[Federal Register Volume 79, Number 176 (Thursday, September 11, 2014)]
[Proposed Rules]
[Pages 54481-54516]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-21118]



[[Page 54481]]

Vol. 79

Thursday,

No. 176

September 11, 2014

Part V





Federal Housing Finance Agency





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12 CFR Part 1282





 2015-2017 Enterprise Housing Goals; Proposed Rule

Federal Register / Vol. 79 , No. 176 / Thursday, September 11, 2014 / 
Proposed Rules

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FEDERAL HOUSING FINANCE AGENCY

12 CFR Parts 1282

RIN 2590-AA65


2015-2017 Enterprise Housing Goals

AGENCY: Federal Housing Finance Agency.

ACTION: Proposed rule.

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SUMMARY: The Federal Housing Finance Agency (FHFA) is issuing a 
proposed rule with request for comments regarding the housing goals for 
Fannie Mae and Freddie Mac (the Enterprises). The Federal Housing 
Enterprises Financial Safety and Soundness Act of 1992, as amended, 
(the Safety and Soundness Act) requires FHFA to establish annual 
housing goals for mortgages purchased by the Enterprises. The housing 
goals include separate categories for single-family and multifamily 
mortgages on housing that is affordable to low-income and very low-
income families, among other categories. The existing housing goals for 
the Enterprises remain in effect through the end of 2014.
    This proposed rule would update the benchmark levels for each of 
the housing goals and subgoals for 2015 through 2017. The proposed rule 
would also establish a new housing subgoal for small multifamily 
properties affordable to low-income families.
    The proposed rule presents three alternatives for determining 
whether an Enterprise has met the single-family housing goals. The 
first option would keep the current approach, which compares the 
performance of the Enterprise both to a benchmark level and to a 
retrospective market level. The second option would use a benchmark 
level only, and the third option would use a retrospective market level 
only.
    The proposed rule would also revise a number of other provisions in 
order to provide greater clarity on the mortgages eligible for goal or 
subgoal categories. Specific changes include rules for counting shared 
living spaces such as student housing and rules for skilled nursing and 
seniors housing units. In addition, the proposed rule would make a 
number of clarifying and conforming changes, including revisions to the 
definitions of ``rent'' and ``utilities'' and to the rules for 
determining affordability of both single-family and multifamily units.
    FHFA also plans to require more detailed Enterprise reporting on 
their purchases of mortgages on single-family rental housing. Finally, 
the proposed rule would establish more transparent agency procedures if 
FHFA issues guidance on the housing goals in the future.

DATES: FHFA will accept written comments on the proposed rule on or 
before October 28, 2014.

ADDRESSES: You may submit your comments on the proposed rule, 
identified by regulatory information number (RIN) 2590-AA65, by any one 
of the following methods:
     Agency Web site: www.fhfa.gov/open-for-comment-or-input.
     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 email 
to FHFA at [email protected] to ensure timely receipt by FHFA. 
Include the following information in the subject line of your 
submission: Comments/RIN 2590-AA65.
     Hand Delivered/Courier: The hand delivery address is: 
Alfred M. Pollard, General Counsel, Attention: Comments/RIN 2590-AA65, 
Federal Housing Finance Agency, Eighth Floor, 400 Seventh Street SW., 
Washington, DC 20024. Deliver the package at the Seventh Street 
entrance 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-AA65, Federal 
Housing Finance Agency, Eighth Floor, 400 Seventh Street SW., 
Washington, DC 20024. Please note that all mail sent to FHFA via U.S. 
Mail is routed through a national irradiation facility, a process that 
may delay delivery by approximately two weeks.

FOR FURTHER INFORMATION CONTACT: Dr. Nayantara Hensel, Associate 
Director, Division of Housing Mission and Goals, at (202) 649-3122; 
Michael Groarke, Senior Policy Analyst, Division of Housing Mission and 
Goals, at (202) 649-3125; Kevin Sheehan, Office of General Counsel, at 
(202) 649-3086. These are not toll-free numbers. The mailing address 
for each contact is: Federal Housing Finance Agency, 400 Seventh Street 
SW., Washington, DC 20024. The telephone number for the 
Telecommunications Device for the Deaf is (800) 877-8339.

SUPPLEMENTARY INFORMATION: 

I. Comments

    FHFA invites comments on all aspects of the proposed rule, and will 
take all comments into consideration before issuing the final 
regulation. Copies of all comments will be posted without change, 
including any personal information you provide such as your name, 
address, email address and telephone number, on the FHFA 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, 400 
Seventh Street SW., Washington, DC 20024. To make an appointment to 
inspect comments, please call the Office of General Counsel at (202) 
649-3804.
    Commenters are encouraged to review and comment on all aspects of 
the proposed rule, including the single-family benchmark levels, the 
possible changes to the retrospective market approach, the multifamily 
benchmark levels, the new low-income housing subgoal for small 
multifamily properties, and other changes to the regulation. FHFA also 
requests comments on the two issues described in Section IX.

II. Background

A. Statutory and Regulatory Background for the Existing Housing Goals

    The Safety and Soundness Act requires FHFA to establish several 
annual housing goals for both single-family and multifamily mortgages 
purchased by Fannie Mae and Freddie Mac.\1\ The annual housing goals 
are one measure of the extent to which the Enterprises are meeting 
their public purposes, which include ``an affirmative obligation to 
facilitate the financing of affordable housing for low- and moderate-
income families in a manner consistent with their overall public 
purposes, while maintaining a strong financial condition and a 
reasonable economic return.'' \2\
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    \1\ See 12 U.S.C. 4561(a).
    \2\ See 12 U.S.C. 4501(7).
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    The housing goals provisions of the Safety and Soundness Act were 
substantially revised in 2008 with the enactment of the Housing and 
Economic Recovery Act, which amended the Safety and Soundness Act.\3\ 
Under this revised structure, FHFA established housing goals for the 
Enterprises for 2010 and 2011 in a final rule published on September 
14, 2010.\4\ FHFA established new housing goals levels for the 
Enterprises for 2012 through 2014 in a final rule published on November 
13, 2012.\5\ The housing goals established by FHFA in these two prior 
rulemakings

[[Page 54483]]

include four goals and one subgoal for single-family, owner-occupied 
housing and one goal and one subgoal for multifamily housing.
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    \3\ Housing and Economic Recovery Act of 2008, Public Law 110-
289, 122 Stat. 2654 (July 30, 2008).
    \4\ See 75 FR 55892.
    \5\ See 77 FR 67535.
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    Single-family goals. The single-family goals defined under the 
Safety and Soundness Act include separate categories for home purchase 
mortgages for low-income families, very low-income families, and 
families that reside in low-income areas. Performance on the single-
family home purchase goals is measured as the percentage of the total 
home purchase mortgages purchased by an Enterprise each year that 
qualifies for each goal or subgoal. There is also a separate goal for 
refinancing mortgages for low-income families, and performance on the 
refinancing goal is determined in a similar way.
    Under the Safety and Soundness Act, the single-family housing goals 
are limited to mortgages on owner-occupied housing with one to four 
units total. The single-family goals cover ``conventional, conforming 
mortgages,'' with the ``conventional'' component meaning not insured or 
guaranteed by the Federal Housing Administration or other government 
agency and the ``conforming'' component meaning those mortgages with a 
principal balance that does not exceed the loan limits for Enterprise 
mortgages.
    The single-family goals established by FHFA in 2010 and 2012 
compare the goal-qualifying share of the Enterprise's mortgage 
purchases to two separate measures: a ``benchmark level'' and a 
``market level.'' The ``benchmark level'' is set prospectively by 
rulemaking, based on various factors, including FHFA's forecast of the 
goal-qualifying share of the overall market. The ``market level'' is 
determined retrospectively each year, based on the actual goal-
qualifying share of the overall market as measured by the Home Mortgage 
Disclosure Act (HMDA) data for that year. The ``overall market'' that 
FHFA uses for purposes of both the prospective market forecasts and the 
retrospective market measurement consists of all single-family owner-
occupied conventional conforming mortgages that would be eligible for 
purchase by either Enterprise. It includes loans actually purchased by 
the Enterprises as well as comparable loans held in a lender's 
portfolio. It also includes any loans that are part of a private label 
security (PLS), though very few such securities have been issued for 
conventional conforming mortgages since 2008.
    Under this two-part approach, determining whether an Enterprise has 
met the single-family goal requirements for a specified year requires 
looking at both the benchmark level and the market level measures. In 
order to meet a single-family housing goal or subgoal, the actual 
percentage of mortgage purchases by an Enterprise that meet each goal 
or subgoal must exceed either the benchmark level or the market level 
for that year.
    Multifamily goals. The multifamily goals defined under the Safety 
and Soundness Act include separate categories for mortgages on 
multifamily properties (i.e., properties with five or more units) with 
rental units affordable to low-income families and very low-income 
families. The multifamily goals established by FHFA in 2010 and 2012, 
as required by the Safety and Soundness Act, evaluate the performance 
of the Enterprises based on numeric targets, not percentages, for the 
number of affordable units in properties backed by mortgages purchased 
by an Enterprise. FHFA has not established a retrospective market level 
measure for the multifamily goals and subgoals, due to a lack of 
comprehensive data about the multifamily market such as that provided 
by HMDA for single-family mortgages. As a result, FHFA measures 
Enterprise multifamily goals performance against the benchmark levels 
only.

B. Adjusting the Housing Goals

    Under the housing goals regulation first established by FHFA in 
2010, as well as under this proposed rule, FHFA may adjust the 
benchmark levels for any of the single-family or multifamily housing 
goals in a particular year without going through notice and comment 
rulemaking based on (1) market and economic conditions or the financial 
condition of the Enterprise, or (2) a determination by FHFA that 
``efforts to meet the goal or subgoal would result in the constraint of 
liquidity, over-investment in certain market segments, or other 
consequences contrary to the intent of the Safety and Soundness Act or 
the purposes of the Charter Acts.'' \6\ The regulation also takes into 
account the possibility that achievement of a particular housing goal 
may or may not have been feasible for the Enterprise. If FHFA 
determines that a housing goal was not feasible for the Enterprise to 
achieve, then the regulation provides for no further enforcement of 
that housing goal for that year.\7\
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    \6\ 12 CFR 1282.14(d).
    \7\ 12 CFR 1282.21(a).
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    If, after publication of a final rule establishing the housing 
goals for 2015 through 2017, FHFA determines that any of the single-
family or multifamily housing goals should be adjusted in light of 
market conditions, to ensure the safety and soundness of the 
Enterprises, or for any other reason, FHFA will take any steps that are 
necessary and appropriate to adjust that goal. Such steps could include 
adjusting the benchmark levels through the processes in the existing 
regulation or establishing new or revised housing goal levels through 
notice and comment rulemaking.

C. Housing Goals Under Conservatorship

    On September 6, 2008, FHFA placed each Enterprise into 
conservatorship. Although the Enterprises remain in conservatorship at 
this time, they continue to have the mission of supporting a stable and 
liquid national market for residential mortgage financing. FHFA has 
continued to establish annual housing goals for the Enterprises and to 
assess their performance under the housing goals each year during 
conservatorship.

