[Federal Register Volume 75, Number 103 (Friday, May 28, 2010)]
[Proposed Rules]
[Pages 29947-29962]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-12849]


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FEDERAL HOUSING FINANCE AGENCY

12 CFR Part 1281

RIN 2590-AA16


Federal Home Loan Bank Housing Goals

AGENCY: Federal Housing Finance Agency.

ACTION: Notice of proposed rulemaking; request for comment.

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SUMMARY: 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 housing

[[Page 29948]]

goals 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.
    To implement section 10C, FHFA is issuing and seeking comments on a 
proposed rule that would establish three single-family owner-occupied 
purchase money mortgage goals and one single-family refinancing 
mortgage goal applicable to the Banks' purchases of single-family 
owner-occupied mortgages, if any, under their Acquired Member Assets 
(AMA) programs, consistent with FHFA's proposed single-family housing 
goals for the Enterprises. A Bank would be subject to the proposed 
housing goals if its AMA-approved mortgage purchases in a given year 
exceed a volume threshold of $2.5 billion. Other provisions in the 
proposed rule would be consistent with comparable provisions applicable 
to the proposed Enterprise housing goals to the extent appropriate, 
taking into account the nature of the Banks' AMA programs and the 
Banks' unique mission and ownership structure.

DATES: Written comments must be received on or before July 12, 2010.

ADDRESSES: You may submit your comments, identified by regulatory 
information number (RIN) 2590-AA16, by any one of the following 
methods:
     E-mail: Comments to Alfred M. Pollard, General Counsel, 
may be sent by e-mail to [email protected]. 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 [email protected] 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.

FOR FURTHER INFORMATION CONTACT: Nelson Hernandez, Senior Associate 
Director, (202) 408-2993, Charles E. McLean, Associate Director, (202) 
408-2537, or Rafe R. Ellison, Senior Program Analyst, (202) 408-2968, 
Office of Housing and Community Investment, 1625 Eye Street, NW., 
Washington, DC 20006. (These are not toll-free numbers.) For legal 
matters, contact Kevin Sheehan, Attorney, (202) 414-8952, or Sharon 
Like, Associate General Counsel, (202) 414-8950, Office of General 
Counsel, Federal Housing Finance Agency, Fourth Floor, 1700 G Street, 
NW., Washington, DC 20552. (These are not toll-free numbers.) The 
telephone number for the Telecommunications Device for the Hearing 
Impaired is (800) 877-8339.

SUPPLEMENTARY INFORMATION:

I. Comments

    FHFA invites comments on all aspects of the proposed rule, and will 
revise the language of the proposed rule as appropriate after taking 
all comments into consideration. Copies of all comments will be posted 
without change, including any personal information you provide, such as 
your name and address, on the FHFA Internet Web site at http://www.fhfa.gov. In addition, copies of all comments received will be 
available for examination by the public on business days between the 
hours of 10 a.m. and 3 p.m., at the Federal Housing Finance Agency, 
Fourth Floor, 1700 G Street, NW., Washington, DC 20552. To make an 
appointment to inspect comments, please call the Office of General 
Counsel at (202) 414-6924.

II. Background

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. 4501 et 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. See 
12 U.S.C. 1421 et 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 consolidated

[[Page 29949]]

obligations 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. See 12 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. See 12 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. See 12 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.\1\ 
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.
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    \1\ See 12 U.S.C. 4562. For that reason, the proposed rule would 
provide that such loans not be eligible to be counted toward the 
Banks' housing goals either. The AMA regulation also authorizes the 
Banks to purchase other real-estate-related collateral, including: 
second liens and commercial real estate loans; small business, small 
farm and small agri-business loans; whole loans secured by 
manufactured housing regardless of whether the housing qualifies as 
residential real property, and state and local housing finance 
agency bonds, subject to prior new business activity approval by 
FHFA under 12 CFR part 980. See 12 CFR 955.2(a).
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    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.\2\
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    \2\ See ``Federal Home Loan Banks First Quarter 2010 Combined 
Financial Report, Combined Statement of Condition,'' at 4.
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    The MPF and MPP programs are designed such that the Banks manage 
the interest-rate risk and the PFI assumes a substantial portion of the 
risks associated with originating the mortgage, particularly the credit 
risk. The AMA regulation requires that PFIs provide credit enhancement 
to give the mortgages the Banks purchase the credit quality equivalent 
to an instrument rated at least investment grade (the fourth highest 
credit rating category or triple-B), although the approved AMA programs 
require PFIs to enhance the loans to the second highest investment 
grade (double-A). 12 CFR 955.3. The PFI may provide this credit 
enhancement through various means, such as establishing a risk account 
to cover losses in excess of a borrower's equity and primary mortgage 
insurance on mortgages purchased by a Bank, accepting direct liability 
to pay credit losses up to a specified amount, or entering into a 
contractual obligation to provide supplemental mortgage guaranty 
insurance.
    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\
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    \3\ See ``Federal Home Loan Banks Combined Financial Report for 
2008'' at 78-80, and ``Federal Home Loan Banks Combined Financial 
Report for 2009'' at 55-56.
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3. Bank Housing Goals Statutory Provisions
    Section 10C(a) of the Bank Act, as amended by HERA, requires the 
Director of FHFA to ``establish housing goals with respect to the 
purchase of mortgages, if any, by the [Banks],'' which ``shall be 
consistent with the goals established under sections 1331 through 1334 
of the [Safety and Soundness Act, as amended].'' 12 U.S.C. 1430c(a). 
Section 10C(b) provides that, in establishing the goals for the Banks, 
``the Director shall consider the unique mission and ownership 
structure of the [Banks].'' 12 U.S.C. 1430c(b). In addition, section 
10C(c) provides that, ``to facilitate an orderly transition,'' the 
Director shall establish interim target goals for the purchase of 
mortgages by the Banks for the calendar years 2009 and 2010. 12 U.S.C. 
1430c(c). Section 10C(d) provides that the monitoring and enforcement 
requirements of section 1336 of the Safety and Soundness Act shall 
apply to the Banks in the same manner and to the same extent as they 
apply to the Enterprises. 12 U.S.C. 1430c(d). Section 10C(e) requires 
the Director to annually report to Congress on the performance of the 
Banks in meeting the housing goals under section 10C. 12 U.S.C. 
1430c(e).
    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.

[[Page 29950]]

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. See 12 U.S.C. 4561, 4563(a)(2). The single-family 
housing goals target purchase money mortgages for low-income 
families,\4\ families that reside in low-income areas,\5\ and very low-
income families,\6\ and refinancing mortgages for low-income families. 
See 12 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. See 12 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).
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    \4\ ``Low-income'' is defined as income not in excess of 80 
percent of area median income. See 12 U.S.C. 4502(14).
    \5\ ``Families in low-income areas'' is defined to include 
families living in census tracts where the median income does not 
exceed 80 percent of the area median income and families with 
incomes not in excess of the area median income that either live in 
a minority census tract or in a designated disaster area. See 12 
U.S.C. 4502(28).
    \6\ ``Very low-income'' is defined as income not in excess of 50 
percent of area median income. See 12 U.S.C. 4502(24).
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4. Banks' and Enterprises' Differences
    Section 1201 of HERA, 12 U.S.C. 4513(f), requires the Director of 
FHFA to consider the differences between the Banks and the Enterprises 
with respect to the Banks' cooperative ownership structure, mission of 
providing liquidity to members, affordable housing and community 
development mission, capital structure, and joint and several 
liability, whenever promulgating regulations that affect the Banks. The 
Director may also consider any other differences that are deemed 
appropriate. In preparing the proposed rule, the Director considered 
the differences between the Banks and the Enterprises as they relate to 
the above factors and determined that the rule is appropriate. As 
described below, FHFA is proposing significant differences between the 
Enterprise housing goals and the Bank housing goals--including 
establishing a volume threshold to avoid adverse impact on small PFIs--
that recognize the significant differences between the Banks' 
businesses and purposes and those of the Enterprises.
    Each Bank is a cooperative owned by financial institution members 
that act as both owners and customers of the cooperative. Members, as 
owners, are entitled to receive shares of the cooperative's earnings 
and access to the cooperative's products and services, including the 
AMA programs. A Bank is authorized to serve only members of its 
cooperative and, as discussed above, its primary business is providing 
advances to its members.
    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. See 12 U.S.C. 1451 note; 
12 U.S.C. 1716.
    The Banks' and Enterprises' different ownership structures and 
associated statutory restrictions in the Bank Act and the Federal 
National Mortgage Association Charter Act and the Federal Home Loan 
Mortgage Corporation Act (together, the Charter Acts), respectively, 
have a significant impact on their respective mortgage purchase 
activities. The Enterprises' mortgage purchase activities are 
substantially greater than that of the Banks. In calendar year 2009, 
the Banks' combined number of single-family mortgage purchases was 
slightly over 48,000, while Fannie Mae purchased approximately 3.51 
million single-family mortgages and Freddie Mac purchased approximately 
2.42 million single-family mortgages. The disparity between the Banks' 
and Enterprises' mortgage purchase businesses was great even during the 
peak years of the AMA programs. In 2003, the Banks purchased 
approximately 606,000 single-family mortgages, which was only 4.3 
percent of the approximately 14.02 million single-family mortgages 
purchased by the Enterprises in that year (see Figure 1).

