[Federal Register Volume 59, Number 229 (Wednesday, November 30, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-29433]
[[Page Unknown]]
[Federal Register: November 30, 1994]
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Part VII
Department of Housing and Urban Development
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Office of the Secretary
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24 CFR Part 81
Continuation of Federal Home Loan Mortgage Corporation and Federal
National Mortgage Association Housing Goals; Final Rule
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
Office of the Secretary
24 CFR Part 81
[Docket No. R-94-1763; FR-3810-F-01]
RIN 2501-AB87
Continuation of Federal Home Loan Mortgage Corporation and
Federal National Mortgage Association Housing Goals
AGENCY: Office of the Secretary, HUD.
ACTION: Final rule.
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SUMMARY: Under the Federal Housing Enterprises Financial Safety and
Soundness Act of 1992, the Secretary is required to establish housing
goals to direct the purchase of mortgages by the Federal Home Loan
Mortgage Corporation (Freddie Mac) and the Federal National Mortgage
Association (Fannie Mae) on: housing for low- and moderate-income
families; housing located in central cities, rural areas and other
underserved areas; and housing meeting the needs of and affordable to
low-income families in low-income areas and very low-income families.
By Notices published on October 13, 1993, the Secretary established
housing goals for 1993 and 1994. This final rule temporarily extends
into 1995 the 1994 housing goals that were established by the Secretary
for Freddie Mac and Fannie Mae. The Secretary will soon propose
regulations that will include adjusted housing goals for 1995. When
these new 1995 goals are established by final regulation, the 1994
goals extended through this action will be superseded for the remainder
of the year, i.e., the new goals will be established ``short year,'' so
that the Freddie Mac and Fannie Mae are not expected to perform under
the new goals for the entire year. The goals shall be applied using the
same requirements set forth in the Notices of Interim Housing Goals and
as clarified subsequently by the Department.
EFFECTIVE DATE: December 30, 1994.
FOR FURTHER INFORMATION CONTACT: Harold Bunce, Acting Director,
Financial Institutions Regulation, Office of Policy Development and
Research, telephone (202) 708-2770 or (202) 708-0770 (TDD). For legal
questions, contact Kenneth A. Markison, Assistant General Counsel for
Government-Sponsored Enterprises/RESPA, Office of General Counsel,
telephone (202) 708-3137. The address for both of these persons is:
Department of Housing and Urban Development, 451 Seventh Street, SW,
Washington, DC 20410. A telecommunications device for deaf persons
(TDD) is available at (202) 708-9300. (These are not toll-free
telephone numbers.)
SUPPLEMENTARY INFORMATION:
Justification for Final Rulemaking
In general, the Department publishes a rule for public comment
before issuing a rule for effect, in accordance with its own
regulations on rulemaking, 24 CFR part 10. However, the Administrative
Procedure Act (see 5 U.S.C. 553) and part 10 provide for exceptions
from that general rule where the agency finds good cause to omit
advance notice and public participation. The good cause requirement is
satisfied when prior public procedure is ``impracticable, unnecessary,
or contrary to the public interest.'' (24 CFR 10.1)
The Department finds that good cause exists to publish this rule
for effect without first soliciting public comment, in that prior
public procedure is impracticable, unnecessary, and contrary to public
interest. The rule merely ensures that housing goals are established
under which the Federal Home Loan Mortgage Corporation and the Federal
National Mortgage Association (together, Fannie Mae and Freddie Mac are
referenced throughout this text as ``Government-Sponsored Enterprises''
or ``GSEs'') will be accountable for carrying out their statutory and
charter responsibilities. A critical need exists to ensure continued
applicability of housing goals pending the establishment of new housing
goals through notice-and-comment rulemaking.
The Secretary currently is in the process of issuing a proposed
regulation that will establish housing goals from the date established
when such regulation becomes final, some time in 1995. That final
regulation will replace this rule. Accordingly, the housing goals
extended through this rule will only apply to that portion of 1995 that
precedes the effective date of that rule.
This Rule
This rule extends the housing goals for the GSEs' purchase of
mortgages on housing for low- and moderate-income families, housing
located in central cities, and housing meeting the needs of and
affordable to low-income families in low-income areas and very low-
income families. The housing goals being extended were established by
the Secretary and promulgated as Notices of Interim Housing Goals (58
FR 53048 and 53072; October 13, 1993). The requirements of the Notices,
including any clarifications issued by the Secretary, will also apply
to the housing goals continued for 1995 by this action.