III. Summary of Proposed Rule

A. Benchmark Levels for the Single-Family Housing Goals

    This proposed rule would establish the benchmark levels for the 
single-family housing goals and subgoal for 2015-2017 as follows:

------------------------------------------------------------------------
                                                  Current      Proposed
                                                 benchmark    benchmark
             Goal                  Criteria      level for    level for
                                                 2012-2014    2015-2017
                                                 (percent)    (percent)
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Low-Income Home Purchase Goal  Home purchase             23           23
                                mortgages on
                                single-family,
                                owner-occupied
                                properties
                                with borrowers
                                with incomes
                                no greater
                                than 80
                                percent of
                                area median
                                income.
Very Low-Income Home Purchase  Home purchase              7            7
 Goal.                          mortgages on
                                single-family,
                                owner-occupied
                                properties
                                with borrowers
                                with incomes
                                no greater
                                than 50
                                percent of
                                area median
                                income.

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Low-Income Areas Home          Home purchase             11           14
 Purchase Subgoal.              mortgages on
                                single-family,
                                owner-occupied
                                properties
                                with:
                               
                                Borrowers in
                                census tracts
                                with tract
                                median income
                                of no greater
                                than 80
                                percent of
                                area median
                                income; and.
                               
                                Borrowers with
                                income no
                                greater than
                                100 percent of
                                area median
                                income in
                                census tracts
                                where (i)
                                tract income
                                is less than
                                100 percent of
                                area median
                                income, and
                                (ii)
                                minorities
                                comprise at
                                least 30
                                percent of the
                                tract
                                population..
Low-Income Refinancing Goal..  Refinancing               20           27
                                mortgages on
                                single-family,
                                owner-occupied
                                properties
                                with borrowers
                                with incomes
                                no greater
                                than 80
                                percent of
                                area median
                                income.
------------------------------------------------------------------------

B. Proposed Alternatives to the Market-Based Retrospective Approach

    The proposed rule would adopt one of three different approaches for 
determining whether an Enterprise has met one of the single-family 
housing goals. Under the current regulation, the performance of the 
Enterprise on each single-family housing goal is compared to both a 
benchmark level and a retrospective market level. The first proposed 
alternative would maintain this approach. The second proposed 
alternative would evaluate the performance of the Enterprise based 
solely on a comparison to a benchmark level. The third proposed 
alternative would evaluate the performance of the Enterprise based 
solely on a comparison to a retrospective market level.

C. Multifamily Housing Goal Levels

    The proposed rule would establish the levels for the multifamily 
goal and subgoal for 2015-2017 as follows:

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                                                               Current goal levels    Proposed goal levels   Proposed goal levels   Proposed goal levels
                Goal                        Criteria            for 2014 (units)        for 2015 (units)       for 2016 (units)       for 2017 (units)
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Low-Income Goal....................  Units affordable to     Fannie Mae: 250,000...  Fannie Mae: 250,000..  Fannie Mae: 250,000..  Fannie Mae: 250,000.
                                      families with incomes  Freddie Mac: 200,000..  Freddie Mac: 210,000.  Freddie Mac: 220,000.  Freddie Mac: 230,000.
                                      no greater than 80
                                      percent of area
                                      median income in
                                      multifamily rental
                                      properties with
                                      mortgages purchased
                                      by an Enterprise.
Very Low-Income Subgoal............  Units affordable to     Fannie Mae: 60,000....  Fannie Mae: 60,000...  Fannie Mae: 60,000...  Fannie Mae: 60,000.
                                      families with incomes  Freddie Mac: 40,000...  Freddie Mac: 43,000..  Freddie Mac: 46,000..  Freddie Mac: 50,000.
                                      no greater than 50
                                      percent of area
                                      median income in
                                      multifamily rental
                                      properties with
                                      mortgages purchased
                                      by an Enterprise.
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D. Small Multifamily Housing Subgoal Levels

    The proposed rule would also establish for the first time a 
separate subgoal for rental units that are affordable to families with 
incomes no greater than 80 percent of area median income in small 
multifamily properties with mortgages purchased by an Enterprise. The 
proposed rule would establish the levels for the small multifamily 
subgoal for 2015-2017 as follows:

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                                                               Current goal levels    Proposed goal levels   Proposed goal levels   Proposed goal levels
                Goal                        Criteria            for 2014 (units)        for 2015 (units)       for 2016 (units)       for 2017 (units)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Low-Income Subgoal for Small         Units affordable to     None..................  Fannie Mae: 20,000...  Fannie Mae: 25,000...  Fannie Mae: 30,000.
 Multifamily.                         families with incomes                          Freddie Mac: 5,000...  Freddie Mac: 10,000..  Freddie Mac: 15,000.
                                      no greater than 80
                                      percent of area
                                      median income in
                                      small multifamily
                                      rental properties (5
                                      to 50 units) with
                                      mortgages purchased
                                      by an Enterprise.
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E. Single-Family Rental Housing

    The housing goals regulation currently requires the Enterprises to 
report to FHFA on all mortgage purchases. Starting in 2015, FHFA plans 
to revise the reports required under this existing authority so that 
the Enterprises provide more detailed information about their purchases 
of mortgages on single-family rental housing, including detailed 
affordability information.

F. Other Proposed Changes

    The proposed rule would also make a number of changes and 
clarifications to the existing rules concerning whether a particular 
mortgage purchase may be counted for purposes of the housing goals. 
These changes include updating and clarifying definitions and other 
provisions to reflect current Enterprise lending programs and market 
practices. The proposed rule would incorporate existing FHFA guidance 
on the appropriate treatment of loans on senior housing and skilled 
nursing units. The proposed rule would also add transparency to agency 
guidance on issues that may arise under the housing goals by placing 
past and future guidance on the FHFA Web site.

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IV. Single-Family Housing Goals

A. Factors Considered in Setting the Proposed Single-Family Housing 
Goal Levels

    Section 1332(e)(2) of the Safety and Soundness Act requires FHFA to 
consider the following seven factors in setting the single-family 
housing goals:
    1. National housing needs;
    2. Economic, housing, and demographic conditions, including 
expected market developments;
    3. The performance and effort of the Enterprises toward achieving 
the housing goals under this section in previous years;
    4. The ability of the Enterprise to lead the industry in making 
mortgage credit available;
    5. Such other reliable mortgage data as may be available;
    6. The size of the purchase money conventional mortgage market, or 
refinance conventional mortgage market, as applicable, serving each of 
the types of families described, relative to the size of the overall 
purchase money mortgage market or the overall refinance mortgage 
market, respectively; and
    7. The need to maintain the sound financial condition of the 
Enterprises.\8\
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    \8\ 12 U.S.C. 4562(e)(2).
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    FHFA has considered each of these seven statutory factors in 
setting the proposed benchmark levels for each of the single-family 
housing goals and subgoal. Additional discussion of these single-family 
factors is contained in the Appendix.
    Market estimation models. In setting the proposed benchmark levels, 
FHFA relies extensively on its projections of the estimated market 
performance for each goal or subgoal in the primary mortgage market. 
FHFA has developed market estimation models for determining these 
projections. Additional discussion of the market estimation models can 
be found in a research paper, available at http://www.fhfa.gov/PolicyProgramsResearch/Research/.
    FHFA's market estimation models look at the relationship between 
(a) the actual historical market performance for each single-family 
housing goal, as calculated from HMDA data, and (b) the actual 
historical values for various factors that may influence the market 
performance, such as interest rates, inflation, house prices, home 
sales and the unemployment rate. The market estimation models then use 
forecasts for each of the variables influencing market performance to 
project an estimated market performance for each goal or subgoal. The 
models yield a point estimate which represents the best estimate of 
goal qualifying shares for each year (i.e., 2015, 2016, and 2017), as 
well as a range of predicted levels based on different confidence 
levels. The models produce ranges and estimates for each successive 
year. For example, the estimate for the low-income home purchase goal 
for 2015 is 20.9 percent, with a 95 percent confidence interval of plus 
or minus 6.7 percent. In other words, the model prediction is that 
there is a 95 percent chance that the actual market share in 2015 will 
be between 14.2 percent and 27.6 percent. The same forecast for 2017 is 
19.8 percent, with a 95 percent confidence interval of plus or minus 
9.0 percent. Thus, the model prediction range for 2017 is between 10.8 
percent and 28.8 percent.
    FHFA periodically updates the market estimation models to reflect 
new data. These updates may result in changes to the specific variables 
that are included in the model for each of the housing goals. The 
updates may also result in new estimates for the goal-qualifying share 
for one or more of the single-family housing goals. If the market 
estimation models are updated before publication of the final rule, 
FHFA will consider any such updates and the new estimates for the goal-
qualifying shares of the market when establishing the benchmark levels 
for 2015 through 2017.
    The market estimation models address four of the seven factors that 
FHFA is required to consider. The models are designed to measure the 
size of the single-family mortgage market (Factor 6), and in doing so 
they incorporate aspects of three of the other factors: Factor 1: 
National Housing Needs; Factor 2: Economic, Housing, and Demographic 
Conditions; and Factor 5: Other Mortgage Data. Information about 
economic and housing conditions, such as the unemployment rate, 
inflation, housing starts, home sales, and home prices are included in 
the market models, which estimate the market performance for 2015 
through 2017. FHFA also considers various other mortgage data sources, 
including the Mortgage Bankers Association's mortgage default survey, 
the National Association of Realtors' Housing Affordability Index and 
Freddie Mac's Primary Mortgage Market Survey.
    Past performance. The past performance of the Enterprises on each 
of the single-family housing goals and subgoal, Factor 3 above, is also 
an important factor in setting the benchmark levels. Reviewing the 
actual performance of the Enterprises on each housing goal in previous 
years and comparing that performance to the performance of the overall 
market helps FHFA ensure that the benchmark levels are set at levels 
that are feasible for the Enterprises to achieve. For example, the 
market estimation models may not capture all of the factors that 
contribute to Enterprise performance, or FHFA's measurements of the 
market using HMDA data may not reflect the exact portion of the market 
that is eligible for purchase by the Enterprises. FHFA may rely more 
heavily on past Enterprise performance if the market estimation model 
yields results that are far above, or far below, the past performance 
of either Enterprise on a housing goal.
    Other factors. FHFA has also considered the remaining two statutory 
factors in proposing these single-family housing goals: Factor 4: 
Ability to Lead the Industry and Factor 7: Need to Maintain Sound 
Financial Condition. FHFA's consideration of these factors takes into 
account the financial condition of the Enterprises, the importance of 
maintaining the Enterprises in sound and solvent financial condition, 
and the appropriate role of the Enterprises in relation to the overall 
mortgage market. The process of setting benchmark levels based on the 
recent performance of the Enterprises and on the past and expected 
performance of the overall market also contributes to FHFA's 
consideration of these required statutory factors.\9\
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    \9\ In 2013, the Enterprises remained the largest issuers of 
mortgage-backed securities (MBS), guaranteeing 73 percent of single-
family MBS, slightly above the average of 72 percent for 2008-2012, 
but above the average of 46 percent for 2004-2007, and above the 
average of 67 percent for 2000-2003. See Inside Mortgage Finance 
Publications, ``Mortgage Market Statistical Annual,'' volume II, 
``The Secondary Mortgage Market,'' p.4 (2013 Edition); see also 
Inside MBS & ABS, p.4 (April 4, 2014).
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    FHFA continues to monitor the activities of the Enterprises, both 
in FHFA's capacity as safety and soundness regulator and as 
conservator. If necessary, FHFA will make any appropriate changes in 
the housing goals to ensure the continued safety and soundness of the 
Enterprises.