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[GRAPHIC] [TIFF OMITTED] TP28MY10.022

III. The Proposed Rule

    The proposed rule would define housing goals for the Banks in terms 
similar to the single-family housing goals for the Enterprises. 
Separate goals would be established for AMA-approved mortgages on 
owner-occupied single-family housing. The goals for purchase money 
mortgages would separately measure performance on purchase money 
mortgages for low-income families, for families in low-income areas, 
and for very low-income families. The goal for refinancing mortgages 
would measure performance on refinancing mortgages for low-income 
families.

IV. Applicability of Bank Housing Goals to 2010 and Beyond

    HERA requires FHFA to establish 2009 and 2010 interim target 
housing goals for the Banks that facilitate an orderly transition and 
are consistent with those of the Enterprises. In order to facilitate an 
orderly transition, FHFA is proposing to establish housing goals for 
2010 and beyond. The Banks' administrative and monitoring challenges 
would be reduced by enabling the Banks to establish policies and 
procedures to meet the housing goals requirements with the knowledge 
that these requirements will not be changed the following year. 
Further, FHFA believes this approach would facilitate a more orderly 
transition to housing goals than the alternative, which would entail 
establishing interim target housing goals in the third quarter of 2010 
and establishing new housing goals in the fourth quarter of 2010 or 
first quarter of 2011. The Banks' unique ownership structure and 
mission is such that FHFA needed to add criteria to the Bank housing 
goals that are not necessary for those of the Enterprises, and FHFA 
required additional time to develop these criteria. In addition, 
establishing interim target housing goals for 2009 and 2010 and then 
replacing them with housing goals for 2011 that differ significantly 
could create administrative and monitoring challenges for the Banks.
    Pursuant to the requirements of HERA, a Bank that fails to meet a 
housing goal in 2010 and beyond would be required to submit a housing 
plan if FHFA determined that the housing goal was feasible for that 
year and that a housing plan was appropriate. See 12 U.S.C. 4566. FHFA 
appreciates that a Bank's capacity to meet the housing goals is 
affected by when the housing goals requirements are finalized and that 
a Bank may have difficulty meeting a housing goal for 2010. For this 
reason, when determining the feasibility of the 2010 housing goals, 
FHFA will take into consideration whether a Bank had the capacity to 
adjust its AMA program in an orderly manner to meet a housing goal and 
whether a Bank had sufficient opportunity to meet a housing goal. 
Additionally, FHFA will study the Banks' performance in 2010 and the 
operations of their AMA programs to gain information on whether the 
housing goals will require the Banks to make significant changes to 
their MPF or MPP programs.

V. Market-Based Housing Goals

    The proposed rule would establish market-based housing goals for 
the Banks in a manner largely consistent with the proposed market-based 
housing goals for the Enterprises. The proposed rule would measure the 
Banks' single-family housing goals performance relative to the actual 
goals-qualifying shares of the primary mortgage market during the year 
in their districts. FHFA believes that the advantages of comparing the 
Bank's performance to actual market performance outweigh the 
disadvantages. A more detailed discussion of the proposed market-based 
approach and its legal justification is included in the proposal for 
the new Enterprise housing goals. See 75 FR at 9035-9036 (Feb. 26, 
2010).
    A disadvantage of this approach is that public information on the 
goals-qualifying shares of the single-family primary mortgage market is 
not available until the release of Home Mortgage Disclosure Act (HMDA) 
data in late summer of the following year. However, FHFA will conduct a 
monthly survey of single-family mortgage originations pursuant to 
section 1324(c) of the Safety and Soundness Act, as amended by HERA, 
and make data collected under that survey available to

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the public. 12 U.S.C. 4544(c). Release of that data is likely to 
provide detailed information on home mortgage lending activity more 
frequently and in a timelier manner than does the public release of the 
data collected under HMDA. FHFA will use the survey data to supplement 
HMDA data in its monitoring of Bank housing goals performance.
    Proposed Sec.  1281.11 would establish single-family housing goals 
that include an assessment of a Bank's performance as compared to the 
actual share of the market that fits the criteria for each goal. FHFA 
is proposing to calculate the actual goals-qualifying shares of the 
district-level primary mortgage market during a year using all 
mortgages originated in the geographic boundaries of each Bank district 
(meaning that the properties securing the mortgages are located in the 
district), including mortgages originated both by members and non-
members. A Bank would meet a housing goal if its annual performance 
meets or exceeds the actual share of the market in that district that 
fits the criteria for a particular housing goal for that year. A Bank 
would fail to meet a goal if it falls short of the actual market share 
for that goal in the year. All mortgages purchased by a Bank that meet 
the requirements of the proposed regulation would count toward the 
Bank's goal performance, regardless of where the mortgages are located; 
but the market share against which the Bank's performance would be 
evaluated would be the market share of mortgages located in the 
district as described above. The housing goals would not apply until an 
individual Bank reached the dollar volume threshold.
    FHFA is proposing this approach after considering several 
alternatives. Because Banks can only purchase AMA-approved mortgages 
from their members, and because Banks are permitted to, and often do, 
purchase AMA-approved mortgages originated outside of their districts, 
defining a Bank's mortgage market based on loans originated within the 
district does not completely reflect the market a Bank serves. To 
address this, FHFA considered defining the district-level mortgage 
market as those mortgages originated by each Bank's members, regardless 
of the location of the property securing the mortgage. However, the 
majority of members have never sold mortgages to a Bank, and therefore, 
this approach would not accurately reflect the market served by a Bank. 
Additionally, smaller members and nonmetropolitan members are not 
subject to the data reporting requirements of HMDA, which could have a 
significant impact on determining the goals-qualifying share in 
districts such as the Des Moines and Topeka Bank districts with a large 
number of such members.
    FHFA also considered limiting the market to those members that sold 
AMA-approved mortgages to their Banks in a given year. However, the 
issues with measuring the market based on all mortgages originated by a 
Bank's members that are discussed above would also exist for this 
approach. There could also be variations in the goals-qualifying share 
resulting from changes in member participation in the AMA program. Such 
variations would make it difficult for the Banks to establish policies 
and procedures for meeting the housing goals requirements.
    FHFA also considered assigning weights to each AMA-approved 
mortgage purchased by a Bank to reflect the variations in the share of 
goals-qualifying mortgages in districts. This approach would assign 
more weight to a mortgage purchase in a district where the goals-
qualifying share of the market was lower, so that the Banks in such 
districts would not be disadvantaged. FHFA concluded that such an 
approach would be impractical, because FHFA would not be able to 
produce the weights until district-level shares of goals-qualifying 
mortgages were known. As a result, the Banks would not have an 
opportunity to modify their mortgage purchase activities in response to 
the weighting values. Such a mortgage-weighting approach could also 
lead a Bank to increase its mortgage purchase activities outside its 
district in a manner that could adversely impact members that operate 
only within its district. The mortgage-weighting approach would 
increase the complexity of calculating housing goals performance, thus 
making the process less transparent and potentially more subjective.
    FHFA also considered proposing the inclusion of a benchmark level 
for each housing goal to measure a Bank's performance. Specifically, a 
Bank would meet a housing goal if its annual performance met the 
benchmark level or the actual share of the market that fits the 
criteria for a particular housing goal for that year. A Bank would fail 
to meet a goal if it fell short of both the benchmark level for that 
goal and the actual market share for that goal in the year. Benchmark 
levels for performance could provide more certainty for the Banks in 
establishing strategies for meeting the housing goals.
    If benchmark levels were adopted for the Bank housing goals, FHFA 
would set the benchmark levels equal to the benchmark levels for the 
corresponding Enterprise housing goals. FHFA has proposed to establish 
benchmark levels for the Enterprise housing goals based on FHFA's 
national market size estimates. See 75 FR at 9037-9051 (Feb. 26, 2010). 
FHFA also considered the possibility of setting benchmark levels based 
on district-level market size estimates but concluded that the market 
sizes could not be reliably estimated in advance. Bank members with 
large residential lending businesses often originate mortgages outside 
the states that comprise the district of the Bank of which they are a 
member. For this reason, the geographic market being served by the 
Banks is not limited to areas within their respective districts. In 
addition, large Bank members have affiliates that may be members of 
different Banks, which makes it possible for these affiliates to sell 
mortgages originated in one Bank district to another Bank. For these 
reasons, FHFA is not proposing to set benchmarks for the Banks.
    FHFA seeks comment on whether it would be appropriate to establish 
benchmark levels as a means of measuring the Banks' housing goals 
performance, in addition to measuring performance based on a Bank's 
actual share of goal-qualifying mortgages relative to its district-
level market share, and if so, whether it would be appropriate to set 
benchmark levels for the Bank housing goals equal to the benchmark 
levels for the Enterprise housing goals. See 75 FR at 9051 (Feb. 26, 
2010).