For the housing goals for low- and moderate-income families and for
housing located in central cities, this rule extends the Notices' goals
into 1995. Accordingly, the housing goal for each GSE's purchases of
mortgages financing housing for low- and moderate-income families is 30
percent of the total number of dwelling units financed by each GSE's
mortgage purchases. For central cities, the housing goal for each GSE's
purchases of mortgages financing housing located in central cities is
30 percent of the total number of dwelling units financed by each GSE's
mortgage purchases. These goals shall apply on a proportional basis for
that portion of 1995 before permanent goals are established and
effective following rulemaking.
The goals for special affordable housing (i.e., housing meeting the
needs of and affordable to low-income families in low-income areas and
very low-income families) applicable to each GSE were established under
the Federal Housing Enterprises Financial Safety and Soundness Act of
1992, 12 U.S.C. 4501-4641 (the 1992 Act), and the Interim Notices as
two-year goals covering 1993 and 1994. This rule extends the 1993-1994
special affordable housing goals for each GSE into 1995 and provides
that the goals for 1995 shall be as described below. The special
affordable housing goals established under this rule also shall apply
on a proportional basis to that portion of 1995 before permanent goals
are established and effective following rulemaking.
The level of the two-year (1993-1994) special affordable housing
goal for each GSE was established at a dollar amount above and beyond a
1992 baseline. The GSEs were asked to provide the Secretary with a
good-faith estimate of the dollar amount of each enterprise's 1992
mortgage purchases that would have qualified under the special
affordable housing goal if the goal had applied to 1992 purchases.
Fannie Mae estimated that in 1992 it purchased $7.1965 billion of
mortgages that would have qualified toward the special affordable
housing goal had it applied. Freddie Mac estimated that in 1992 it
purchased $5.214 billion of mortgages that would have qualified toward
the special affordable housing goal had it applied.
The 1993-1994 special affordable housing goal for Fannie Mae was
then established as twice the 1992 baseline ($14.393 billion) plus $2
billion--the minimum amount of the goal for the transition period
established for Fannie Mae under the 1992 Act--for a two-year goal of
$16.393 billion. The 1993-1994 special affordable housing goal for
Freddie Mac was then established as twice the 1992 baseline ($10.428
billion) plus $1.5 billion--the minimum amount of the goal for the
transition period established for Freddie Mac under the 1992 Act--for a
two-year goal of $11.928 billion.
The Secretary recognizes that in 1995 the dollar amount of
conventional mortgages originated will be substantially lower than the
amount originated in 1992. HUD estimates that there will be a reduction
in conventional originations of at least one-third between the 1992
market ($819 billion) and the 1995 mortgage market (an estimated $510
billion). In addition, seasonality is an important factor in the
mortgage markets--fewer mortgages are originated in the first quarter
of the year than in any other quarter. These goals are likely to be in
place for only a portion of 1995, including that quarter for which
mortgage originations are the lowest.
Because of these two factors--the large reduction in the size of
the mortgage market and the seasonality of originations--the Secretary
has appropriately revised the baseline applicable to the special
affordable housing goals that will be in place for 1995. The Secretary
has reduced the baselines for each enterprise by 50 percent. The 1995
goal for Fannie Mae is $4.598 billion (the revised baseline plus $1
billion, half of the two-year goal under the 1992 Act). The 1995 goal
for Freddie Mac is $3.357 billion (the revised baseline plus $750
million, half of the goal for Freddie Mac under the 1992 Act).
Background
Since 1968, the Secretary has had general regulatory authority and
specific regulatory authorities respecting Fannie Mae. Since 1989,
pursuant to the Financial Institution Reform Recovery and Enforcement
Act of 1989 (Pub.L. 101-73, approved August 9, 1989) (``FIRREA''), the
Secretary has had the same regulatory authorities respecting Freddie
Mac.
The 1992 Act substantially changed the Secretary's regulatory
authorities respecting the GSEs. The 1992 Act increased and detailed
the Secretary's authority to establish, monitor performance under, and
enforce annual goals for mortgage purchases by the GSEs of mortgages
financing: (1) housing for low- and moderate-income families; (2)
housing located in central cities, rural areas, and other underserved
areas; and (3) housing meeting the needs of and affordable to low-
income families in low-income areas and very low-income families. (See
generally sections 1331-49 of the 1992 Act.)
The 1992 Act provided for a transition period of 1993 and 1994, for
which the Act established annual targets for the purchases by both GSEs
of mortgages financing housing for low- and moderate-income families
and housing located in central cities. These transition targets were
set at the same percentages provided under HUD regulations applicable
to Fannie Mae that were issued in 1978. Accordingly, the 1992 Act set
the transition targets at 30 percent of the mortgage purchases of the
GSEs.