B. Proposed Single-Family Benchmark Levels

1. Low-Income Home Purchase Goal
    The low-income home purchase goal is based on the percentage of all 
single-family, owner-occupied home purchase mortgages purchased by an 
Enterprise that are for low-income families, defined as families with 
incomes less

[[Page 54486]]

than or equal to 80 percent of the area median income.
    The proposed rule would set the annual low-income home purchase 
housing goal benchmark level for 2015 through 2017 at 23 percent, which 
would be unchanged from the current 2014 benchmark level. FHFA's market 
model forecasts a declining proportion of home purchase mortgages for 
low-income families for these years. FHFA has not reduced the proposed 
benchmark level, however, in order to encourage the Enterprises to 
continue their efforts to promote safe and sustainable lending to low-
income families. This may include any steps the Enterprises take to 
bring greater certainty to origination and servicing standards for 
lenders, any additional outreach to small and rural lenders and to 
state and local Housing Finance Agencies (HFAs), and any other efforts 
by the Enterprises to reach underserved creditworthy borrowers.
    A summary of the past performance of the Enterprises on the low-
income home purchase housing goal, including past benchmark levels and 
the size of the market in past years, appears in the Appendix in Table 
6.
    Market size. FHFA's forecast for the low-income share of the 
overall market for home purchase mortgages for 2015 through 2017 starts 
with a point estimate of 20.9 percent for 2015 and declines to a point 
estimate of 19.8 percent for 2017. These forecasts are significantly 
lower than the actual low-income share of the overall market for home 
purchase mortgages in 2010 through 2012 and are somewhat lower than 
FHFA's estimates of the low-income share of the market for 2013 and 
2014. The actual low-income market shares for 2010 through 2012 are 
based on FHFA's analysis of the most recent HMDA data available and 
start at 27.2 percent in 2010, declining to 26.5 percent in 2011, and 
remaining essentially the same at 26.6 percent in 2012. FHFA has 
estimated the actual market shares for 2013 and 2014 using the market 
estimation models, because HMDA data for those years are not yet 
available. FHFA estimates that the low-income share of the overall 
market declined to 23.4 percent in 2013 and FHFA forecasts a further 
decline to 21.4 percent for 2014.
    Past performance. The performance of the Enterprises on the low-
income home purchase goal has followed a similar pattern as the overall 
market performance on the goal since 2010. Fannie Mae's performance on 
the low-income home purchase goal in 2010 was 25.1 percent and, in 
fact, increased slightly in 2011 and 2012. Fannie Mae's performance 
then declined to 23.8 percent in 2013. Freddie Mac's performance on the 
low-income home purchase goal in 2010 was 26.8 percent before declining 
to 23.3 percent in 2011, increasing to 24.4 percent in 2012, and 
declining to 21.8 percent in 2013.
    Past benchmark levels. The benchmark level for the low-income home 
purchase housing goal in 2010 and 2011 was 27 percent. This level was 
very close to the actual low-income share of the overall market as 
measured by HMDA data for 2010 and 2011. The benchmark level for the 
low-income home purchase housing goal was lowered to 23 percent for 
2012, 2013 and 2014. This new benchmark level was significantly lower 
than the actual low-income share of the overall market in 2012. FHFA 
estimates that the low-income share of the overall market was slightly 
higher than the benchmark level in 2013, and that the low-income share 
of the overall market will be below the 23 percent benchmark level in 
2014.
    Proposed benchmark levels. Although FHFA's market estimation model 
forecasts further declines in the low-income share of the overall home 
purchase mortgage market, the proposed rule would maintain the existing 
benchmark level of 23 percent for 2015 through 2017. FHFA is proposing 
this benchmark level in light of the current two-part process for 
evaluating Enterprise performance on the single-family housing goals, 
using both a benchmark level and a retrospective market level. If FHFA 
adopts an alternative approach that relies solely on benchmark levels, 
as described below in Section IV.C, FHFA may adopt a benchmark level in 
the final rule that is lower than the proposed benchmark level of 23 
percent.
    The market estimation model forecasts a range of possible market 
levels and, while the proposed benchmark level of 23 percent is above 
the point estimates for each year from 2015 through 2017, the proposed 
benchmark level is within the confidence interval range for those 
years. In addition, while the forecast of the market level declines 
each year from 2015 through 2017, the point estimate for 2015 is 
subject to less uncertainty than the point estimate for 2017. This 
supports setting the proposed benchmark level closer to the somewhat 
higher market estimate for 2015 than the lower estimate for 2017. 
Finally, FHFA is proposing benchmark levels for the low-income home 
purchase housing goal that are somewhat higher in the forecast range to 
encourage the Enterprises to continue to find ways to support lower 
income borrowers, without compromising safe and sound lending 
standards. FHFA will continue to monitor the Enterprises in its 
capacities as regulator and as conservator, and if FHFA determines in 
later years that the benchmark level for the low-income home purchase 
housing goal is no longer feasible for the Enterprises to achieve in 
light of market conditions, or for any other reason, FHFA will take 
appropriate steps to adjust the benchmark level.
2. Very Low-Income Home Purchase Goal
    The very low-income home purchase goal is based on the percentage 
of all single-family, owner-occupied home purchase mortgages purchased 
by an Enterprise that are for very low-income families, defined as 
families with incomes less than or equal to 50 percent of the area 
median income.
    The proposed rule would set the annual very low-income home 
purchase housing goal benchmark level for 2015 through 2017 at 7 
percent, which would be unchanged from the current 2014 benchmark 
level. FHFA's market model forecasts a declining proportion of home 
purchase mortgages for very low-income families for these years. FHFA 
has not reduced the proposed benchmark level, however, in order to 
encourage the Enterprises to continue their efforts to promote safe and 
sustainable lending to very low-income families. This may include any 
steps the Enterprises take to bring greater certainty to origination 
and servicing standards for lenders, any additional outreach to small 
and rural lenders and to state and local Housing Finance Agencies 
(HFAs), and any other efforts by the Enterprises to reach underserved 
creditworthy borrowers.
    A summary of the past performance of the Enterprises on the very 
low-income home purchase housing goal, including past benchmark levels 
and the size of the market in past years, appears in the Appendix in 
Table 7.
    Market size. FHFA's forecast for the very low-income share of the 
overall market for home purchase mortgages is almost the same for each 
year from 2015 through 2017: 5.8 percent for 2015, 5.7 percent for 
2016, and 5.6 percent for 2017. These forecasts for the very low-income 
share of the overall market are lower than the actual very low-income 
shares of the overall market in 2010 through 2012 and are slightly 
lower than the estimated very low-income shares for 2013 and 2014. The 
actual very low-income market shares for 2010 through 2012 are based on 
FHFA's analysis of the most recent HMDA data available: 8.1 percent in 
2010, declining slightly to 8.0 percent in 2011 and 7.7

[[Page 54487]]

percent in 2012. FHFA estimates that the very low-income share of the 
overall market declined to 6.3 percent in 2013, and FHFA forecasts a 
further decline to 5.9 percent for 2014.
    Past performance. The performance of the Enterprises on the very 
low-income home purchase housing goal was relatively stable between 
2010 and 2012, before declining in 2013. Fannie Mae's performance was 
7.2 percent in 2010, 7.6 percent in 2011 and 7.3 percent in 2012, while 
Freddie Mac's performance was 7.9 percent in 2010, 6.6 percent in 2011 
and 7.1 percent in 2012. Both Enterprises performed at a lower level on 
the very low-income home purchase housing goal in 2013, with Fannie Mae 
at 6.0 percent and Freddie Mac at 5.5 percent.
    Past benchmark levels. The benchmark level for the very low-income 
home purchase housing goal in 2010 and 2011 was 8 percent. This level 
was very close to the actual very low-income share of the overall 
market as measured by HMDA data for 2010 and 2011. The benchmark level 
for the very low-income home purchase housing goal was lowered to 7 
percent for 2012, 2013 and 2014. This new benchmark level was slightly 
below the actual very low-income share of the overall market in 2012. 
FHFA estimates that the very low-income share of the overall market for 
2013 and 2014 will be below the benchmark level of 7 percent.
    Proposed benchmark levels. Although FHFA's market estimation model 
forecasts the very low-income share of the overall market to be below 
the current benchmark level, the proposed rule would maintain the 
existing benchmark level of 7 percent for 2015 through 2017. FHFA is 
proposing this benchmark level in light of the current two-part process 
for evaluating Enterprise performance on the single-family housing 
goals, using both a benchmark level and a retrospective market level. 
If FHFA adopts an alternative approach that relies solely on benchmark 
levels, as described below in Section IV.C, FHFA may adopt a benchmark 
level in the final rule that is lower than the proposed benchmark level 
of 7 percent.
    The market estimation model forecasts a range of possible market 
levels and, while the proposed benchmark level is above the point 
estimates for each year from 2015 through 2017, the proposed benchmark 
level is within the confidence interval range for those years. FHFA is 
proposing benchmark levels for the very low-income home purchase 
housing goal that are somewhat higher in the forecast range to 
encourage the Enterprises to continue to find ways to support lower 
income borrowers, without compromising safe and sound lending 
standards. FHFA will continue to monitor the Enterprises in its 
capacities as regulator and as conservator, and if FHFA determines in 
later years that the benchmark level for the very low-income home 
purchase housing goal is no longer feasible for the Enterprises to 
achieve in light of market conditions, or for any other reason, FHFA 
will take appropriate steps to adjust the benchmark level.
3. Low-Income Areas Home Purchase Subgoal
    The low-income areas home purchase subgoal is based on the 
percentage of all single-family, owner-occupied home purchase mortgages 
purchased by an Enterprise that are either: (1) For families in low-
income areas, defined to include census tracts with median income less 
than or equal to 80 percent of area median income; or (2) for families 
with incomes less than or equal to area median income who reside in 
minority census tracts (defined as census tracts with a minority 
population of at least 30 percent and a tract median income of less 
than 100 percent of the area median income).
    The proposed rule would set the annual low-income areas home 
purchase subgoal benchmark level for 2015 through 2017 at 14 percent. 
This proposed benchmark level would be an increase over the current 
benchmark level of 11 percent. However, the proposed benchmark level 
would be in line with FHFA's forecasts for the actual low-income areas 
shares of the overall market and in line with the recent performance of 
the Enterprises on the low-income areas home purchase housing subgoal.
    A summary of the past performance of the Enterprises on the low-
income areas home purchase subgoal, including past benchmark levels and 
the size of the market in past years, appears in the Appendix in Table 
8.
    Market size. FHFA's forecast for the low-income areas share of the 
overall market for home purchase mortgages is almost the same for each 
year from 2015 through 2017: 14.7 percent for 2015 and 2016, and 14.2 
percent for 2017. These forecasts for the low-income areas share of the 
overall market are higher than the actual low-income areas shares of 
the overall market in 2010 through 2012, and are close to or higher 
than the estimated low-income areas shares for 2013 and 2014. The 
actual low-income areas market shares for 2010 through 2012 are based 
on FHFA's analysis of the most recent HMDA data available: 12.1 percent 
in 2010, declining slightly to 11.4 percent in 2011 before increasing 
to 13.6 percent in 2012. FHFA estimates that the low-income areas share 
of the overall market increased to 13.4 percent in 2013, and FHFA 
forecasts a further increase to 14.3 percent for 2014.
    Past performance. The performance of the Enterprises on the low-
income areas home purchase subgoal has generally followed the changes 
in the low-income shares of the overall market between 2010 and 2013. 
Fannie Mae's performance was 12.4 percent in 2010 and declined to 11.6 
percent in 2011 before increasing to 13.1 percent in 2012 and 14.0 
percent in 2013. Freddie Mac's performance has followed the same basic 
pattern. Freddie Mac's performance was 10.4 percent in 2010 and 
declined to 9.2 percent in 2011 before increasing to 11.4 percent in 
2012 and 12.3 percent in 2013.
    Past benchmark levels. The benchmark level for the low-income areas 
home purchase subgoal in 2010 and 2011 was 13 percent. This level was 
somewhat higher than the actual low-income areas share of the overall 
market as measured by HMDA data for 2010 and 2011. The benchmark level 
for the low-income areas home purchase subgoal was lowered to 11 
percent for 2012, 2013 and 2014. This new benchmark level turned out to 
be lower than the actual low-income areas share of the overall market 
in 2012. FHFA estimates that the low-income areas share of the overall 
market for 2013 and 2014 will continue to be higher than the 2014 
benchmark level of 11 percent.
    Proposed benchmark levels. The proposed rule would set the annual 
low-income areas home purchase subgoal benchmark level for 2015 through 
2017 at 14 percent. The proposed benchmark levels are higher than the 
current benchmark level of 11 percent. However, the proposed benchmark 
levels are very close to the low-income areas shares of the overall 
market forecast by FHFA's market estimation model for 2015 through 
2017, as well as to the recent performance levels of the Enterprises.
    FHFA is proposing this benchmark level in light of the current two-
part process for evaluating Enterprise performance on the single-family 
housing goals, using both a benchmark level and a retrospective market 
level. If FHFA adopts an alternative approach that relies solely on 
benchmark levels, as described below in Section IV.C, FHFA may adopt a 
benchmark level in the final rule that is lower than the proposed 
benchmark level of 14 percent. FHFA will continue to monitor the 
Enterprises in its capacities as