VI. Volume Threshold

    The proposed rule would establish a dollar volume threshold of $2.5 
billion that a Bank must exceed before it is subject to the housing 
goals. The threshold is designed to take into consideration the Banks' 
unique mission and ownership structure and the current status of the 
AMA programs. Several Banks that continue to participate in the AMA do 
so principally as a service to their members. The large majority of 
members participating in the AMA are small asset size institutions. 
Since the inception of the AMA programs, approximately 88 percent of 
PFIs that sold mortgages to the Banks had total assets of under $1 
billion. From January 1, 2009 to June 30, 2009, the percentage was even 
higher at 93 percent. Faced with risk management requirements, 
monitoring for compliance, and reporting of achievement on the housing 
goals, a Bank with a small AMA program might elect to discontinue 
offering an AMA product to its members. Discontinuance of an AMA

[[Page 29953]]

program could adversely impact PFIs, such as those in rural areas, that 
may have limited or no access to the secondary market because of the 
higher per-mortgage sales cost associated with delivering a relatively 
small number of mortgages to purchasers, or the inability of these PFIs 
to meet purchasers' mortgage servicing requirements.
    FHFA is proposing to establish a volume threshold that would need 
to be met before a Bank would be subject to the proposed housing goals. 
The volume threshold is intended to ensure that Banks with significant 
AMA volume in any year would be subject to the housing goals, while 
Banks with a relatively low annual volume of purchases of AMA-approved 
mortgages, i.e., $2.5 billion or less, can continue to serve all PFIs 
without being subject to the housing goals. FHFA believes it is 
important that the housing goal mission objective of expanding access 
to mortgage finance to low-income families and families in low-income 
areas be balanced against the Banks' need to provide liquidity to small 
members and the communities they serve.
    To establish the proposed volume threshold, FHFA used 2008 HMDA 
mortgage origination data since these data are the most reliable and 
accurate mortgage data available to FHFA at this time. Using these 
data, FHFA calculated the total unpaid principal balance (UPB) of 
conforming, first lien mortgages secured by owner-occupied, single-
family residences (mortgages for home improvement and Home Ownership 
Equity Protection Act (HOEPA)) mortgages were excluded to be consistent 
with the market estimate approach for the Enterprise housing goals), 
which equaled $986 billion (approximately $1.0 trillion). FHFA is 
proposing that the volume threshold should be equal to approximately 
0.25 percent of the market, i.e., $2.5 billion. Assuming the average 
UPB of the mortgages a Bank purchases equals $200,000, a Bank would 
need to purchase only 12,500 mortgages in a given year to meet the 
volume threshold.
    The proposed volume threshold of $2.5 billion would be reasonable 
in light of the history of the AMA program. FHFA considered the volume 
of mortgages purchased by the Banks during the period when the Banks 
had their largest presence in the national market, which was from 2002 
to 2004. During this period, seven Banks in 2002, eight Banks in 2003 
and four Banks in 2004 had annual volume of AMA-approved mortgages 
greater than $2.5 billion and would have been subject to the housing 
goals. A significant percentage of Banks' annual volume of AMA-approved 
mortgages exceeded $5.0 billion in 2002 and 2003: four Banks in 2002 
and seven Banks in 2003. (See Table 1). Given this, FHFA considered 
proposing to set the volume threshold at $5.0 billion. The proposed 
volume threshold of $2.5 billion would be mid-way between the higher 
volume threshold and housing goals that would apply without regard to 
the volume of mortgages purchased by the Bank. FHFA requests comments 
on whether a volume threshold should apply, whether the proposed 
threshold of $2.5 billion is appropriate, and whether a higher or lower 
threshold should apply.
[GRAPHIC] [TIFF OMITTED] TP28MY10.023

    FHFA considered proposing a volume threshold that would exclude 
mortgages acquired from small members when calculating a Bank's annual 
volume of AMA-approved mortgages for purposes of the volume threshold. 
If small members were excluded for purposes of the volume threshold, 
FHFA would establish criteria for determining which members should be 
excluded, such as excluding members with total assets of less than $1.0 
billion. An alternative would be to exclude members that originate a 
small number of mortgages, or members that are not required to submit 
HMDA data to their primary regulator. FHFA requests comments on whether 
any of these alternatives would be appropriate, what criteria would be 
appropriate for determining which members should be excluded, and 
whether affiliates should be considered in applying such criteria.
    In developing the proposed rule, FHFA also considered other 
approaches for establishing volume thresholds for the Bank housing 
goals. FHFA considered a district market share approach that would 
apply housing goals to a Bank if its purchases of AMA-approved 
mortgages exceeded one percent of all mortgages originated in its 
district. The rationale behind the district market share approach was 
that a Bank would have a material impact on the mortgage market serving 
its district if it purchased at least one percent of the mortgages 
originated in its district.
    FHFA also considered a dollar and volume loan approach, which was 
first raised by FHFB in the May 2000 proposed rulemaking for the AMA 
regulation. In that proposed rule, FHFB decided to defer establishing 
housing goals until ``* * * such time as the conventional residential 
mortgage programs of the Banks, in the aggregate, have achieved a size 
and scope indicative of a mature program. * * *'' See 65 FR 25676, 
25685 (May 3, 2000). As an example of a ``mature program,'' FHFB 
proposed annual aggregated acquisition volume for the System of at 
least 100,000 loans or $10 billion, which FHFB considered to be of 
national scope. FHFB also discussed a volume threshold of 75,000 
mortgages acquired, so long as seven Banks accounted for at least 10 
percent of the AMA acquisitions volume for a given year.

[[Page 29954]]

    FHFA also considered the feasibility of adopting a volume threshold 
based on the percentage of AMA-approved mortgages purchased to Bank 
assets. For example, a Bank would be subject to housing goals if its 
purchases of AMA-approved mortgages exceeded 10 percent of the Bank's 
assets. FHFA considered such an approach because at some level of 
annual mortgage purchases, a Bank is no longer simply providing a 
service to its members, but is engaging in a profitable line of 
business to augment its primary line of business--advances to its 
members. At such a point, it would appear to be reasonable to also 
apply housing goals to this line of business.
    FHFA requests comments on the volume threshold alternatives 
discussed above and on any other alternatives that might be used.

