[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goals extended through this action will be superseded for the remainder 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