[[Page 54488]]

regulator and as conservator, and if FHFA determines in later years 
that the benchmark level for the low-income areas home purchase housing 
goal is no longer feasible for the Enterprises to achieve in light of 
market conditions, or for any other reason, FHFA will take appropriate 
steps to adjust the benchmark level.
4. Low-Income Areas Home Purchase Goal
    The low-income areas home purchase goal covers the same categories 
as the low-income areas home purchase subgoal, but it also includes 
moderate income families in designated disaster areas. As a result, the 
low-income areas home purchase goal is based on the percentage of all 
single-family, owner-occupied home purchase mortgages purchased by an 
Enterprise that are: (1) For families in low-income areas, defined to 
include census tracts with median income less than or equal to 80 
percent of area median income; (2) for families with incomes less than 
or equal to median income who reside in minority census tracts (defined 
as census tracts with a minority population of at least 30 percent and 
a tract median income of less than 100 percent of the area median 
income); or (3) for families with incomes less than or equal to median 
income who reside in designated disaster areas.
    The low-income areas goal benchmark level is established by a two-
step process. The first step is setting the benchmark level for the 
low-income areas subgoal, which would be established by this proposed 
rule. The second step is establishing an additional increment for 
mortgages to families with incomes less than or equal to the area 
median income who are located in Federally-declared disaster areas. The 
disaster areas increment is set annually by FHFA separately from this 
rulemaking. Each year, FHFA notifies the Enterprises by letter of the 
benchmark level for that year. Thus, under this process, this proposed 
rule would set the annual low-income areas home purchase goal benchmark 
level for 2015 through 2017 at the subgoal benchmark level of 14 
percent plus a disaster areas increment that FHFA will set separately 
and that may vary from year to year.
5. Low-Income Refinancing Goal
    The low-income refinancing goal is based on the percentage of all 
single-family, owner-occupied refinancing mortgages purchased by an 
Enterprise that are for low-income families, defined as families with 
incomes less than or equal to 80 percent of the area median income.
    The proposed rule would set the annual low-income refinancing 
housing goal benchmark level for 2015 through 2017 at 27 percent. This 
proposed benchmark level would be a significant increase from the 
current benchmark level of 20 percent. However, because FHFA forecasts 
even larger increases in the low-income share of the overall 
refinancing mortgage market, the proposed benchmark levels are 
relatively low in the forecast range for the low-income refinancing 
housing goal.
    A summary of the past performance of the Enterprises on the low-
income refinancing housing goal, including past benchmark levels and 
the size of the market in past years, appears in the Appendix in Table 
9.
    Market size. FHFA's forecast for the low-income share of the 
overall market for refinancing mortgages in 2015 is 31.0 percent, 
increasing to 33.5 percent in 2016 and to 34.2 percent in 2017. These 
forecasts for the low-income share of the overall market for 
refinancing mortgages are notably higher than the actual low-income 
share in recent years. The actual low-income shares are based on FHFA's 
analysis of the most recent HMDA data available. The low-income share 
of the overall refinancing mortgage market in 2010 was 20.2 percent, 
increasing slightly to 21.5 percent in 2011 and to 22.3 percent in 
2012. FHFA estimates that the low-income share of the overall 
refinancing market increased slightly to 22.4 percent in 2013, and FHFA 
forecasts a more significant increase for 2014, to 27.6 percent.
    Past performance. The performance of the Enterprises on the low-
income refinancing housing goal was somewhat higher than the actual 
market levels for 2010 through 2012, as well as the forecast market 
level for 2013. Since 2010, the low-income refinancing housing goal has 
treated modifications under the Home Affordable Modification Program 
(HAMP) as refinancing mortgages for purposes of the housing goals. The 
Enterprise performance numbers include HAMP modifications, which are 
not included in the data used to calculate the market levels. Including 
HAMP modifications in the Enterprise performance numbers tends to 
increase the measured performance of the Enterprises on the low-income 
refinancing housing goal. This is because lower income borrowers make 
up a greater proportion of the borrowers receiving HAMP modifications 
than the low-income share of the overall refinancing mortgage market.
    Fannie Mae's performance on the low-income refinancing housing goal 
was 20.9 percent in 2010, increasing to 23.1 percent in 2011, falling 
to 21.8 percent in 2012, and increasing again to 24.3 percent in 2013. 
Freddie Mac's performance followed a similar pattern, starting at 22.0 
percent in 2010, increasing to 23.4 percent in 2011, falling to 22.4 
percent in 2012, and increasing again to 24.1 percent in 2013.
    Past benchmark levels. The benchmark level for the low-income 
refinancing housing goal was 21 percent in 2010 and 2011. This level 
was very close to the actual low-income share of the overall 
refinancing mortgage market as measured by HMDA data for 2010 and 2011. 
The benchmark level for the low-income refinancing housing goal was 
lowered to 20 percent for 2012, 2013 and 2014. This new benchmark level 
was below the actual low-income share of the overall refinancing 
mortgage market in 2012. FHFA estimates that the low-income share of 
the overall refinancing mortgage market for 2013 and 2014 will be 
significantly higher than the benchmark level of 20 percent.
    Proposed benchmark levels. The proposed rule would set the annual 
low-income refinancing housing goal benchmark level for 2015 through 
2017 at 27 percent. This is significantly higher than the current 
benchmark level of 20 percent. FHFA's market estimation model forecasts 
the low-income share of the overall refinancing mortgage market to be 
significantly higher than both the current benchmark level and the 
recent performance of the Enterprises. Although the proposed rule would 
increase the benchmark level for the low-income refinancing goal 
significantly, the proposed benchmark levels would be lower than the 
point estimates projected by the market estimation model for 2015 
through 2017. However, the proposed benchmark level would still be 
within the range of possible market levels forecast by the market 
estimation model. In addition, while the forecast of the market level 
increases each year from 2015 through 2017, the point estimate for 2015 
is subject to less uncertainty than the point estimate for 2017. This 
supports setting the proposed benchmark level closer to the somewhat 
lower market estimate for 2015 than the higher estimate for 2017.
    Although this proposed benchmark level is higher than any level 
achieved by either Enterprise since 2010 and would represent an 
increase of 7 percentage points over the current goal, the proposed 
benchmark level should be achievable because higher income

[[Page 54489]]

borrowers are historically more likely to refinance their mortgages 
when interest rates have decreased. As a result, when interest rates 
fall, overall refinance volumes tend to increase, but the low-income 
goal qualifying share tends to decrease. The opposite is true when 
interest rates increase: There are usually fewer refinancings overall, 
but a greater percentage of those refinancings are by low-income 
borrowers. FHFA's market model forecasts that over the next three years 
the low-income goal-qualifying share of refinancing mortgages will 
increase significantly both due to future increases in interest rates 
and due to the fact that many borrowers would already have refinanced 
during the recent extended period of historically low interest rates.
    FHFA is proposing this benchmark level in light of the current two-
part process for evaluating Enterprise performance on the single-family 
housing goals, using both a benchmark level and a retrospective market 
level. If FHFA adopts an alternative approach that relies solely on 
benchmark levels, as described below in Section IV.C, FHFA may adopt a 
benchmark level in the final rule that is lower than the proposed 
benchmark level of 27 percent. In addition, FHFA will continue to 
monitor the Enterprises in its capacities as regulator and as 
conservator, and if FHFA determines in later years that the benchmark 
level for the low-income refinancing housing goal is no longer feasible 
for the Enterprises to achieve in light of market conditions, or for 
any other reason, FHFA will take appropriate steps to adjust the 
benchmark level.

C. Proposed Alternatives to the Market-Based Retrospective Approach

    Since 2010, the single-family housing goals have measured 
Enterprise performance by comparing it to both: (1) A benchmark level 
that is set in advance, and (2) the actual market level, as measured 
retrospectively based on HMDA data. Under the current rule, an 
Enterprise has met a goal if it achieves either the benchmark level for 
that goal, or the actual, retrospective market size for that goal. FHFA 
is requesting comment on whether this current approach should be 
maintained or whether FHFA should adopt a different approach in the 
final rule.
    FHFA is proposing three different alternatives and may adopt any of 
the three in the final rule. The first alternative would maintain the 
current approach, measuring performance on the single-family housing 
goals against both a benchmark level and a market level. The second 
alternative would eliminate the retrospective market level and measure 
performance on the single-family housing goals against a benchmark 
level only. The third alternative would eliminate the prospective 
benchmark levels and measure performance on the single-family housing 
goals against a retrospective market level only.
    Each of these alternatives strikes a different balance between 
goals that are established in advance and goals that are determined 
retrospectively based on market performance. To the extent any of these 
alternatives sets goal levels in advance, it is easier for the 
Enterprises to establish plans for meeting the goal, while at the same 
time it is harder for FHFA to set the goal accurately for more than one 
year in advance. To the extent that an alternative sets goal levels 
retrospectively based on market performance, it is harder for the 
Enterprises to establish plans for meeting the goal, but the goal level 
is more likely to be feasible because it would be based on the actual 
performance of the overall market.
    Under each of these alternatives, FHFA would continue to monitor 
the Enterprises in its capacities as regulator and as conservator. If 
FHFA determines that the housing goals established under any of these 
alternatives need to be adjusted in light of changes in the market, to 
ensure the safety and soundness of the Enterprises, or for any other 
reason, FHFA will take all appropriate steps, including adjusting the 
levels of the housing goals or initiating additional rulemaking to 
amend the housing goals regulation.
    Alternative 1: Benchmark Level and Market Level. The first 
alternative being proposed by FHFA would continue evaluating Enterprise 
performance based on a comparison with both a benchmark level that is 
set prospectively by regulation and a retrospective market level based 
on HMDA data.
    This alternative would maintain the existing regulatory language in 
Sec.  1282.12. Paragraph (a) would continue to provide that ``[a]n 
Enterprise shall be in compliance with a single-family housing goal if 
its performance under the housing goal meets or exceeds either: (1) The 
share of the market that qualifies for the goal; or (2) The benchmark 
level for the goal.'' Paragraph (b) would define the process for 
measuring the share of the market that qualifies for the goal. The 
remaining paragraphs in the section would describe each of the single-
family housing goals, including the retrospective market share and the 
benchmark level, where applicable.
    This two-part approach incorporates some of the advantages both of 
a benchmark level that is set prospectively and of a market level that 
is set retrospectively. By including a benchmark level, the two-part 
approach gives the Enterprises more certainty in planning how they will 
achieve the single-family housing goals each year. At the same time, 
the retrospective market level measure helps to address the inherent 
difficulty of accurately forecasting, years in advance, the housing 
goals shares of the overall market. The retrospective market level is 
much more adaptive than a fixed benchmark level by itself, although the 
HMDA data used for the retrospective measure does not become available 
until September of the following year. The retrospective market level 
incorporates many of the same considerations that FHFA uses in setting 
the prospective benchmark levels, but it is based on the actual 
performance of the market in the year being evaluated. This versatility 
helps ensure that the single-family goals are feasible for the 
Enterprises to achieve each year. Without the retrospective market 
approach, additional regulatory action would be required for the agency 
to adapt to unanticipated market changes.
    One disadvantage of this two-part approach is that if the 
Enterprises anticipate that the retrospective market level will end up 
lower than the benchmark level for a particular year, the single-family 
housing goals may provide less of an incentive for the Enterprises to 
serve the targeted parts of the market. On the other hand, the 
Enterprise would still have some incentive to meet benchmark targets in 
the first instance, rather than waiting to find out the results of the 
market-based analysis.
    Another potential disadvantage of the retrospective, market-based 
approach generally is that it may be less meaningful under market 
circumstances where the Enterprises purchase a large percentage of the 
total number of single-family, conventional conforming mortgages in a 
particular year. In those circumstances, the retrospective, market-
based approach would effectively compare the performance of the 
Enterprises to their own activity.
    FHFA welcomes comments on this alternative, including any other 
advantages or disadvantages of measuring performance against both a 
benchmark level and the market level.
    Alternative 2: Benchmarks Only. The second alternative being 
proposed by FHFA would be to evaluate Enterprise performance on the 
single-family housing goals based solely on a