VII. Analysis of Proposed Rule

A. Definitions--Proposed Sec.  1281.1

    Proposed Sec.  1281.1 would set forth definitions applicable to the 
Bank housing goals provisions. A number of the definitions are the same 
as those applicable to the Enterprises for their proposed new housing 
goals, and other definitions have been modified to reflect their 
applicability under the AMA programs. In order to maintain consistency 
between the Enterprise housing goals and the Bank housing goals where 
feasible, FHFA will consider public comments on the definitions 
proposed in the Enterprise housing goals and any resulting changes to 
the Enterprise housing goals in determining whether conforming changes 
are needed in the Bank housing goals. See 75 FR 9034 (Feb. 26, 2010).
    Definition of ``families in low-income areas.'' The definition of 
``families in low-income areas'' includes families with incomes at or 
below 100 percent of AMI who reside in ``minority census tracts,'' 
which is defined by HERA to mean 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. 12 U.S.C. 4502(29).
    In addition, the definition of ``families in low-income areas'' 
includes families with incomes at or below 100 percent of AMI who 
reside in ``designated disaster areas.'' Consistent with the proposed 
definition for the new Enterprise housing goals, the proposed rule 
would define ``designated disaster areas'' as areas at the census tract 
level and include 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.
    Definition of ``mortgage.'' The definition of ``mortgage'' would 
not include personal property manufactured housing loans, pending 
further review of the appropriate treatment of such loans under the 
Enterprise and Bank housing goals.
    Designated disaster areas. The definition of ``families in low-
income areas'' includes families with incomes at or below 100 percent 
of AMI who reside in ``designated disaster areas.'' The proposed rule 
would define ``designated disaster areas'' as areas at the census tract 
level and include 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 FEMA, exceeds 
$1,000 per household for that census tract.
    Disaster areas are declared when an area is adversely affected by 
some unforeseen event. However, not all disasters impact housing to the 
same degree, and the severity of the impact varies within the declared 
area. Presidential Major Disaster Declarations are defined by FEMA at 
the county level in the area affected by the major disaster and can be 
declared to be eligible for public assistance, individual assistance or 
both. Public assistance is available to local governments for the 
repair, replacement or clean-up of public infrastructure. Individual 
assistance is broken down further into two categories, housing needs 
and ``other than housing needs.'' \7\ Housing needs include repair, 
replacement and construction of homeowner residences. The proposed rule 
would limit the definition of ``designated disaster areas'' to those 
counties eligible for individual assistance, and it would establish a 
minimum average real property damage severity.
---------------------------------------------------------------------------

    \7\ Federally declared disaster areas are managed by FEMA and 
can be tracked at FEMA's Web site. See http://www.fema.gov/news/disasters.fema.
---------------------------------------------------------------------------

    For purposes of complying with the Community Reinvestment Act 
(CRA), regulators have made the determination 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.'' \8\ To 
accommodate the Banks' business planning requirements, for purposes of 
the low-income areas housing goal, the proposed rule would treat a 
designated disaster area as effective beginning no later than January 1 
of the year following the FEMA designation and continuing through 
December 31 of the third full calendar year following the FEMA 
designation. If data are available in a particular case to support 
treatment as a designated disaster area from an earlier date, FHFA may 
provide for such treatment.
---------------------------------------------------------------------------

    \8\ The 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 498, 509 (Jan. 6, 2009).
---------------------------------------------------------------------------

    FHFA welcomes comments on the proposed definitions in Sec.  1281.1.

B. Housing Goals--Proposed Sec. Sec.  1281.10 and 1281.11

    General. Proposed Sec.  1281.10 provides an overview of the 
contents of this subpart. Although the final rule establishing the new 
housing goals for the Banks will not be published for effect until 
later in 2010, FHFA will evaluate performance under the housing goals 
established for 2010 on a calendar year basis.
    Volume Threshold. Proposed Sec.  1281.11(a) would establish a 
volume threshold that would trigger application of the housing goals to 
a Bank. Specifically, a Bank that in a calendar year purchased AMA-
approved mortgages with a total UPB greater than $2.5 billion would be 
subject to the housing goals for that year.
    Market-Based Housing Goals. Proposed Sec.  1281.11(b) would provide 
that compliance with a housing goal would be measured by comparing a 
Bank's performance with the actual share of the market in the Bank's 
district. Proposed Sec.  1281.11(b) would establish criteria for 
determining the size of the market for each Bank district based on HMDA 
data on mortgages secured by property located in that Bank district. 
The criteria for establishing the size of the market reflect the types 
of mortgages that would be counted for purposes of the housing goals 
and that would typically be eligible for purchase by a Bank.
    Bank Housing Goals. Proposed Sec.  1281.11(c) through 1281.11(f) 
would establish four single-family housing goals applicable to any Bank 
that met the volume threshold in a particular year. Goals would be 
established for purchase money mortgages for low-income families, for 
families in low-income areas, and for very low-income

[[Page 29955]]

families. A goal would also be established for refinancing mortgages 
for low-income families. Unlike the new Enterprise housing goals, these 
Bank housing goals would not include a multifamily special affordable 
housing goal or multifamily special affordable housing subgoal, as the 
Banks have not been approved to purchase multifamily loans under the 
AMA programs. The single-family housing goals would be based on an 
evaluation of the Bank's performance relative to the market for each 
housing goal in each year.

C. General Counting Requirements--Proposed Sec.  1281.12

    Proposed Sec.  1281.12 would set forth general requirements for the 
counting of Bank AMA-approved mortgage purchases toward the achievement 
of the housing goals. Performance under the single-family housing goals 
would be evaluated based on the percentage of all AMA-approved 
mortgages on single-family, owner-occupied properties purchased by a 
Bank that meet a particular goal.
    Proposed Sec.  1281.12(a) would provide that 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 Bank transactions or activities that are not 
AMA-approved mortgage purchases as defined by FHFA or that are 
specifically excluded as ineligible under Sec.  1281.13(b). The 
numerator is the number of AMA-approved mortgage purchases of a Bank in 
a particular year that finance owner-occupied single-family properties 
that count toward achievement of a particular housing goal. The 
denominator is the total number of AMA-approved mortgage purchases of a 
Bank in a particular year that finance owner-occupied, single-family 
properties.
    Proposed Sec.  1281.12(b) would provide that when a Bank lacks 
sufficient data or information, e.g., income of mortgagor, to determine 
whether the purchase of a mortgage counts toward achievement of a 
particular housing goal, that mortgage purchase shall be included in 
the denominator for that housing goal, but may not be included in the 
numerator. The proposed rule would not allow the Banks to use missing 
data estimation methodologies as used by the Enterprises, in light of 
the complexity of developing an estimation methodology that would be 
suitable for the Banks. FHFA invites comment on whether a method for 
estimating missing affordability data would be feasible for the Bank 
housing goals.
    The provisions in proposed Sec.  1281.12(c) through (f), which 
address credit toward multiple goals, application of median income, 
sampling and newly available data, respectively, are consistent with 
the provisions proposed for the Enterprise 2010 housing goals.
    The MPF program allows Banks to purchase a percentage of a mortgage 
or mortgage pool initially acquired by another Bank under the program. 
For purposes of receiving credit under one of the housing goals, each 
mortgage will be assigned to the Bank that initially acquired the 
mortgage regardless of whether an interest in the mortgage was later 
sold to another Bank.
    In September 2008, FHFA approved the Chicago Bank's request to 
establish the MPF Xtra program, under which the Bank would buy certain 
qualified, conforming mortgages from eligible members for immediate 
sale to Fannie Mae. The MPF Xtra program is not an AMA program 
authorized under 12 CFR part 955.\9\ Under the MPF Xtra program, the 
Bank serves essentially as a conduit or intermediary with respect to 
the sale of the mortgages to Fannie Mae. The mortgages may be counted 
by Fannie Mae toward compliance with its housing goals. If the 
mortgages were also to be considered for purposes of the Bank housing 
goals, double-counting of the mortgages could occur. For these reasons, 
under the proposed rule, mortgages purchased by a Bank pursuant to the 
MPF Xtra program would not be considered for purposes of the Bank 
housing goals.
---------------------------------------------------------------------------

