FHFA Lowers Certain Low-income Housing Goals for GSE Loan Purchases
Written By: Joel Palmer, Op-Ed Writer
The Federal Housing Finance Agency (FHFA) has lowered the benchmarks for affordable housing goals for loan purchases by Fannie Mae and Freddie Mac.
The move came despite concerns that the agency should be more aggressive in promoting low-income housing, not less.
FHFA issued a final rule last week that establishes new affordable housing goals over the next three years, and updates the process for requiring an action plan when an enterprise misses certain goals.
The housing goals, generally set in regulation by FHFA every three years, introduce 2025–2027 annual benchmarks for the Enterprises’ acquisitions to support equitable housing access for low-income families and families in low-income areas.
“The affordable housing goals better enable the enterprises to effectively advance their missions and support housing finance markets in a safe and sound manner,” said FHFA Director Sandra L. Thompson. “It is critical that the Enterprises meet these goals, as required by law and regulation.”
In the final rule, FHFA established a goal that the GSEs must purchase at least 25 percent of its loans over the next three years from designated low-income borrowers. That’s less than the 28 percent benchmark the GSEs had to meet the previous three years. The very low-income purchase goal was lowered from 7 percent to 6 percent.
The low-income home purchase goal is met on home purchase mortgages on single-family, owner-occupied properties, to borrowers with incomes no greater than 80 percent of area median income (AMI). The very low-income goal lowers the AMI benchmark to 50 percent.
FHFA noted in the rule document that “elevated mortgage interest rates and high home price levels will likely continue to impact the ability of low- and very low-income households to purchase homes.”
Other single-family housing goals that FHFA established including:
Maintaining the low-income refinance goal at the current benchmark level of 26 percent.
An increase in the benchmark level for the single-family minority census tracts home purchase subgoal from 10 percent to 12 percent. These are defined as properties purchased by borrowers with incomes no greater than 100 percent of AMI in minority census tracts.
A 4 percent benchmark for purchases in the low-income census tract category.
For single-family housing goals, the enterprises must meet the benchmark level or the actual market level of loans for each category. The actual market level is determined retrospectively for the year based on Home Mortgage Disclosure Act (HMDA) data.
The final rule also establishes new “measurement buffers” to help determine if an enterprise that misses certain single-family housing goals during the 2025–2027 cycle must develop a plan to demonstrate how it will improve its performance. This was done, FHFA said, due to “potential future uncertainty regarding the size and composition of the single-family mortgage market.”
A housing plan may be required if the enterprise fails to meet a goal and the gap between the enterprise’s performance and the market level is greater than the buffer defined in the final rule.
In the final rule document, FHFA summarized the 31 comment letters signed by 61 organizations and individuals responding to the new benchmarks.
While there was support for the rule overall, a number of commenters opposed the new housing goals. FHFA noted that “three nonprofit advocacy organizations, one trade association, and a community development financial institution disagreed with all or many of the proposed single- family goal benchmark levels, and their comments supported maintaining or increasing the benchmark levels relative to the levels established for 2022 through 2024.”
These responders generally wanted increased benchmarks for low-income buyers, urging “FHFA to remain aggressive and ambitious when setting the housing goal benchmark levels as a means to motivate the enterprises to lead the market.”
Also, while there was general support for the new measurement buffers, “comment letters submitted on behalf of several policy advocacy organizations expressed opposition to the proposed enforcement factors, based on the view that they would reduce the accountability of the enterprises and allow them to meet a share lower than the market level.”
About the Author
As an NAMP® Opinion Editorial Contributor, Joel Palmer is a freelance writer who spent 10 years as a business and financial reporter and another 10 years in marketing for the insurance and financial services industries. He regularly writes about the mortgage industry, as well as residential and commercial real estate, investments, and retirement income planning. He has also ghostwritten books on starting a business, marketing, and retirement income planning.