[[Page 54490]]

comparison with a benchmark level that is set prospectively by 
regulation.\10\
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    \10\ Prior to 2010, the Enterprise housing goals consisted 
solely of benchmark levels that were set prospectively.
---------------------------------------------------------------------------

    This alternative would revise the existing regulatory language in 
Sec.  1282.12(a) to provide that ``[a]n Enterprise shall be in 
compliance with a single-family housing goal if its performance under 
the housing goal meets or exceeds the benchmark level for the goal.'' 
The current paragraph (b) would be deleted from the regulation. The 
remaining paragraphs in the section would be revised to delete from 
each the current subparagraph (1), which refers back to the 
retrospective market level. As revised, these paragraphs would simply 
set out the benchmark levels for each of the single-family housing 
goals.
    An advantage of this approach is that it would provide the 
Enterprises with certainty in planning how to achieve the single-family 
housing goals each year. Another advantage of this approach would be 
that FHFA could determine whether the Enterprises met the single-family 
goals relatively early in the year, allowing the Enterprises to adjust 
their activities if necessary.
    A disadvantage of the benchmarks-only approach is the difficulty in 
accurately forecasting market dynamics and goal-qualifying share levels 
years in advance. As a result, much of the impact of using housing 
goals based only on prospective benchmark levels depends on whether 
those forecasts are accurate or if the actual market level for that 
year is higher or lower than the benchmark level. If the actual market 
level for a particular year turns out to be higher than the benchmark 
level that was set in advance, the Enterprises are likely to find the 
goal easy to achieve without a particular focus on serving the portions 
of the single-family market targeted by the housing goals. Conversely, 
if the actual market level for a particular year turns out to be lower 
than the benchmark level that was set in advance, the Enterprises may 
find the goal difficult or impossible to achieve.
    If FHFA adopts this alternative, FHFA would consider whether 
adjustments to the proposed benchmark levels for the single-family 
housing goals are necessary. Without the existence of the retrospective 
market level to help mitigate the uncertainty in projecting the market 
shares for each goal, FHFA's considerations might lead the agency to 
select a benchmark that is in the lower part of the projected market 
range.
    FHFA welcomes comments on this alternative, including any other 
advantages or disadvantages of measuring performance against a 
benchmark level only. FHFA also encourages commenters to address what 
benchmark levels would be appropriate for each of the single-family 
housing goals if FHFA adopts this alternative in the final rule.
    Alternative 3: Market Level Only. The third alternative being 
proposed by FHFA would be to evaluate Enterprise performance on the 
single-family housing goals based solely on a comparison with a 
retrospective market level based on HMDA data.
    This alternative would revise the existing regulatory language in 
Sec.  1282.12(a) to provide that ``[a]n Enterprise shall be in 
compliance with a single-family housing goal if its performance under 
the housing goal meets or exceeds the share of the market that 
qualifies for the goal.'' Paragraph (b) would define the process for 
measuring the share of the market that qualifies for the goal. The 
remaining paragraphs in the section would be revised to delete from 
each the current subparagraph (2), which sets out the benchmark level 
for each single-family housing goal.
    Under this alternative, whether an Enterprise meets a particular 
housing goal would depend solely on whether the performance of the 
Enterprise met the actual market level for that year. This would 
eliminate the need for FHFA to forecast the goal-qualifying share of 
the overall market, and it would make it more likely that the single-
family goals would be feasible for the Enterprises each year compared 
to Alternative 2. An additional advantage of this approach would be 
that it would require the Enterprises to continue efforts to support 
all aspects of the market in years when the actual market levels are 
higher than forecasts would have predicted.
    A disadvantage of this approach would be that it may be more 
difficult for the Enterprises to establish plans for how to meet or 
exceed the actual market level. If FHFA adopts this alternative, it may 
be necessary for FHFA to require more frequent reporting from the 
Enterprises on their current activities and on their forecasts and 
plans for addressing the housing goals over the course of each year. As 
discussed under Alternative 1, another disadvantage of the 
retrospective, market-based approach is that it may be less meaningful 
under market circumstances where the Enterprises purchase a large 
percentage of mortgages in a particular year. In addition, this 
alternative would not allow FHFA to determine whether an Enterprise has 
met the single-family goals until October of the following year.
    FHFA welcomes comments on this alternative, including other 
advantages or disadvantages of measuring performance against a market 
level that can only be determined retrospectively, or against a market 
level based on data from a previous year.

V. Multifamily Housing Goals

A. Factors Considered in Setting the Proposed Multifamily Housing Goal 
Levels

    Section 1333(a)(4) of the Safety and Soundness Act requires FHFA to 
consider the following six factors in setting the multifamily housing 
goals:
    1. National multifamily mortgage credit needs and the ability of 
the Enterprise to provide additional liquidity and stability for the 
multifamily mortgage market;
    2. The performance and effort of the Enterprise in making mortgage 
credit available for multifamily housing in previous years;
    3. The size of the multifamily mortgage market for housing 
affordable to low-income and very low-income families, including the 
size of the multifamily markets for housing of a smaller or limited 
size;
    4. The ability of the Enterprise to lead the market in making 
multifamily mortgage credit available, especially for multifamily 
housing affordable to low-income and very low-income families;
    5. The availability of public subsidies; and
    6. The need to maintain the sound financial condition of the 
Enterprise.\11\
---------------------------------------------------------------------------

    \11\ 12 U.S.C. 4563(a)(4).
---------------------------------------------------------------------------

    In setting the proposed benchmark levels for the multifamily 
housing goals, FHFA has considered each of the six statutory factors. 
The statutory factors for the multifamily goals are very similar, but 
not identical, to the statutory factors considered in setting the 
benchmark levels for the single-family housing goals. At the same time, 
there are several important distinctions between the single-family 
housing goals and the multifamily housing goals. While there are 
separate single-family housing goals for home purchase and refinancing 
mortgages, the multifamily goals include all Enterprise multifamily 
mortgage purchases, regardless of the purpose of the loan. In addition, 
unlike the single-family housing goals, by statute the multifamily 
goals are measured based on the total volume of affordable multifamily 
mortgage purchases, not based on a percentage of multifamily mortgage 
purchases. The use of total volumes, which FHFA measures by the number 
of eligible

[[Page 54491]]

units, rather than percentages of each Enterprises' overall multifamily 
purchases requires particular attention both to the overall size of the 
multifamily mortgage market and to the expected volume of the 
Enterprises' multifamily purchases in a given year.
    Another difference between the single-family and multifamily goals 
is that performance on the multifamily housing goals is measured based 
solely on a benchmark level, without any retrospective market measure. 
The absence of a retrospective market measure for the multifamily 
housing goals results, in part, from the lack of comprehensive data 
about the multifamily mortgage market. Unlike the single-family market, 
where HMDA provides a reasonably comprehensive dataset about single-
family mortgage originations each year, the multifamily market (and the 
affordable multifamily market segment) has no such comparable data set. 
As a result, it can be difficult to correlate different data sets that 
may rely on different reporting formats--for example, some data is 
available by dollar volume while other data is available by unit 
production. The lack of comprehensive data about the multifamily 
mortgage market is even more acute with respect to the segments of the 
market that are targeted to low-income families, defined as families 
with incomes less than or equal to 80 percent of the area median 
income, and very low-income families, defined as families with incomes 
less than or equal to 50 percent of the area median income. Much of the 
analysis that follows discusses trends in the overall multifamily 
mortgage market. FHFA recognizes that these general trends may not 
apply to the same extent to all segments of the market.
    FHFA has considered each of the required statutory factors and a 
discussion of the various factors, a number of which are related or 
overlap, follows.
1. The Multifamily Mortgage Market: Market Size, Competition and the 
Affordable Multifamily Market
    FHFA's consideration of the multifamily mortgage market addresses 
the size of and competition within the multifamily mortgage market, as 
well as the subset of the multifamily market affordable to low-income 
and very low-income families (Factors 1, 3 and 5). Recent trends in the 
multifamily market indicate that overall multifamily mortgage market 
volumes are expected to increase between 2014 and 2017, both in terms 
of total refinancing activity and total financing for new multifamily 
units being completed. However, FHFA expects the Enterprises will make 
up a smaller share of the overall multifamily mortgage market due to 
increased participation from the private sector. FHFA has also 
considered the importance of Enterprise support of the multifamily 
market in light of recent decreases in rental affordability.
    Multifamily mortgage market size. The overall size of the 
multifamily market, in terms of units, was over 23 million rental units 
in 2011, according to the data from the U.S. Census Bureau in the 2011 
American Community Survey (ACS).\12\ The size of the multifamily market 
in terms of mortgage origination volume varies significantly from year 
to year based on a variety of market conditions.
---------------------------------------------------------------------------

    \12\ U.S. Census Bureau, 2011 American Community Survey (ACS). 
The percentage of multifamily units relative to all housing units 
was highest in the Middle Atlantic Division (23.1 percent), the 
Pacific Division (21.7 percent), and the South Atlantic Division 
(18.4 percent).
---------------------------------------------------------------------------

    During the financial crisis and the resulting decline in the 
housing market, the size of the multifamily mortgage market decreased 
significantly. Overall, multifamily mortgage originations fell from 
$147.7 billion in 2007 to $87.9 billion in 2008 and $52.5 billion in 
2009, as shown in Table 1. The declines were even more pronounced in 
the private sector segment of the multifamily market, which decreased 
from almost $112 billion in 2007 to $46.4 billion in 2008 and $18.4 
billion in 2009. The Enterprises' multifamily purchases provided a 
countercyclical source of financing during this same period. While the 
size of the overall multifamily mortgage market was declining, the 
volume of Enterprise purchases was relatively steady. The combined 
volume of Enterprise purchases in 2007, excluding purchases of 
commercial mortgage-backed securities (CMBS), was $34.6 billion. The 
Enterprises' combined multifamily volume rose to $40 billion in 2008 
before declining to $31 billion in 2009.