    \9\ In May 2007, FHFB also approved the Atlanta Bank's request 
to offer the Global Mortgage Alliance Program (GMAP), under which 
the Bank would facilitate the sale of certain qualified conforming 
mortgage loans from eligible members to another of its members--
Global Mortgage Alliance, LLC, which would then securitize those 
loans. To date, no transactions have occurred under GMAP. The GMAP 
is not an AMA program authorized under part 955. Both the MPF Xtra 
and GMAP programs were separately authorized under the Banks' 
incidental authority contained in sections 11(a) and 11(e)(1) of the 
Bank Act. See 12 U.S.C. 1431(a), 1431(e)(1).
---------------------------------------------------------------------------

D. Special Counting Requirements--Proposed Sec.  1281.13

    Proposed Sec.  1281.13 would set 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 which 
are discussed further below.
    Proposed Sec.  1281.13(b) would specify the types of transactions 
that shall not be counted for purposes of the housing goals and shall 
not be included in the numerator or the denominator in calculating a 
Bank's performance under the housing goals. The intent of this section 
is to specify the counting treatment for transactions in which the 
Banks are authorized to engage under the approved AMA programs. The 
counting rules do not purport to authorize the purchase of any types of 
mortgages, but are intended solely to indicate whether such mortgages 
shall receive full, partial or no credit toward the housing goals. 
Accordingly, transactions in which the Banks are not authorized to 
engage under the approved AMA programs are not included in paragraph 
(b). The Bank counting rules may differ from the counting rules for the 
proposed new Enterprise housing goals. For example, the Banks are not 
authorized to purchase private label securities (PLS) under the AMA 
programs; therefore, it is not necessary to state in the proposed rule 
that Bank purchases of PLS shall not be counted for purposes of the 
housing goals. On the other hand, while the Banks are authorized to 
purchase non-conventional loans under the AMA authority, HERA amended 
the Safety and Soundness Act to prohibit such loans from counting 
toward the Enterprise housing goals and, thus, purchases of such loans 
by the Banks are specifically excluded from counting in paragraph (b).
    Proposed Sec.  1281.13(b) would make clear that where a mortgage 
falls within one of the categories excluded from consideration under 
the housing goals, the mortgage should be excluded even if it otherwise 
would fall within one of the special counting rules in proposed Sec.  
1281.13(c). For example, a non-conventional mortgage that would be 
excluded from consideration pursuant to proposed Sec.  1281.13(b)(1) 
could not be counted even if it otherwise would be counted as a 
seasoned mortgage under proposed Sec.  1281.13(c)(2).
    Home Equity Conversion Mortgages. Proposed Sec.  1281.13(b)(1) 
would exclude the purchases of all non-conventional single-family 
mortgages, including Home Equity Conversion Mortgages (HECMs), from 
counting towards the Banks' housing goals--that is, such purchases 
would be excluded from both the numerator and denominator in 
calculating goal performance. This is consistent with the counting 
treatment for the proposed new Enterprise housing goals, as HERA 
amended section 1332(a) of the Safety and Soundness Act to restrict the 
Enterprise single-family housing goals to include only conventional 
mortgages. See 12 U.S.C. 4562(a).
    Mortgages financing secondary residences. Proposed Sec.  
1281.13(b)(6) would prohibit the counting of mortgage

[[Page 29956]]

purchases to the extent they finance any dwelling units that are 
secondary residences. This is consistent with the counting treatment 
for the proposed new Enterprise housing goals, as HERA amended section 
1332(a) of the Safety and Soundness Act to restrict the Enterprise 
single-family housing goals to include only purchases of owner-occupied 
mortgages. See 12 U.S.C. 4562.
    Subordinate liens. Proposed Sec.  1281.13(b)(8) would exclude the 
purchases of subordinate lien mortgages (second mortgages) from 
counting towards the Banks' housing goals. This exclusion is consistent 
with the counting treatment for the proposed new Enterprise housing 
goals, as HERA amended section 1331 of the Safety and Soundness Act to 
provide that the single-family housing goals are limited to purchase 
money or refinancing mortgages. See 12 U.S.C. 4561. This would exclude 
``piggy-back'' liens that may be acquired by a Bank along with the 
corresponding first lien mortgage and subordinate lien mortgages, such 
as home equity loans, acquired separately by a Bank where the Bank does 
not also acquire the corresponding first lien mortgage.
    Previously counted mortgages. Proposed Sec.  1281.13(b)(9) would 
prohibit the counting of mortgages toward performance under the housing 
goals if the mortgage has previously been counted for purposes of the 
performance of the Bank under the housing goals. In order to limit 
excessively burdensome recordkeeping that could result, the rule would 
make clear that this limitation only extends back for five years. 
Although the Banks have not previously been subject to housing goals, 
this language is included for applicability in future years.
    Construction-to-permanent loans. Proposed Sec.  1281.13(b)(10) 
would exclude purchases of mortgages secured by properties that have 
not been approved for occupancy from consideration for purposes of the 
housing goals.
    Housing goals credit for certain transactions. Proposed Sec.  
1281.13(c) would specifically provide that certain types of 
transactions be counted for purposes of the housing goals, including 
mortgages on cooperative housing and condominium units, seasoned 
mortgages, and refinancing mortgages. Proposed Sec.  1281.13(c) would 
not include certain types of transactions that are eligible for housing 
goals credit under the Enterprise housing goals, including credit 
enhancements for goal-qualifying mortgages, entering into risk sharing 
agreements with federal agencies to finance qualifying mortgages, and 
purchasing mortgage revenue bonds backed by qualifying mortgages. Such 
transactions would not be eligible for Bank housing goals credit 
because of the more limited scope of the approved AMA programs. 
Proposed Sec.  1281.13(c) would also make clear that where a 
transaction falls under more than one of the special counting rules in 
Sec.  1281.13(c), all of the applicable requirements must be satisfied 
in order for the loan to be counted for purposes of the housing goals.
    HOEPA mortgages and mortgages with unacceptable terms and 
conditions. Proposed Sec.  1281.13(d) would provide that HOEPA 
mortgages and mortgages with unacceptable terms and conditions must be 
counted in the denominator as mortgage purchases but may not be counted 
in the numerator, regardless of whether the mortgages would otherwise 
qualify based on the affordability and other counting criteria. This 
proposed treatment is consistent with past practice for the Enterprises 
and with section 1332(i) of the Safety and Soundness Act, as amended by 
HERA, which provides that no credit may be given for mortgages that 
FHFA determines are ``unacceptable or contrary to good lending 
practices.'' 12 U.S.C. 4562(i).
    FHFA guidance. Proposed Sec.  1281.13(e) would provide that FHFA 
may provide guidance on the treatment of any transactions under the 
housing goals. Such guidance may be provided in response to a request 
from a Bank, or it may be provided at the initiation of FHFA.
    Private label securities. Because FHFA is proposing to count only 
mortgages purchased through AMA programs in determining each Bank's 
housing goal performance, and the Banks are not authorized to purchase 
PLS through these programs, PLS would not be counted in determining a 
Bank's housing goals performance.
    Housing finance agency obligations. FHFA also considered whether to 
apply the housing goals to the Banks' purchase of state or local 
housing finance agency obligations. However, because FHFA is proposing 
to count only mortgages purchased through AMA programs in determining 
each Bank's housing goal performance, and the Banks are not authorized 
to purchase state or local housing finance agency obligations through 
these programs, state or local housing finance agency obligations would 
not be counted in determining a Bank's housing goals performance.

