, No. 177 / Tuesday, September 14, 2010 / Rules and Regulations 55939 

submission requirements for mortgage 

data, and to assist the Director in 

monitoring the Enterprises’ housing goal 

activities, each Enterprise shall collect 

and compile computerized loan-level 

data on each mortgage purchased in 

accordance with 12 U.S.C. 1456(e) and 

1723a(m). The Director may, from time 

to time, issue a list entitled ‘‘Required 

Loan-level Data Elements’’ specifying 

the loan-level data elements to be 

collected and maintained by the 

Enterprises and provided to the 

Director. The Director may revise the 

list by written notice to the Enterprises. 

(b) Quarterly Mortgage Reports. Each 

Enterprise shall submit to the Director a 

quarterly Mortgage Report. The fourth 

quarter Mortgage Report shall serve as 

the Annual Mortgage Report and shall 

be designated as such. Each Mortgage 

Report shall include: 

(1) Aggregations of the loan-level 

mortgage data compiled by the 

Enterprise under paragraph (a) of this 

section for year-to-date mortgage 

purchases, in the format specified in 

writing by the Director; 

(2) Year-to-date dollar volume, 

number of units, and number of 

mortgages on owner-occupied and 

rental properties purchased by the 

Enterprise that do, and do not, qualify 

under each housing goal as set forth in 

this part; and 

(3) Year-to-date computerized loanlevel data consisting of the data 

elements required under paragraph (a) 

of this section. 

(c) Timing of Reports. The Enterprises 

shall submit the Mortgage Report for 

each of the first 3 quarters of each year 

within 60 days of the end of the quarter. 

Each Enterprise shall submit its Annual 

Mortgage Report within 75 days after 

the end of the calendar year. 

(d) Revisions to Reports. At any time 

before submission of its Annual 

Mortgage Report, an Enterprise may 

revise any of its quarterly reports for 

that year. 

(e) Format. The Enterprises shall 

submit to the Director computerized 

loan-level data with the Mortgage 

Report, in the format specified in 

writing by the Director. 

§ 1282.63 Annual Housing Activities 

Report. 

To comply with the requirements in 

sections 309(n) of the Fannie Mae 

Charter Act and 307(f) of the Freddie 

Mac Act and assist the Director in 

preparing the Director’s Annual Report 

to Congress, each Enterprise shall 

submit to the Director an AHAR 

including the information listed in those 

sections of the Charter Acts. Each 

Enterprise shall submit such report 

within 75 days after the end of each 

calendar year, to the Director, the 

Committee on Financial Services of the 

House of Representatives, and the 

Committee on Banking, Housing, and 

Urban Affairs of the Senate. Each 

Enterprise shall make its AHAR 

available to the public online and at its 

principal and regional offices. Before 

making any such report available to the 

public, the Enterprise may exclude from 

the report any information that the 

Director has deemed proprietary. 

§ 1282.64 Periodic reports. 

Each Enterprise shall provide to the 

Director such reports, information and 

data as the Director may request from 

time to time. 

§ 1282.65 Enterprise data integrity. 

(a) Certification.—(1) The senior 

officer of each Enterprise who is 

responsible for submitting the fourth 

quarter Annual Mortgage Report and the 

AHAR under sections 309(m) and (n) of 

the Fannie Mae Charter Act or sections 

307(e) and (f) of the Freddie Mac Act, 

as applicable, or for submitting any 

other report(s), data or information for 

which certification is requested in 

writing by the Director, shall certify 

such report(s), data or information. 

(2) The certification shall state as 

follows: ‘‘To the best of my knowledge 

and belief, the information provided 

herein is true, correct and complete.’’ 

(b) Adjustment to correct errors, 

omissions or discrepancies in AHAR 

data. FHFA shall determine the official 

housing goal performance figure for 

each Enterprise under the housing goals 

on an annual basis. FHFA may resolve 

any error, omission or discrepancy by 

adjusting the Enterprise’s official 

housing goal performance figure. If the 

Director determines that the year-end 

data reported by an Enterprise for a year 

preceding the latest year for which data 

on housing goals performance was 

reported to FHFA contained a material 

error, omission or discrepancy, the 

Director may increase the corresponding 

housing goal for the current year by the 

number of mortgages (or dwelling units) 

that the Director determines were 

overstated in the prior year’s goal 

performance. 

Dated: September 1, 2010. 

Edward J. DeMarco, 

Acting Director, Federal Housing Finance 

Agency. 

[FR Doc. 2010–22361 Filed 9–13–10; 8:45 am] 

BILLING CODE 8070–01–P 


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