                                     Table 1--Government and Private Sector Market Share of Multifamily Originations
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                          Total volume S                                   % Enterprise                      % Private
                          Year                                 Bil.        % Fannie Mae    % Freddie Mac       total           % FHA          sector
--------------------------------------------------------------------------------------------------------------------------------------------------------
2005....................................................          $133.1            11.7             6.7            18.4             2.2            79.3
2006....................................................           138.0            11.7             7.1            18.8              10            80.2
2007....................................................           147.7            13.1            10.4            23.4             0.8            75.8
2008....................................................            87.9            25.4            20.1            45.5             1.7            52.8
2009....................................................            52.5            30.2            28.9            59.2             5.6            35.2
2010....................................................            68.8            24.5            20.3            44.8            15.3            40.0
2011....................................................           110.1            20.9            18.9            39.8            10.6            49.6
2012....................................................           146.1            21.7            18.3            39.9            10.2            49.8
2013....................................................           170.0            16.6            14.8            31.4            10.4            58.3
--------------------------------------------------------------------------------------------------------------------------------------------------------
*FHA data is for fiscal year 2005 to 2013.
Sources: ``MBA Commercial Real Estate Finance Survey.''
Sources for 2013 data: Fannie Mae, Freddie Mac, and FHA. Total 2013 volume derived from ``MBA Commercial Real Estate Finance Survey'' data.
Note: All multifamily loans in CMBS issuances are included under ``Private Sector'', regardless of the investor.

    Since 2009, the overall size of the market has rebounded and has 
shown increasing private sector participation. The market has increased 
from a low of $52.5 billion in 2009, to $69 billion in 2010, $110 
billion in 2011, and $146 billion in 2012. Total multifamily mortgage 
originations from all capital sources continued to increase in 2013, to 
$170 billion.\13\
---------------------------------------------------------------------------

    \13\ MBA, Annual Origination Volume Summary (February 3, 2014).
---------------------------------------------------------------------------

    Competition in the multifamily mortgage market. Increased demand 
for multifamily housing and strong investment returns have attracted 
banks, insurance companies, CMBS issuers, and other private lenders 
back to the

[[Page 54492]]

multifamily market.\14\ Much of the increase in private sector activity 
has come from commercial banks and life insurance companies, the 
entities, other than the Enterprises, that purchase the most 
multifamily mortgages. Additionally, multifamily loans included in CMBS 
issuances increased from $785 million in the first half of 2013 to $2.6 
billion in the first half of 2014.\15\ FHA also remained a significant 
backer of multifamily mortgages, insuring over $18 billion in 
multifamily loans in 2013.\16\ As reflected in Table 1, increased 
competition in the multifamily mortgage market resulted in the 
Enterprises' multifamily market share declining from a peak of almost 
60 percent in 2009 to just under 40 percent in 2011 and 2012 and to 
just over 30 percent in 2013.\17\
---------------------------------------------------------------------------

    \14\ National Mortgage News, ``JPMorgan's Appetite for 
Multifamily Loans Keeps Growing'' (February 19, 2014).
    \15\ Bloomberg and Commercial Mortgage Alert.
    \16\ FHA, Annual Management Report, 2013.
    \17\ Computed from data in the ``MBA Commercial Real Estate 
Finance Survey''; Mortgage Bankers Association CREF Conference 
presentation: ``The Economy and Multifamily Finance Markets'' 
(February 4, 2014).
---------------------------------------------------------------------------

    The decrease in market share for the Enterprises relative to the 
overall market is expected to continue in 2014 and beyond. According to 
the MBA multifamily originations index, total multifamily originations 
for the first quarter of 2014 were about the same as first quarter 2013 
data. MBA data shows a sharp rise in multifamily lending by banks and 
life insurance companies from first quarter 2013 compared to first 
quarter 2014.\18\ The increase in activity by banks and life insurance 
companies likely affected the Enterprises' combined multifamily loan 
purchases, which were down by almost 50 percent in the first half of 
2014 compared to their purchases in the first half of 2013. While this 
sharp decline is unlikely to continue through the rest of 2014, the 
overall trend of increased competition from the private sector is 
expected to continue in 2014 and beyond.
---------------------------------------------------------------------------

    \18\ MBA, ``Commercial Real Estate/Multifamily Finance Quarterly 
Data Book'' (June, 2014).
---------------------------------------------------------------------------

    Affordable Multifamily Market Segment. FHFA's consideration of the 
multifamily mortgage market is limited by the lack of comprehensive 
data about the size of the market for low-income and very low-income 
families. However, FHFA recognizes that the portion of the overall 
multifamily mortgage market that is affordable to low-income and very 
low-income families may vary from year-to-year, that the competition 
within the multifamily market overall may differ from the competition 
within the affordable multifamily market segment, and that the volume 
for the affordable multifamily market segment will also be related to 
the availability of affordable housing subsidies.
    Affordability for families living in rental units has decreased in 
recent years for many households. Spending more than 30 percent of 
household income towards rent is often used as a measure of whether a 
household is rent burdened, and the Safety and Soundness Act also 
incorporates this metric when determining whether a unit meets the low-
income or very low-income categories, with appropriate adjustments for 
unit size.\19\ According to the Joint Center on Housing Studies, 
``[t]he share of cost-burdened renters increased in all but one year 
from 2001 to 2011, to just above 50 percent. More than a quarter of 
renter households (28 percent) had severe burdens (paid more than half 
their incomes for housing). In 2012, the share of cost-burdened renters 
improved slightly but their numbers held steady as more households 
entered the rental market.'' \20\
---------------------------------------------------------------------------

    \19\ 12 U.S.C. 4563(c).
    \20\ Joint Center for Housing Studies, Harvard University, ``The 
State of the Nation's Housing,'' p.5 (2014).
---------------------------------------------------------------------------

    The affordable segment of the multifamily market is critical in 
meeting the housing needs of low-income and very low-income families 
that would otherwise be rent-burdened. Financing for affordable 
multifamily buildings--particularly those that are affordable to very 
low-income families, defined as families with incomes at or below 50 
percent of AMI--often uses an array of state and federal housing 
subsidies, such as low-income housing tax credits (LIHTCs), tax-exempt 
bonds, Section 8 rental assistance or soft subordinate financing. 
Investor interest in tax credit equity projects of all types and in all 
markets is strong and is expected to remain so, especially in markets 
in which bank investors are seeking to meet Community Reinvestment Act 
(CRA) goals. Consequently, there should continue to be opportunities in 
the multifamily market to provide permanent financing for properties 
with low-income housing tax credits during the 2015-2017 period. 
Additionally, there should also be opportunities for market 
participants, including the Enterprises, to purchase mortgages that 
finance the preservation of existing affordable housing units 
(especially for restructurings of older properties that reach the end 
of their initial 15-year LIHTC compliance periods and for refinancing 
properties with expiring Section 8 rental assistance contracts).
2. Factors Impacting the Multifamily Mortgage Market
    FHFA has considered a variety of economic indicators and measures 
related to the size and affordability of the multifamily mortgage 
market, which reflect fundamentals in the overall multifamily market 
and an ongoing need for affordable multifamily rental units. This 
section examines the following: interest rates, property values, 
multifamily rents, vacancy rates, multifamily building permits, 
multifamily housing starts, and multifamily housing completions.
    Interest rates. The volume of multifamily mortgage originations is 
influenced heavily by interest rates. Although interest rates rose in 
2013, they remained low compared to historical levels. If multifamily 
mortgage rates increase relative to the lower rates prior to 2013, 
multifamily mortgage origination volumes would be expected to decrease, 
including both refinancings and purchases.
    Lower mortgage interest rates in recent years have resulted in 
refinancings making up a significant percentage of overall multifamily 
volume. This is reflected in the share of multifamily units financed by 
mortgages purchased by the Enterprises. For Fannie Mae, the share of 
multifamily units financed that were refinancings (as opposed to 
purchases, new construction, or preservation) increased from 64 percent 
in 2009, peaked at 75 percent in 2010, and declined to 66 percent in 
2011, 66 percent in 2012, and 60 percent in 2013. For Freddie Mac the 
share of multifamily units financed that were refinancings declined 
from 77 percent in 2009, to 61 percent in 2010, 59 percent in 2011, 58 
percent in 2012, and 50 percent in 2013.\21\ If mortgage interest rates 
increase, the volume of refinancing mortgages can be expected to 
decrease.
---------------------------------------------------------------------------

    \21\ Enterprise data.
---------------------------------------------------------------------------

    In addition to the impact on refinancing volumes, increases in 
mortgage interest rates would make it more costly to finance the 
purchase of multifamily properties. The increased cost of multifamily 
financing would tend to decrease the volume of multifamily mortgage 
originations that fund purchases of multifamily properties.
    Property values. As of the end of January 2014, multifamily 
property values were up over 13 percent from January 2013 and are now 
at or above the peak reached in 2007.\22\ Rising

[[Page 54493]]

multifamily property values usually spur increases in refinancings, 
property sales, and new construction activity. The impact of higher 
multifamily property values may be offset to some extent by rising 
interest rates. FHFA anticipates that multifamily property values will 
continue to increase in 2014, with more modest increases continuing 
during 2015-2017.
---------------------------------------------------------------------------

    \22\ Moody's/Real Capital Analytics, ``Composite CPPI Indices'' 
(January, 2014), https://www.rcanalytics.com/Public/rca_cppi.aspx.
---------------------------------------------------------------------------

    Multifamily vacancy rates and rents. During the housing crisis, 
vacancy rates for multifamily properties increased significantly and 
median asking rents declined. Since that time, vacancy rates have 
returned to lower levels, while rents have increased. Rental vacancy 
rates for multifamily units peaked at over 13 percent in the third 
quarter of 2009 but have declined each year since. Vacancy rates fell 
to around 9 percent in 2012 and have continued to average around 9 
percent through 2013.\23\ Median asking rents nationwide declined 
slightly between 2009 and 2011, from $708 in 2009 to $694 in 2011. 
Median asking rents have increased since 2011, reaching $734 in 2013 
and $756 in the second quarter of 2014.\24\ Both the average vacancy 
rates and median asking rents indicate that the market for multifamily 
housing will remain relatively strong, though trends in both measures 
are likely to moderate.
---------------------------------------------------------------------------

    \23\ U.S. Census Bureau, ``Rental Vacancy Rates by Units in 
Structure.'' The vacancy rates reported by the U.S. Census Bureau 
are different from some other sources, but trends are similar. For 
example, data from CB Richard Ellis shows rental vacancy rates for 
multifamily units averaging over 7 percent in 2009 before falling to 
just under 5 percent in 2012 and 2013.
    \24\ U.S. Census Bureau, ``Median Asking Rent for the U.S. and 
Regions.'' The asking rents reported by the U.S. Census Bureau are 
different from some other sources, but trends are similar. For 
example, data from CB Richard Ellis shows average rent rates at 
$1,211 in 2009 and $1,191 in 2010, then increasing steadily to 
$1,339 in 2013.
---------------------------------------------------------------------------