E. Housing Goals Enforcement--Proposed Sec. Sec.  1281.14 and 1281.15

    Proposed Sec.  1281.14 would provide that the Director shall 
determine whether each Bank has exceeded the volume threshold on an 
annual basis. For any Bank that has exceeded the volume threshold, the 
Director would also determine whether the Bank has met the housing 
goals, in accordance with the standards established under the Safety 
and Soundness Act, as amended by HERA. If the Director determines that 
a Bank has failed to meet any housing goal, the Director shall provide 
notice to the Bank in writing of such preliminary determination.
    Proposed Sec.  1281.15 would include requirements for submission of 
a housing plan by a Bank for failure to meet any housing goal that is 
determined to be feasible by FHFA. The requirement to submit a housing 
plan would be at the discretion of the Director.

F. Reporting Requirements--Proposed Sec. Sec.  1281.20 through 1281.23

    As required for the Enterprises, proposed Sec. Sec.  1281.20 
through 1281.23 would establish reporting requirements for the Banks 
with respect to their housing goals performance. Proposed Sec.  
1281.21(a) would require the Banks to collect and compile computerized 
loan-level data on each AMA mortgage purchased, as described in the 
FHFA's Data Reporting Manual (DRM). These reporting requirements would 
apply to each Bank, regardless of whether in a particular year the Bank 
expects to exceed the volume threshold and thus be subject to the 
housing goals.
    Proposed Sec.  1281.21(b) would require each Bank to submit to the 
Director, on a semi-annual basis, a Mortgage Report containing 
aggregations of the loan-level mortgage data for year-to-date AMA 
mortgage purchases, and year-to-date dollar volume, number of units, 
and number of AMA mortgages on owner-occupied properties purchased that 
do, and do not, qualify under each housing goal. The loan-level data 
that would be required to be reported are currently collected by FHFA 
on a semiannual basis. For 2010-2011, the Enterprises would be required 
to submit quarterly Mortgage Reports, as advances in technology have 
made more frequent submissions less burdensome, and the additional data 
provided will facilitate FHFA's monitoring of Enterprise performance 
under the housing goals. FHFA will consider quarterly reporting for the 
Banks in future years. The Enterprises are also required to submit

[[Page 29957]]

Annual Housing Activities Reports (AHARs) to FHFA. The proposed rule 
would not require the Banks to submit AHARs, but FHFA will consider 
requiring such reports in the future.
    Proposed Sec.  1281.22 would require each Bank to provide to the 
Director such reports, information and data as the Director may request 
from time to time, or as may be supplemented in the DRM.
    Proposed Sec.  1281.23 would set forth the data integrity process 
for Bank housing goals data. The proposed rule would require the senior 
officer of each Bank who is responsible for submitting any report, data 
or other information for which certification is requested by the 
Director, to certify such report, data or information. FHFA would 
determine on an annual basis the official housing goals performance 
figures for any Bank that is subject to the housing goals, and may 
resolve any error, omission or discrepancy by adjusting the Banks' 
official housing goals performance figure. If the Director determines 
that the year-end data reported by a Bank 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 that the Director determines were overstated in the 
prior year's goal performance.
    FHFA will implement the data integrity process pursuant to its 
general regulatory authority over the Banks. FHFA expects that the 
Banks will work cooperatively with FHFA to identify and resolve any 
discrepancies or errors in the housing goals data reported to FHFA.

VIII. Paperwork Reduction Act

    The proposed 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.).

IX. 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 
proposed rule under the Regulatory Flexibility Act. The General Counsel 
of FHFA certifies that the proposed rule, if adopted as a final rule, 
is not likely to have a significant economic impact on a substantial 
number of small business entities because the regulation is applicable 
only to the Banks, which are not small entities for purposes of the 
Regulatory Flexibility Act.

List of Subjects in 12 CFR Part 1281

    Credit, Federal home loan banks, Housing, Mortgages, Reporting and 
recordkeeping requirements.

    For the reasons stated in the preamble, FHFA proposes to amend 
chapter XII of title 12 of the Code of Federal Regulations, by adding 
new part 1281 to subchapter E to read as follows:

PART 1281--FEDERAL HOME LOAN BANK HOUSING GOALS

Subpart A--General
Sec.
1281.1 Definitions.
Subpart B--Housing Goals
1281.10 General.
1281.11 Bank housing goals.
1281.12 General counting requirements.
1281.13 Special counting requirements.
1281.14 Determination of compliance with housing goals; notice of 
determination.
1281.15 Housing plans.
Subpart C--Reporting Requirements
1281.20 General.
1281.21 Mortgage reports.
1281.22 Periodic reports.
1281.23 Bank data integrity.

    Authority: 12 U.S.C. 1430c.

Subpart A--General


Sec.  1281.1  Definitions.

    As used in this part:
    Acquired Member Assets (AMA) program means a program that 
authorizes a Bank to hold assets acquired from or through Bank members 
or housing associates by means of either a purchase or a funding 
transaction, subject to the requirements of 12 CFR parts 955 and 980, 
or successor regulations.
    AMA-approved mortgage means a mortgage that meets the requirements 
of the AMA program at 12 CFR part 955, and is approved to be 
implemented under 12 CFR part 980, or successor regulations.
    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 specific period (but before the mortgage would 
fully amortize) and pays off or satisfies the outstanding balance of 
the mortgage.
    Bank means a Federal Home Loan Bank established under section 12 of 
the Bank Act (12 U.S.C. 1432).
    Bank Act means the Federal Home Loan Bank Act, as amended (12 
U.S.C. 1421 et seq.).
    Bank System means the Federal Home Loan Bank System, consisting of 
the 12 Banks and the Office of Finance.
    Borrower income means the total gross income relied on in making 
the credit decision.
    Conforming mortgage means, with respect to a Bank, a conventional 
AMA-approved single-family mortgage having an original principal 
obligation that does not exceed the dollar limitation in effect at the 
time of such origination and applicable to such mortgage under 12 CFR 
955.2(a)(1)(i) and 12 U.S.C. 1717(b)(2), as these sections may be 
amended.
    Conventional mortgage means a mortgage other than a mortgage as to 
which a Bank has the benefit of any guaranty, insurance or other 
obligation by the United States or any of its agencies or 
instrumentalities.
    Data Reporting Manual (DRM) means the manual prepared by FHFA in 
connection with the Banks' reporting requirements, as may be 
supplemented from time to time, including reporting requirements under 
this part.
    Day means a calendar day.
    Designated disaster area means any census tract that is located in 
a county designated by FEMA as adversely affected by a declared major 
disaster, where individual assistance payments were authorized by FEMA, 
and where average damage severity, as reported by FEMA, exceeds $1,000 
per household in the census tract. 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.
    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

[[Page 29958]]

property, multifamily property, or other residential or mixed-use 
property.
    Families in low-income areas means:
    (1) 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;
    (2) Any family with an income that does not exceed area median 
income that resides in a minority census tract; and
    (3) 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.
    FEMA means the Federal Emergency Management Agency.
    FHFA means the Federal Housing Finance Agency.
    HOEPA mortgage means a mortgage covered by section 103(aa) of the 
Truth in Lending Act (15 U.S.C. 1602(aa)), as amended by the Home 
Ownership Equity Protection Act (HOEPA), as implemented by the Board of 
Governors of the Federal Reserve System.
    HMDA means the Home Mortgage Disclosure Act of 1975 (12 U.S.C. 
2801, et seq.), as amended.
    HUD means the United States Department of Housing and Urban 
Development.
    Low-income means income not in excess of 80 percent of area median 
income.
    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 Banks 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.
    Member means an institution that has been approved for membership 
in a Bank and has purchased capital stock in the Bank in accordance 
with 12 CFR 1263.20 or 1263.24(b), or successor regulation(s).
    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:
    (1) 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;
    (2) 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;
    (3) Black or African American--a person having origins in any of 
the black racial groups of Africa;
    (4) Hispanic or Latino--a person of Cuban, Mexican, Puerto Rican, 
South or Central American, or other Spanish culture or origin, 
regardless of race; and
    (5) 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 income not in excess of area median income.
    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 resident-
member 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 Bank or 
Banks under this part and/or the Data Reporting Manual.
    Mortgage purchase means a transaction in which a Bank bought or 
otherwise acquired a mortgage.
    Mortgages 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:
    (1) 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 $1,000, or an alternative amount requested by 
a Bank and determined by the Director as appropriate for small 
mortgages;
    (i) For purposes of this definition, points and fees include:
    (A) Origination fees;
    (B) Underwriting fees;
    (C) Broker fees;
    (D) Finder's fees; and
    (E) Charges that the member imposes as a condition of making the 
loan, whether they are paid to the member or a third party;
    (ii) For purposes of this definition, points and fees do not 
include:
    (A) Bona fide discount points;
    (B) 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;
    (C) The cost of mortgage insurance or credit-risk price 
adjustments;
    (D) The costs of title, hazard, and flood insurance policies;
    (E) State and local transfer taxes or fees;
    (F) Escrow deposits for the future payment of taxes and insurance 
premiums; and
    (G) Other miscellaneous fees and charges that, in total, do not 
exceed 0.25 percent of the loan amount;
    (2) 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;
    (3) Prepayment penalties, except where:
    (i) The mortgage provides some benefits to the borrower in exchange 
for the prepayment penalty (e.g., a rate or fee reduction for accepting 
the prepayment premium);
    (ii) The borrower is offered the choice of another mortgage that 
does not contain payment of such a premium;
    (iii) The terms of the mortgage provision containing the prepayment 
penalty are adequately disclosed to the borrower; and
    (iv) 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;
    (4) The sale or financing of prepaid single-premium credit life 
insurance products in connection with the origination of the mortgage
    (5) Underwriting practices contrary to the Interagency Guidance on 
Nontraditional Mortgage Product Risks (71 FR 58609) (Oct. 4, 2006), the 
Interagency Statement on Subprime