The 1992 Act provided that, for the transition period, in cases
where a GSE was not meeting its 30 percent target as of January 1,
1993, the Secretary was to establish annual goals so that the GSE would
improve its performance relative to the target annually and, to the
maximum extent feasible, would meet the target at the conclusion of the
transition period. The 1992 Act also established dollar goals for the
GSEs' purchases of mortgages financing special affordable housing.
On July 22, 1993, in accordance with requirements in the 1992 Act,
the Secretary provided the GSEs with an opportunity to review and
comment on the proposed interim goals. Subsequently, HUD staff met with
representatives of both GSEs for discussion of the comments received,
after which the GSEs provided additional comments to the Department.
Pursuant to sections 1332(d)(3), 1333(d)(4), and 1334(d)(3) of the
1992 Act, on October 13, 1993 (58 FR 53048 and 53061) (``October 13
Notice''), the Secretary published two notices in the Federal Register
establishing the interim goals for each GSE--applicable to the
transition years of 1993 and 1994--and requirements for implementation
of the goals. Since neither GSE was meeting its targets as of the
beginning of the transition period, the goals were established so that
the GSEs would, to the maximum extent feasible, meet the targets by the
end of the transition period.
The October 13 Notice established Fannie Mae's low- and moderate-
income housing goal at 30 percent of the units financed by mortgages
purchased by Fannie Mae in 1993 and 1994. The notice also established
Fannie Mae's central cities goal at 28 percent of units financed by
mortgages purchased by Fannie Mae in 1993, and 30 percent in 1994.
The October 13 Notice established Freddie Mac's low- and moderate-
income housing goal at 28 percent for 1993 and 30 percent for 1994. The
notice also established Freddie Mac's goal for purchases of mortgages
financing housing located in central cities at 26 percent for 1993 and
30 percent for 1994.
The October 13 Notice established the Special Affordable Housing
Goals as two-year goals for the GSEs' purchases of conventional
mortgages on rental and owner-occupied housing meeting the then-
existing unaddressed needs of, and affordable to, low-income families
in low-income areas and very low-income families. This goal for Fannie
Mae was established as not less than 2 billion dollars ($2,000,000,000)
above Fannie Mae's existing performance and commitments. This goal for
Freddie Mac was established as not less than 1\1/2\ billion dollars
($1,500,000,000) above Freddie Mac's existing performance and
commitments.
Basis for Secretary's Action
The Secretary is empowered to extend the housing goals under
section 1321 of the 1992 Act, which confers on the Secretary general
regulatory authority and the authority to ``make such rules and
regulations as shall be necessary and proper'' to ensure that the
purposes of the 1992 Act and the purposes of the Fannie Mae Charter Act
and the Freddie Mac Act are accomplished.
Section 1331 of the 1992 Act provides that the Secretary shall
establish housing goals by regulation. Section 1331 also provides that
from year to year the Secretary may adjust any housing goal by
regulation. Section 1349 of the 1992 Act provides that any final
regulations necessary to implement the provisions of the 1992 Act
relating to the housing goals shall be issued after notice and
opportunity for public comment.
This rule does not involve either an establishment of goals or an
adjustment of existing goals; it involves an extension of established
goals for which the GSEs were invited to comment. (In the case of the
special affordable housing goal, only the baseline is revised
appropriately to reflect market conditions and seasonality.) The
Secretary will soon propose final regulations implementing the
Secretary's responsibilities under the 1992 Act, including establishing
new housing goals. Those regulations will be proposed for public
comment. However, those regulations will not be effective by the
beginning of 1995.
Therefore, issuance of this final rule is essential to assure that
the GSEs continue carrying out their Charter purposes pending
rulemaking. The Fannie Mae Charter Act (12 U.S.C. 1716 et seq.) and the
Freddie Mac Act (12 U.S.C. 1451 et seq.) establish identical purposes
for Fannie Mae and Freddie Mac, including ``provid[ing] ongoing
assistance to the secondary market for residential mortgages (including
activities relating to mortgages on housing for low- and moderate-
income families involving a reasonable economic return that may be less
than the return earned on other activities) by increasing the liquidity
of mortgage investments and improving the distribution of investment
capital available for residential mortgage financing;'' and
``promot[ing] access to mortgage credit throughout the Nation
(including central cities, rural areas, and other underserved areas) by
increasing the liquidity of mortgage investments and improving the
distribution of investment capital available for residential mortgage
financing.'' (See section 301 (3) and (4) of the Fannie Mae Charter Act
and section 301(b) (3) and (4) of the Freddie Mac Act.)