    Multifamily building permits, starts and completions. Multifamily 
building permits and starts have recovered in recent years, after 
falling significantly after the housing market crisis. Multifamily 
building permits averaged 357,000 units annually between 2005 and 2008. 
The annual volume of multifamily building permits fell dramatically in 
2009 and 2010, to approximately 130,000 units per year. The volume of 
permits has increased in the years since 2010, exceeding 340,000 units 
in 2013 and on pace to do the same in 2014.\25\ Multifamily housing 
starts have followed the same pattern, averaging approximately 287,000 
units annually between 2005 and 2008. Multifamily housing starts 
dropped to just under 100,000 units each year in 2009 and 2010, and 
have since increased, exceeding 293,000 units in 2013.\26\
---------------------------------------------------------------------------

    \25\ U.S. Census Bureau, ``New Privately Owned Housing Units 
Authorized by Building Permits in Permit-Issuing Places (In 
structures with 5 units or more).''
    \26\ U.S. Census Bureau, ``New Privately Owned Housing Started 
(In structures with 5 units or more).''
---------------------------------------------------------------------------

    Multifamily housing completions have followed a similar pattern, 
though as expected, the changes in volume have occurred somewhat later 
than the volume changes in permits and starts. Multifamily housing 
completions exceed 250,000 units each year from 2005 through 2009. The 
decline that was seen in multifamily building permits and housing 
starts in 2009 and 2010 occurred for multifamily housing completions in 
2010 and 2011, when the number of multifamily units completed was below 
150,000 units each year. Multifamily housing completions have also been 
slower to recover, reaching 186,000 units in 2013.\27\ However, given 
the recent increases in volume for multifamily building permits and 
housing starts, multifamily housing completions are expected to 
increase in coming years.
---------------------------------------------------------------------------

    \27\ U.S. Census Bureau, ``New Privately Owned Housing Units 
Completed (In structures with 5 units or more).''
---------------------------------------------------------------------------

3. Enterprise Multifamily Performance
    The Enterprises have served a consistent and critical role in the 
multifamily market in the years since the financial crisis. In the 
final rule establishing the multifamily goals for 2012 through 2014, 
FHFA increased these goal levels compared to previous years, reflecting 
the Enterprises' increased market share since 2008. However, in 
anticipation of increased private market activity during 2012 through 
2014, FHFA also decreased these goals each of those years with 2012 
being the highest and 2014 being the lowest. As required by the Safety 
and Soundness Act, FHFA has considered the performance of the 
Enterprises in previous years (Factor 2) in establishing the 
multifamily housing goal benchmark levels for 2015 through 2017.
    In previous years, FHFA established higher multifamily housing goal 
levels for Fannie Mae than for Freddie Mac in order to reflect the 
larger size and more established history of Fannie Mae's multifamily 
purchase business. Fannie Mae consistently financed more low-income and 
very low-income units than Freddie Mac every year between 2009 and 
2013. The difference between the volume of low-income units financed by 
mortgages purchased by Fannie Mae relative to Freddie Mac has been 
relatively stable, with Fannie Mae's volume being 67,800 units higher 
in 2009, 53,500 units higher in 2010, 72,200 units higher in 2011, 
77,400 units higher in 2012, and 71,500 units higher in 2013. The 
difference between the volume of very low-income units financed by 
mortgages purchased by Fannie Mae relative to Freddie Mac has varied 
more, with Fannie Mae's volume being 40,500 units higher in 2009, 
24,300 units higher in 2010, 48,800 units higher in 2011, 48,800 units 
higher in 2012, and 21,300 units higher in 2013.\28\
---------------------------------------------------------------------------

    \28\ Enterprise data.
---------------------------------------------------------------------------

    Multifamily low-income housing goal. The multifamily low-income 
housing goal includes units affordable to low-income families, defined 
as families with incomes no greater than 80 percent of area median 
income. In 2013, both Enterprises reported that they exceeded their 
low-income multifamily goals. Fannie Mae purchased mortgages financing 
326,597 such units, compared to the 2013 goal level of 265,000 units. 
Freddie Mac purchased mortgages financing 255,057 units, compared to 
the 2013 goal level of 215,000 units.
    Starting in 2010, Fannie Mae and Freddie Mac have purchased a 
relatively stable percentage of low-income multifamily units relative 
to their total multifamily purchases, as is shown in Table 2. The share 
of low-income units purchased by Fannie Mae compared to its total 
purchases rose from 68 percent in 2009 to a range of 75 percent to 77 
percent between 2010 and 2013. Similarly, Freddie Mac's low-income 
unit-eligible purchases rose from 65 percent in 2009 to a range of 75 
percent to 79 percent between 2010 and 2013.\29\
---------------------------------------------------------------------------

    \29\ Enterprise data.

[[Page 54494]]



                                    Table 2--Enterprise Past Performance on the Low-Income Multifamily Goal, 2006-13
                                        [Goals and performance measured in low-income multifamily units financed]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                Fannie Mae                                              Freddie Mac
                                         ---------------------------------------------------------------------------------------------------------------
                                                                          Total                                                   Total
                  Year                                                 multifamily                                             multifamily
                                              Goal       Performance      units     Low-income %      Goal       Performance      units     Low-income %
                                                                        financed                                                financed
--------------------------------------------------------------------------------------------------------------------------------------------------------
2013....................................        265,00       326,597       430,751            76       215,000       255,057       341,921            75
2012....................................       285,000       375,924       501,256            75       225,000       298,529       377,522            79
2011....................................       177,750       301,224       390,526            77       161,250       229,001       290,116            79
2010....................................       177,750       214,997       286,504            75       161,250       161,500       216,042            75
--------------------------------------------------------------------------------------------------------------------------------------------------------
2009....................................            NA       235,199       344,989            68            NA       167,026       256,346            65
2008....................................            NA       450,850       653,060            69            NA       268,036       375,760            71
2007....................................            NA       392,666       668,963            59            NA       298,746       388,072            77
2006....................................            NA       313,620       427,130            73            NA       174,377       224,608            78
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: Performance as reported by the Enterprise for 2013; official performance as determined by FHFA for 2010-12; performance if the goal had been in
  effect for 2006-09 as calculated by FHFA.``Low-income'' refers to units affordable to renters with incomes no greater than 80 percent of Area Median
  income (AMI), based on a rental proxy.
Note: Figures do not include any units financed by the purchase of commercial mortgage-backed securities (CMBS).

    Multifamily very low-income subgoal. The multifamily very low-
income housing subgoal includes units affordable to very low-income 
families, defined as families with incomes no greater than 50 percent 
of area median income. Enterprise purchases of mortgages that finance 
properties with rental units affordable to very low-income families 
over the 2010-2013 period is reflected in Table 3. From 2010 to 2013, 
Fannie Mae purchased mortgages financing an average of 81,000 such 
units each year, peaking at 108,878 units in 2012, and Freddie Mac 
purchased mortgages financing an average of 46,000 such units each 
year, peaking at 60,084 units in 2012.
    In 2013, both Enterprises reported that they exceeded their very 
low-income multifamily goals. Fannie Mae purchased mortgages financing 
78,071 such units, compared to the 2013 goal of 70,000 units. Freddie 
Mac purchased mortgages financing 56,979 units, compared to the 2013 
goal of 50,000 units.
    In recent years, Fannie Mae has purchased a higher percentage of 
very low-income units, although this difference was very small in 2013, 
as shown in Table 3. Fannie Mae's very low-income purchases were 18 
percent of its overall multifamily purchases in 2009, rising to 22 
percent in 2011 and 2012 and then falling to 18 percent in 2013. 
Freddie Mac's very low-income purchases were unusually low in 2009, at 
8 percent of its overall multifamily purchases, but returned to a more 
normal level of 14 percent in 2010, and has fluctuated since then, 
increasing to 17 percent in 2013.\30\
---------------------------------------------------------------------------

    \30\ Enterprise data.

                                Table 3--Enterprise Past Performance on the Very Low-Income Multifamily Subgoal, 2006-13
                                     [Goals and performance measured in very low-income multifamily units financed]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                Fannie Mae                                              Freddie Mae
                                         ---------------------------------------------------------------------------------------------------------------
                                                                          Total                                                   Total
                  Year                                                 multifamily   Very  low-                                multifamily   Very  low-
                                              Goal       Performance      units       income  %       Goal       Performance      units       income  %
                                                                        financed                                                financed
--------------------------------------------------------------------------------------------------------------------------------------------------------
2013....................................         70,00        78,071       430,751            18        50,000        56,752       341,921            17
2012....................................        80,000       108,878       501,256            22        59,000        60,084       377,522            16
2011....................................        42,750        84,244       390,526            22        21,000        35,471       290,116            12
2010....................................        42,750        53,908       286,504            19        21,000        29,656       216,042            14
--------------------------------------------------------------------------------------------------------------------------------------------------------
2009....................................            NA        60,765       344,989            18            NA        20,302       256,346             8
2008....................................            NA        96,242       653,060            15            NA        45,154       375,760            12
2007....................................            NA        88,901       668,963            13            NA        59,821       388,072            15
2006....................................            NA        88,521       427,130            21            NA        34,638       224,608            15
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: Performance as reported by the Enterprise for 2013; official performance as determined by FHFA for 2010-12; performance if the goal had been in
  effect for 2006-09, as calculated by FHFA. ``Very low-income'' refers to units affordable to renters with incomes no greater than 50 percent of Area
  Median Income (AMI), based on a rental proxy.
Note: Figures do not include any units financed by the purchase of commercial mortgage-backed securities (CMBS).


[[Page 54495]]

4. Ability of the Enterprises to Lead the Market in Making Multifamily 
Mortgage Credit Available and Need To Maintain Sound Financial 
Condition of the Enterprises
    In setting the proposed multifamily housing goals, FHFA has 
considered the ability of the Enterprises to lead the market in making 
multifamily mortgage credit available (Factor 4). As discussed above, 
the Enterprises' share of the overall multifamily market increased in 
the years immediately following the financial crisis and has reduced in 
more recent years in response to growing private sector participation. 
Despite the Enterprises' reduced market share in the overall 
multifamily market, they should continue to demonstrate leadership in 
multifamily affordable housing lending, which includes supporting 
housing for tenants at different income levels in various geographic 
markets and in various market segments.
    In setting the proposed multifamily housing goals, FHFA has also 
considered the importance of maintaining the Enterprises in sound and 
solvent financial condition (Factor 6). During the conservatorships, 
the delinquency and default performance of the Enterprise portfolios of 
loans on multifamily affordable housing properties has not been 
significantly different from the performance of loans on market rate 
properties, which experienced extremely low delinquency and foreclosure 
rates. The Enterprises should, therefore, be able to sustain or 
increase their volume of purchases of loans on affordable multifamily 
housing properties without impacting the Enterprises' safety and 
soundness or negatively affecting the performance of their total loan 
portfolio.
    FHFA continues to monitor the activities of the Enterprises, both 
in FHFA's capacity as safety and soundness regulator and as 
conservator. If necessary, FHFA will make appropriate changes in the 
multifamily housing goals to ensure the Enterprises' continued safety 
and soundness.