[[Page 29959]]

Mortgage Lending (72 FR 37569) (July 10, 2007), or similar guidance 
subsequently issued by federal banking agencies;
    (6) Failure to comply with fair lending requirements; or
    (7) Other terms or conditions that are determined by the Director 
to be an unacceptable term or condition of a mortgage.
    Nonmetropolitan 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.
    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:
    (1) A renewal of a single payment obligation with no change in the 
original terms;
    (2) A reduction in the annual percentage rate of the mortgage as 
computed under the Truth in Lending Act, with a corresponding change in 
the payment schedule;
    (3) An agreement involving a court proceeding;
    (4) The renewal of optional insurance purchased by the mortgagor 
and added to an existing mortgage; or
    (5) A conversion of a balloon mortgage note on a single-family 
property to a fully amortizing mortgage note where the Bank already 
owns or has an interest in the balloon note at the time of the 
conversion.
    Residence means a property where one or more families reside.
    Residential mortgage means a mortgage on single-family or 
multifamily housing.
    Seasoned mortgage means a mortgage on which the date of the 
mortgage note is more than one year before the Bank 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.
    Very low-income means income not in excess of 50 percent of area 
median income.

Subpart B--Housing Goals


Sec.  1281.10  General.

    Pursuant to the requirements of the Bank Act (12 U.S.C. 1430c), 
this subpart establishes:
    (a) Three single-family owner-occupied purchase money mortgage 
housing goals, and one single-family refinancing mortgage housing goal;
    (b) A volume threshold for the application of the housing goals to 
a Bank;
    (c) Requirements for measuring performance under the housing goals; 
and
    (d) Procedures for monitoring and enforcing the housing goals.


Sec.  1281.11  Bank housing goals.

    (a) Volume threshold. The housing goals established in this section 
shall apply to a Bank for a calendar year only if the unpaid principal 
balance (UPB) of the Bank's purchases of AMA-approved mortgages in that 
year exceeds $2.5 billion.
    (b) Market-based housing goals. A Bank that is subject to the 
housing goals shall be in compliance with a housing goal if its 
performance under the housing goal meets or exceeds the share of the 
market that qualifies for the housing goal. The size of the market for 
each housing goal shall be established annually by FHFA for each Bank 
district 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 for each Bank district shall be determined based on 
the following criteria:
    (1) Only owner-occupied, conventional loans secured by property 
located in that Bank district shall be considered;
    (2) Purchase money mortgages and refinancing mortgages shall only 
be counted for the applicable housing 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 300 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. For a Bank that is subject to 
the housing goals, the percentage share of such Bank's total purchases 
of purchase money AMA-approved mortgages on owner-occupied single-
family housing that consists of mortgages for low-income families shall 
meet or exceed the share of such mortgages in the market as defined in 
paragraph (b) of this section.
    (d) Low-income Areas Housing Goal. For a Bank that is subject to 
the housing goals, the percentage share of such Bank's total purchases 
of purchase money AMA-approved mortgages on owner-occupied single-
family housing that consists of mortgages for families in low-income 
areas shall meet or exceed the share of such mortgages in the market as 
defined in paragraph (b) of this section.
    (e) Very Low-income Families Housing Goal. For a Bank that is 
subject to the housing goals, the percentage share of such Bank's total 
purchases of purchase money AMA-approved mortgages on owner-occupied 
single-family housing that consists of mortgages for very low-income 
families shall meet or exceed the share of such mortgages in the market 
as defined in paragraph (b) of this section.
    (f) Refinancing Housing Goal. For a Bank that is subject to the 
housing goals, the percentage share of such Bank's total purchases of 
refinancing AMA-approved mortgages on owner-occupied single-family 
housing that consists of refinancing mortgages for low-income families 
shall meet or exceed the share of such mortgages in the market as 
defined in paragraph (b) of this section.


Sec.  1281.12  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 
Bank transactions or activities that are not AMA-approved mortgage 
purchases as defined by FHFA or that are specifically excluded as 
ineligible under Sec.  1281.13(b).
    (1) The numerator. The numerator of each fraction is the number of 
AMA-approved mortgage purchases of a Bank in a particular year that 
finance owner-

[[Page 29960]]

occupied 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 AMA-approved mortgage purchases of a Bank 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.--
(1) When a Bank 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 and 
shall not be included in the numerator for that housing goal.
    (2) 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., low- or 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 Sec.  1281.1.
    (c) Credit toward multiple goals. A mortgage purchase by a Bank in 
a particular year shall count toward the achievement of each housing 
goal for which such purchase qualifies in that year.
    (d) Application of median income. For purposes of determining an 
area's median income under Sec.  1281.1, the area is:
    (1) The metropolitan area, if the property which is the subject of 
the mortgage is in a metropolitan area; and
    (2) In all other areas, the county in which the property is 
located, except that where the State nonmetropolitan median income is 
higher than the county's median income, the area is the State 
nonmetropolitan area.
    (e) Sampling not permitted. Performance under the housing goals for 
each year shall be based on a complete tabulation of mortgage purchases 
for that year; a sampling of such purchases is not acceptable.
    (f) Newly available data. When a Bank uses data to determine 
whether a mortgage purchase counts toward achievement of any housing 
goal, and new data is released after the start of a calendar quarter, 
the Bank need not use the new data until the start of the following 
quarter.


Sec.  1281.13  Special counting requirements.

    (a) General. FHFA shall determine whether a Bank shall receive 
full, partial, or no credit toward achievement of any of the housing 
goals for a transaction that otherwise qualifies under this part.
    (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 a Bank's performance 
under the housing goals, even if the transaction or activity would 
otherwise be counted under paragraph (c) of this section:
    (1) Purchases of non-conventional single-family mortgages;
    (2) Commitments to buy mortgages at a later date or time;
    (3) Options to acquire mortgages;
    (4) Rights of first refusal to acquire mortgages;
    (5) Any interests in mortgages that the Director determines, in 
writing, shall not be treated as interests in mortgages;
    (6) Mortgage purchases to the extent they finance any dwelling 
units that are secondary residences;
    (7) Single family refinancing mortgages that result from conversion 
of balloon notes to fully amortizing notes, if a Bank already owns, or 
has an interest in, the balloon note at the time conversion occurs;
    (8) Purchases of subordinate lien mortgages (second mortgages);
    (9) Purchases of mortgages that were previously counted by a Bank 
under any current or previous housing goal;
    (10) Purchases of mortgages where the property has not been 
approved for occupancy; and
    (11) Any combination of factors in paragraphs (b)(1) through 
(b)(10) of this section.
    (c) Other special rules. Subject to FHFA's determination of whether 
a Bank shall receive full, partial, or 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 from each such transaction or activity shall be included in 
the denominator in calculating a Bank's performance under the housing 
goals, and shall be included in the numerator, as appropriate.
    (1) Cooperative housing and condominiums. The purchase by a Bank 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.
    (2) Seasoned mortgages. The purchase of a seasoned mortgage by a 
Bank shall be treated as a mortgage purchase for purposes of the 
housing goals, except where the Bank has already counted the mortgage 
under any current or previous housing goal within the five years 
immediately preceding the current performance year.
    (3) Purchase of refinancing mortgages. The purchase of a 
refinancing mortgage by a Bank 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.
    (d) HOEPA mortgages and mortgages with unacceptable terms or 
conditions. The purchase by a Bank of HOEPA mortgages and mortgages 
with unacceptable terms or conditions, as defined in Sec.  1281.1, 
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. FHFA will notify each Bank in writing of any 
determination regarding the treatment of any transaction or class of 
transactions under the housing goals.


