Source: http://www.govpulse.us/entries/2010/05/28/2010-12849/federal-home-loan-bank-housing-goals
Timestamp: 2014-12-18 23:01:47
Document Index: 276414068

Matched Legal Cases: ['§ 1281', '§ 1281', '§ 1281', '§ 1281', '§ 1281', '§ 1281', 'art 955', 'art 980']

govpulse | Federal Home Loan Bank Housing Goals
Section 1205 of the Housing and Economic Recovery Act of 2008 (HERA) amended the Federal Home Loan Bank Act (Bank Act) by adding a new section 10C(a) that requires the Director of the Federal Housing Finance Agency (FHFA) to establish housing goals with respect to the Federal Home Loan Banks' (Banks) purchase of mortgages, if any. Section 10C(b) provides that the Banks' housing goals are to be consistent with the housinggoals established by FHFA for the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) (collectively, the Enterprises) under sections 1331 through 1334 of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 (Safety and Soundness Act), as amended by HERA, taking into consideration the unique mission and ownership structure of the Banks. Section 10C(c) further provides that, to facilitate an orderly transition, the Director shall establish interim target housing goals for the Banks for a transition period extending through 2010. Section 10C(d) also extends the monitoring and enforcement requirements of section 1336 of the Safety and Soundness Act to the Banks in the same manner and to the same extent as those requirements apply to the Enterprises.
A. Definitions—Proposed § 1281.1
B. Housing Goals—Proposed §§ 1281.10 and 1281.11
C. General Counting Requirements—Proposed § 1281.12
D. Special Counting Requirements—Proposed § 1281.13
E. Housing Goals Enforcement—Proposed §§ 1281.14 and 1281.15
F. Reporting Requirements—Proposed §§ 1281.20 through 1281.23
•E-mail: Comments to Alfred M. Pollard, General Counsel, may be sent by e-mail to RegComments@fhfa.gov. Please include “RIN 2590-AA16” in the subject line of the message.
•Federal eRulemaking Portal: http://www.regulations.gov. Follow the instructions for submitting comments. If you submit your comment to the Federal eRulemaking Portal, please also send it by e-mail to FHFA at RegComments@fhfa.gov to ensure timely receipt by the Agency. Please include “RIN 2590-AA16” in the subject line of the message.
•Hand Delivered/Courier: The hand delivery address is: Alfred M. Pollard, General Counsel, Attention: Comments/RIN 2590-AA16, Federal Housing Finance Agency, Fourth Floor, 1700 G Street, NW., Washington, DC 20552. The package should be logged at the Guard Desk, First Floor, on business days between 9 a.m. and 5 p.m.
•U.S. Mail, United Parcel Service, Federal Express, or Other Mail Service: The mailing address for comments is: Alfred M. Pollard, General Counsel, Attention: Comments/RIN 2590-AA16, Federal Housing Finance Agency, Fourth Floor, 1700 G Street, NW., Washington, DC 20552.
I. Comments ↑
A. Establishment of FHFA ↑
Effective July 30, 2008, HERA, Division A, Public Law 110-289, 122 Stat. 2654 (2008) (codified at 12 U.S.C. 4501et seq.), amended the Safety and Soundness Act to create FHFA as an independent agency of the Federal Government. HERA transferred the safety and soundness supervisory and oversight responsibilities over the Enterprises and the Banks from the Office of Federal Housing Enterprise Oversight (OFHEO) and the Federal Housing Finance Board (FHFB), respectively, to FHFA. HERA also transferred the charter compliance authority and responsibility to establish, monitor and enforce the housing goals for the Enterprises from the Department of Housing and Urban Development (HUD) to FHFA. FHFA is responsible for ensuring that the Enterprises and the Banks operate in a safe and sound manner and carry out their public policy missions. The Enterprises and the Banks continue to operate under regulations promulgated by OFHEO and FHFB, respectively, until such regulations are superseded by regulations issued by FHFA. See HERA at sections 1302 and 1312, 122 Stat. 2795 and 2798; 12 U.S.C. 4511 note.
B. Statutory and Regulatory Background ↑
1. Federal Home Loan Bank System ↑
The Federal Home Loan Bank System (System) was created by the Bank Act to support mortgage lending and related community investment. See12 U.S.C. 1421et seq. The System is composed of 12 Banks with more than 8,000 member financial institutions, and the System's fiscal agent, the Office of Finance. The Banks fulfill their statutory mission primarily through providing secured loans (called advances) to their members. The Bank Act provides the Banks explicit authority to make secured advances. 12 U.S.C. 1430(a). Advances provide members with a source of funding for mortgages and asset-liability management, liquidity for a member's short-term needs, and additional funds for housing finance and community investment. Advances are collateralized primarily by residential mortgage loans and government and agency securities. 12 U.S.C. 1430(a)(3). Community financial institutions (i.e., members with average total assets of less than $1 billion (as adjusted annually for inflation)) may also pledge small business, small agriculture or community development loans as collateral for advances. 12 U.S.C. 1430(a)(3)(E).
Consolidated obligations, consisting of bonds and discount notes, are the principal source for the Banks to fund advances and investments. The Office of Finance issues all consolidated obligations on behalf of the 12 Banks. Although each Bank is primarily liable for the portion of consolidatedobligations corresponding to the proceeds received by that Bank, each Bank is also jointly and severally liable with the other eleven Banks for the payment of principal of, and interest on, all consolidated obligations. See12 CFR 966.9.