Other Matters
Regulatory Flexibility Act
The Secretary, in accordance with the Regulatory Flexibility Act (5
U.S.C. 605(b)), has reviewed this rule before publication and by
approving it certifies that this rule does not have a significant
economic impact on a substantial number of small entities. The rule is
limited to ensuring the continuation of established housing goals for
Fannie Mae and Freddie Mac pending the specification of new housing
goals through notice-and-comment rulemaking.
Environmental Impact Statement
In accordance with 40 CFR 1508.4 of the regulations of the Council
on Environmental Quality and 24 CFR 50.20(l) of the HUD regulations,
the policies and procedures contained in this rule relate only to the
extension of statutorily required housing goals and, therefore, are
categorically excluded from the requirements of the National
Environmental Policy Act.
Executive Order 12612, Federalism
The General Counsel, as the Designated Official under section 6(a)
of Executive Order 12612, Federalism, has determined that the policies
contained in this rule do not have substantial direct effects on states
or their political subdivisions, or the relationship between the
Federal Government and the states, or on the distribution of power and
responsibilities among the various levels of government. As a result,
the rule is not subject to review under the Order. Promulgation of this
rule merely ensures the continuation of established housing goals for
the GSEs pending the specification of new housing goals through notice-
and-comment rulemaking.
Executive Order 12606, the Family
The General Counsel, as the Designated Official under Executive
Order 12606, the Family, has determined that this rule does not have
potential for significant impact on family formation, maintenance, and
general well-being, and thus, is not subject to review under the Order.
No significant change in existing HUD policies or programs will result
from promulgation of this rule, as those policies and programs relate
to family concerns.
Regulatory Agenda
This rule was not listed in the Department's Semiannual Agenda of
Regulations published on November 14, 1994, (59 FR 57632) in accordance
with Executive Order 12866 and the Regulatory Flexibility Act.
List of Subjects in 24 CFR Part 81
Accounting, Federal Reserve System, Mortgages, Reporting and
recordkeeping requirements, Securities.
Accordingly, title 24 of the Code of Federal Regulations is amended
by adding a new subpart F to part 81, as follows.
PART 81--REGULATIONS IMPLEMENTING THE AUTHORITY OF THE SECRETARY OF
THE DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT OVER THE CONDUCT OF
THE SECONDARY MARKET OPERATIONS OF THE FEDERAL NATIONAL MORTGAGE
ASSOCIATION (FNMA)
1. The authority citation for part 81 is revised to read as
follows:
Authority: 12 U.S.C. 4501-4641; 42 U.S.C. 3535(d).
2. Subpart F is added, to read as follows:
Subpart F--Extension of Housing Goals for the Federal National
Mortgage Association and the Federal Home Loan Mortgage Corporation
Sec. 81.51 Extension of Housing Goals for 1995.
(a) Low- and moderate-income families and central cities. The
housing goals for 1994 for purchases by the Federal National Mortgage
Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation
(Freddie Mac) of mortgages on housing for low- and moderate-income
families and housing located in central cities provided in the Notices
of Interim Housing Goals, 58 FR 53048 and 53072 (October 13, 1993),
shall apply to 1995. The goals established under this paragraph shall
apply on a proportional basis to that portion of 1995 before goals are
established and effective following notice and comment rulemaking.
(b) Special affordable housing goals. The housing goals for 1993
and 1994 for purchases by Fannie Mae and Freddie Mac of mortgages on
special affordable housing provided in the Notices of Interim Housing
Goals, 58 FR 53048 and 53072 (October 13, 1993), shall apply to 1995
with appropriate revisions to the 1992 baseline for the goals as set
forth herein. In establishing the levels of these housing goals for
1995, the Secretary has considered the level of estimated mortgage
originations in 1995 and that these goals will be in place for only a
portion of the year. Consequently, the Secretary has adjusted the
baselines applicable to the special affordable housing goals, from the
1992 baselines, so that the goals result in the following dollar
amounts: The 1995 goal for Fannie Mae shall be $4.598 billion and the
1995 goal for Freddie Mac shall be $3.357 billion. The goals
established under this paragraph shall apply on a proportional basis to
that portion of 1995 before goals are established and effective
following notice and comment rulemaking.
(c) Applicability of clarifications. The requirements contained in
the Notices of Interim Housing Goals at 58 FR 53048 and 53072 (October
13, 1993), including any clarifications issued by the Secretary or the
Secretary's designee(s), shall apply to the housing goals under this
section.
Dated: November 23, 1994.
Henry G. Cisneros,
Secretary.
[FR Doc. 94-29433 Filed 11-25-94; 9:08 am]
BILLING CODE 4210-27-P