Sec.  1281.14  Determination of compliance with housing goals; notice 
of determination.

    (a) Determination of compliance with housing goals. On an annual 
basis, the Director shall determine whether each Bank has exceeded the 
volume threshold. For each Bank that has exceeded the volume threshold 
in a year, the Director shall determine the Bank's performance under 
each housing goal.
    (b) Failure to meet a housing goal. If the Director determines that 
a Bank has failed to meet any housing goal, the Director shall notify 
the Bank in writing of such preliminary determination. Any notification 
to a Bank of a preliminary determination under this section shall 
provide the Bank with an opportunity to respond in writing in 
accordance with the following procedures:
    (1) Notice. The Director shall provide written notice to a Bank of 
a preliminary determination under this section, the reasons for such 
determination, and the

[[Page 29961]]

information on which the Director based the determination.
    (2) Response period.--(i) In general. During the 30-day period 
beginning on the date on which notice is provided under paragraph 
(b)(1) of this section, the Bank may submit to the Director any written 
information that the Bank considers appropriate for consideration by 
the Director in finally determining whether such failure has occurred 
or whether the achievement of such goal was feasible.
    (ii) Extended period. The Director may extend the period under 
paragraph (b)(2)(i) of this section for good cause for not more than 30 
additional days.
    (iii) Shortened period. The Director may shorten the period under 
paragraph (b)(2)(i) of this section for good cause.
    (iv) Failure to respond. The failure of a Bank to provide 
information during the 30-day period under this paragraph (b)(2), as 
extended or shortened, shall waive any right of the Bank to comment on 
the proposed determination or action of the Director.
    (3) Consideration of information and final determination.--(i) In 
general. After the expiration of the response period under paragraph 
(b)(2) of this section, or upon receipt of information provided during 
such period by a Bank, whichever occurs earlier, the Director shall 
issue a final determination on:
    (A) Whether the Bank has failed to meet the housing goal; and
    (B) Whether, taking into consideration market and economic 
conditions and the financial condition of the Bank, the achievement of 
the housing goal was feasible.
    (ii) Considerations. In making a final determination under 
paragraph (b)(3)(i) of this section, the Director shall take into 
consideration any relevant information submitted by a Bank during the 
response period.


Sec.  1281.15  Housing plans.

    (a) Housing plan requirement. If the Director determines that a 
Bank has failed to meet any housing goal and that the achievement of 
the housing goal was feasible, the Director may require the Bank 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 Bank will take to 
achieve the housing goal for the next calendar year; and
    (4) Address any additional matters relevant to the plan as 
required, in writing, by the Director.
    (c) Deadline for submission. The Bank shall submit the housing plan 
to the Director within 45 days after issuance of a notice requiring the 
Bank 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 plan. The Director shall review and approve 
or disapprove a housing plan as follows:
    (1) Approval. The Director shall review each submission by a Bank, 
including a housing plan submitted under this section and, not later 
than 30 days after submission, approve or disapprove the plan or other 
action. The Director may extend the period for approval or disapproval 
for a single additional 30-day period if the Director determines it 
necessary. The Director shall approve any plan that the Director 
determines is likely to succeed, and conforms with the Bank Act, this 
part, and any other applicable provision of law.
    (2) Notice of approval and disapproval. The Director shall provide 
written notice to a Bank submitting a housing plan of the approval or 
disapproval of the plan, which shall include the reasons for any 
disapproval of the plan, and of any extension of the period for 
approval or disapproval.
    (e) Resubmission. If the Director disapproves an initial housing 
plan submitted by a Bank, the Bank 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 Bank 15 days to submit a new plan.
    (f) Enforcement of housing plan. If the Director finds that a Bank 
has failed to meet any housing goal, and that the achievement of the 
housing goal was feasible, and has required the Bank to submit a 
housing plan under this section, the Director may issue a cease and 
desist order, or impose civil money penalties, if the Bank refuses to 
submit such a plan, fails to submit an acceptable plan, or fails to 
comply with the approved plan. In taking such action, the Director 
shall follow procedures consistent with those provided in 12 U.S.C. 
4581 through 4588 with respect to actions to enforce the housing goals.

Subpart C--Reporting Requirements


Sec.  1281.20  General.

    This subpart establishes data submission and reporting requirements 
to provide the Director with the mortgage and other information 
relating to the Banks' performance in connection with the housing 
goals, as supplemented from time to time in the Banks' Data Reporting 
Manual (DRM).


Sec.  1281.21  Mortgage reports.

    (a) Loan-level data elements. To implement the data collection and 
submission requirements for mortgage data, and to assist the Director 
in monitoring the Banks' housing goal activities, each Bank shall 
collect and compile computerized loan-level data on each AMA-approved 
mortgage purchase, as described in the DRM. The Director may, from time 
to time, issue a list in the DRM specifying the loan-level data 
elements to be collected and maintained by the Banks and provided to 
the Director. The Director may revise the DRM list by written notice to 
the Banks.
    (b) Semi-annual mortgage reports. Each Bank shall submit to the 
Director, on a semi-annual basis, a mortgage report. The second semi-
annual mortgage report each year 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 each 
Bank under paragraph (a) of this section for year-to-date AMA-approved 
mortgage purchases, in the format specified in writing by the Director;
    (2) Year-to-date dollar volume, number of units, and number of AMA-
approved mortgages on owner-occupied properties purchased by each Bank 
that do, and do not, qualify under each housing goal as set forth in 
this part; and
    (3) Year-to-date computerized loan-level data consisting of the 
data elements required under paragraph (a) of this section.
    (c) Timing of reports. Each Bank shall submit its first semi-annual 
mortgage report within 45 days of the end of the second quarter. Each 
Bank shall submit its annual mortgage report within 60 days after the 
end of the calendar year.
    (d) Revisions to reports. At any time before submission of its 
annual mortgage report, a Bank may revise its first semi-annual 
mortgage report for that year.
    (e) Format. The Banks shall submit to the Director computerized 
loan-level data with the mortgage report, in the

[[Page 29962]]

format specified in writing by the Director.


Sec.  1281.22  Periodic reports.

    Each Bank shall provide to the Director such reports, information 
and data as the Director may request from time to time, or as may be 
supplemented in the DRM.


Sec.  1281.23  Bank data integrity.

    (a) Certification.--(1) The senior officer of each Bank who is 
responsible for submitting the annual mortgage report, or for 
submitting any other report(s), data or other 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. FHFA 
shall determine on an annual basis the official housing goals 
performance figures for a Bank that is subject to the housing goals. 
FHFA may resolve any error, omission or discrepancy by adjusting the 
Bank's official housing goals performance figure. If the Director 
determines that the year-end data reported by a Bank 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 that the Director 
determines were overstated in the prior year's goal performance.

    Dated: May 24, 2010.
Edward J. DeMarco,
Acting Director, Federal Housing Finance Agency.
[FR Doc. 2010-12849 Filed 5-27-10; 8:45 am]
BILLING CODE 8070-01-P