2. Bank AMA Programs ↑
In July 2000, FHFB adopted a final regulation authorizing the Banks to establish Acquired Member Assets (AMA) programs. See12 CFR part 955. A Bank may participate in an AMA program at its discretion; FHFA does not have the authority to compel a Bank to engage in any mortgage purchase activities. Each Bank must receive approval from FHFA pursuant to the requirements for new business activities in order to establish an AMA program. See12 CFR part 980. A majority of the Banks have implemented AMA programs pursuant to the AMA approval authority.
In order for a Bank to acquire a mortgage loan under an AMA program, the loan must meet the requirements set forth under a three-part test established by the regulation. The three-part test consists of: a loan type requirement; a member or housing associate nexus requirement; and a credit risk-sharing requirement. 12 CFR 955.2. The AMA regulation generally authorizes the Banks to purchase conforming whole loans on single-family residential real property not more than 90 days delinquent. In addition, the Banks are authorized to purchase conforming whole loans on single-family residential real property regardless of delinquency status if the loan is insured or guaranteed by the U.S. government, although such loans are not eligible to be counted toward the Enterprises' housing goals, as provided in HERA.
The Banks acquire AMA from their participating members through either a purchase or funding transaction. The Banks are not authorized under the AMA programs to securitize the mortgages they purchase.
To date, FHFA has approved two AMA programs—the Mortgage Partnership Finance (MPF) program and the Mortgage Purchase Program (MPP)—that authorize the Banks to purchase only eligible single-family, fixed-rate mortgages, including manufactured housing loans, from participating financial institution members (PFIs). The Banks are not approved to purchase any other types of mortgages under the AMA programs, including mortgages secured by multifamily properties. In operation, the Banks have limited their AMA programs to purchasing conforming, conventional and government-insured or -guaranteed fixed-rate whole first mortgages on single-family residential property with maturities ranging from 5-30 years. Banks have also purchased participations in AMA-approved loan pools after the original Bank acquired the loans. As of March 31, 2010, the combined value of the AMA mortgage loans in the 12 Banks' portfolios was $69 billion, representing approximately seven percent of the Banks' total combined assets. In contrast, the Banks' outstanding advances, their primary business line, totaled $572 billion as of March 31, 2010, representing 59 percent of the Banks' total combined assets.
As previously noted, advances remain the core business activity of the Banks and a principal means by which they fulfill their mission. Participation in an AMA program is elective. The acquisition of AMA has presented certain risk management challenges for some Banks. The AMA are long-term, fixed-rate loans and the portfolio requires careful attention to interest rate risk management in order to match the duration of assets and liabilities and to adjust for loan prepayments. The Banks must also competitively price their product in the market without eroding their own financial interest. Given these challenges and in light of recent interest rate and earnings volatility, several Banks have scaled down their purchases of AMA and returned to their core products. After peaking in 2003, when the Banks purchased over $91.2 billion in AMA, annual AMA purchases have steadily declined to an annualized average of about $6.7 billion during the period between 2006 and 2009. Several Banks either have stopped accepting additional master commitments to purchase AMA from their members or no longer accept delivery. In 2007, 2008 and 2009, the principal pay-down and maturities of AMA held for portfolio were greater than purchases and funding of new loans held for portfolio.
3. Bank Housing Goals Statutory Provisions ↑
Sections 1331 through 1333 of the Safety and Soundness Act, as amended by HERA, require the Director of FHFA to establish new housing goals effective for 2010 and beyond for the Enterprises.The new Enterprise housing goals include four goals for conventional conforming single-family owner-occupied housing, one multifamily special affordable housing goal, and one multifamily special affordable housing subgoal. See12 U.S.C. 4561, 4563(a)(2). 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. See12 U.S.C. 4562. The multifamily special affordable housing goal targets multifamily housing affordable to low-income families, and the multifamily special affordable housing subgoal targets multifamily housing affordable to very low-income families. See12 U.S.C. 4563. In a separate rulemaking in the Federal Register, FHFA has issued and sought comments on proposed new housing goals for the Enterprises for 2010 and 2011 pursuant to the requirements of sections 1331 through 1333 of the Safety and Soundness Act, as amended. 75 FR 9034 (Feb. 26, 2010).
4. Banks' and Enterprises' Differences ↑
Fannie Mae and Freddie Mac have been owned by investors through their holdings of preferred or common stock shares since 1968 and 1989, respectively. An Enterprise's primary business is securitizing mortgages originated by financial institutions, and guaranteeing the timely payment of principal and interest on the mortgage-backed securities (MBS). The Enterprises also purchase mortgages for their mortgage portfolios. FHFA has instructed the Enterprises to significantly reduce the size of their mortgage portfolios over time. The Banks are restricted to purchasing loans from their members, most of which are regulated depositories. By contrast, the Enterprises have access to a broad, nationwide network of financial institutions from which they purchase mortgages. Also, unlike the Banks, for which participation in the AMA is an elective activity, the fundamental statutory purpose of the Enterprises is to bring stability in the secondary market for residential mortgages by purchasing and making commitments to purchase residential mortgages.