B. Proposed Multifamily Housing Goal Benchmark Levels

    Based on FHFA's consideration of each of the statutory factors as 
described above, the proposed rule would establish new benchmark levels 
for the multifamily housing goals that are at the same level as the 
current goals for Fannie Mae and are gradually increasing for Freddie 
Mac. While the proposed multifamily benchmark levels are lower than the 
Enterprises' actual low-income and very low-income purchases in 2012 
and 2013, FHFA expects that Fannie Mae and Freddie Mac will play a 
smaller role in the overall multifamily market as private sector 
activity increases. The Enterprise share of the overall market between 
2005 and 2007 was around 20 percent. As overall multifamily origination 
volumes fell in 2008 through 2010, the Enterprise share increased 
significantly, reaching almost 60 percent in 2009. The Enterprise share 
of the market has decreased since 2009 as overall multifamily 
origination volumes have increased. The Enterprise share of the market 
was just over 30 percent in 2013, and preliminary data for both 
Enterprises show a sharp decrease in multifamily purchases in the first 
half of 2014, compared to the first half of 2013. While these trends 
are likely to moderate, the Enterprise share of the overall multifamily 
mortgage market is expected to remain relatively low in 2015 through 
2017.
    Under these market circumstances, the proposed multifamily 
benchmark levels would require the Enterprises to continue to support 
affordable multifamily housing despite their decreasing role overall. 
Before finalizing the benchmark levels for the low-income and very low-
income multifamily goals in the final rule, FHFA will review any 
additional data that becomes available about the multifamily 
performance of the Enterprises in 2014, along with any comments on the 
proposed multifamily housing goals.
    Additionally, the proposed rule would continue to set the 
multifamily housing goal levels for Freddie Mac at lower levels than 
the multifamily housing goals for Fannie Mae. These lower multifamily 
goal levels reflect the smaller overall unit volume of Freddie Mac's 
multifamily business when compared to Fannie Mae's. The proposed rule 
would increase the multifamily goal levels for Freddie Mac by a small 
amount each year from 2015 through 2017, but Freddie Mac's multifamily 
goal levels would continue to be lower than Fannie Mae's. FHFA requests 
comment on whether the low-income and very low-income multifamily goals 
for Fannie Mae and Freddie Mac should be set at different levels based 
on their expected volumes, or whether Fannie Mae and Freddie Mac should 
be expected to meet the same multifamily goal levels, and if so, 
whether the same goal levels should apply starting in 2015, 2016 or 
2017. Commenters are encouraged to address specifically whether it 
would be feasible for both Enterprises to meet the same multifamily 
goals starting in 2015, as well as what impact requiring the same goals 
starting in 2015 would have on the market or on the Enterprises.
    The proposed rule would also change several definitions to ensure 
that any unit claimed as goals eligible is, in fact, a unit with 
affordable rents. These changes are expected, however, to have only a 
limited impact on the ability of the Enterprises to meet the 2015 
through 2017 multifamily housing goals.
    Low-income families multifamily housing goal. The low-income 
families multifamily housing goal is based on the total number of 
rental units in multifamily properties financed by mortgages purchased 
by the Enterprises that are affordable to low-income families, defined 
as families with incomes less than or equal to 80 percent of the area 
median income. The proposed rule would set the annual low-income 
multifamily housing goal for Fannie Mae at 250,000 units in each year 
from 2015 through 2017. This would be the same as the low-income 
multifamily housing goal for Fannie Mae for 2014. The proposed rule 
would gradually increase the annual low-income multifamily housing goal 
for Freddie Mac in each year from 2015 through 2017, from 200,000 units 
for 2014 to 210,000 units in 2015, 220,000 units in 2016, and 230,000 
units in 2017.
    Very low-income families multifamily subgoal. The very low-income 
families multifamily housing subgoal is based on the total number of 
rental units in multifamily properties financed by mortgages purchased 
by the Enterprises that are affordable to very low-income families, 
defined as families with incomes less than or equal to 50 percent of 
the area median income. The proposed rule would set the annual very 
low-income multifamily subgoal for Fannie Mae at 60,000 units each year 
from 2015 through 2017. This would be the same as the very low-income 
multifamily subgoal for Fannie Mae for 2014. The proposed rule would 
gradually increase the very low-income multifamily subgoal for Freddie 
Mac in each year from 2015 through 2017. The very low-income families 
multifamily housing subgoal for Freddie Mac is currently set at 40,000 
units for 2014. The proposed rule would increase this subgoal to 43,000 
units in 2015, 46,000 units in 2016, and 50,000 units in 2017.

VI. Low-Income Housing Subgoal for Small Multifamily Properties

    This proposed rule would establish a new low-income housing subgoal 
for small multifamily properties beginning in 2015. The Safety and 
Soundness Act requires the Enterprises to report on their volume of 
low-income small

[[Page 54496]]

multifamily purchases and gives FHFA discretion to add a multifamily 
subgoal for this category.\31\ FHFA has not previously established a 
subgoal for affordable small multifamily properties, but proposes to do 
so in this rule.
---------------------------------------------------------------------------

    \31\ See 12 U.S.C. 4563(a)(3).
---------------------------------------------------------------------------

    The Safety and Soundness Act also gives FHFA discretion to define 
``small multifamily properties'' either in terms of the number of units 
in the property or in terms of the size of the loan.\32\ The proposed 
rule would define ``small multifamily properties'' as those with 5 to 
50 units. FHFA is not proposing to define small multifamily properties 
in terms of loan amount because some larger multifamily properties with 
more than 50 units may obtain low-leverage financing, meaning the 
Enterprise loan is small but the property securing the loan is not. 
Including smaller loans on larger properties would tend to overstate 
the level of support that the Enterprises provide for small multifamily 
properties.
---------------------------------------------------------------------------

    \32\ See 12 U.S.C. 4563(a)(3).
---------------------------------------------------------------------------

    The proposed rule would initially set the new subgoal benchmark 
levels for the low-income housing subgoal for small multifamily 
properties at low levels relative to the overall size of the small 
multifamily mortgage market. The gradually increasing levels of the 
proposed low-income housing subgoal for small multifamily properties 
will allow FHFA to assess potential impacts of increased Enterprise 
participation in this segment of the market. FHFA welcomes comments on 
those potential impacts and will consider any comments received.

A. Factors Considered in Setting the Proposed Levels for the Low-Income 
Housing Subgoal for Small Multifamily Properties

    The Safety and Soundness Act requires FHFA to consider the same six 
factors in setting the low-income housing subgoal for small multifamily 
properties that were considered in setting the low-income and very low-
income multifamily housing goals: National multifamily mortgage credit 
needs; past performance of the Enterprises; multifamily mortgage market 
size; ability to lead the market; availability of public subsidies; and 
the need to maintain the sound financial condition of the 
Enterprises.\33\ FHFA has considered each of these six statutory 
factors in setting the proposed benchmark levels for the low-income 
housing subgoal for small multifamily properties.
---------------------------------------------------------------------------

    \33\ 12 U.S.C. 4563(a)(4).
---------------------------------------------------------------------------

    Because small multifamily loans are one component of the overall 
multifamily mortgage market, many of the same trends that were 
discussed previously in the context of the low-income and very low-
income multifamily housing goals also apply to the small multifamily 
market. In general, FHFA expects that there will be an increasing 
volume of multifamily mortgage originations over the next several 
years, but that the Enterprises will purchase a decreasing share of 
this volume. FHFA recognizes the market for mortgages on small 
multifamily properties may also differ in important ways from the 
overall multifamily mortgage market. While information about the small 
multifamily mortgage market is limited, FHFA has considered the extent 
to which the broader trends applicable to the multifamily mortgage 
market are expected to be reflected for small multifamily mortgages to 
the extent information is available and will continue to do so.
1. The Small Multifamily Market: Size, National Mortgage Credit Needs 
and Availability of Public Subsidies
    Small multifamily properties are a significant source of affordable 
rental housing. Small multifamily properties represent one-third of all 
multifamily rental units \34\ and rents in small multifamily properties 
are often lower than rents in larger multifamily properties. The 
Enterprises have played a relatively limited role in supporting 
financing for small multifamily properties. The proposed low-income 
housing subgoal for small multifamily properties would provide an 
additional incentive for the Enterprises to support this important 
source of affordable rental housing. FHFA's consideration of the 
mortgage market for small multifamily properties addresses the size of 
the small multifamily mortgage market, national mortgage credit needs, 
and the availability of public subsidies (Factors 1, 3 and 5).
---------------------------------------------------------------------------

    \34\ U.S. Census Bureau, 2011 American Community Survey, 
``General Housing Data,'' Table C-01-AH.
---------------------------------------------------------------------------

    Small multifamily market size. There is limited data available on 
the overall size of the market for mortgages on small multifamily 
properties. Data on the multifamily mortgage market is generally 
reported based on loan balances rather than property size, which 
necessitates using loan balances to estimate the size of the market for 
multifamily properties that have between 5 and 50 units. Although using 
loan balances between $1 million and $3 million dollars will include 
some smaller balance loans on larger properties and will exclude some 
larger loans on smaller properties, it can provide an estimate of the 
size of the mortgage market for multifamily properties that have 
between 5 and 50 units.
    According to data from the Mortgage Bankers Association (MBA), the 
volume of multifamily loans with balances from $1 million to $3 million 
originated in 2006 and 2007 was just over $34 billion each year. These 
volumes declined significantly in 2008 through 2010, falling as low as 
$8 billion in 2009. The volume of small multifamily loans has increased 
steadily since 2010, reaching $34 billion again in 2012. This 
represents over 25 percent of all multifamily mortgage loans originated 
in that year.
    The trends in origination volumes for small multifamily loans have 
followed a similar pattern to those for the overall multifamily 
mortgage market. As discussed above, the size of the overall 
multifamily mortgage market in 2005 through 2007 averaged approximately 
$140 billion per year. The volumes decreased significantly in 2008 
through 2010, reaching a low point of $52.5 billion in 2009. Since 
2010, volumes have recovered, reaching $146 billion in 2012 and 
continuing to increase in 2013. FHFA expects the higher volumes to 
continue in 2014 through 2017 for both the overall multifamily mortgage 
market and the small multifamily segment of that market.
    National multifamily mortgage credit needs. Small multifamily 
properties have characteristics that are different from larger 
properties, and as a result small multifamily properties have different 
financing needs. Small multifamily properties are more likely to be 
owned by an individual or small investor and less likely to be managed 
by a third party property management firm.\35\ As a result, small 
multifamily properties are more likely to have informal documentation 
of the property's financial and other operating records.\36\ This can 
make it more difficult for small multifamily property owners to obtain 
financing from some sources. Small multifamily properties are also 
often older than larger properties and tend to be more affordable than 
units in large

[[Page 54497]]

properties.\37\ As a result, small multifamily properties are likely to 
generate less revenue per unit than larger properties.\38\ While these 
factors make small multifamily properties an important source of 
affordable rental housing, they can also make financing more difficult 
to obtain for small multifamily property owners.
---------------------------------------------------------------------------

    \35\ ``Rental Housing Finance Survey,'' Tables 2b, 2c, 2d and 3 
(March 27, 2013), http://portal.hud.gov/hudportal/HUD?src=/press/press_releases_media_advisories/2013/HUDNo.13-035.
    \36\ See Abt Associates, ``An Assessment of the Availability and 
Cost of Financing for Small Multifamily Properties'' (August 2001), 
http://abtassociates.com/reports/01-024.pdf.
    \37\ ``Rental Housing Finance Survey,'' Tables 2b, 2c, and 2d 
(March 27, 2013), http://portal.hud.gov/hudportal/HUD?src=/press/press_releases_media_advisories/2013/HUDNo.13-035.
    \38\ ``Rental Housing Finance Survey,'' Tables 2b, 2c, and 2d 
(March 27, 2013), http://portal.hud.gov/hudportal/HUD?src=/press/press_releases_media_advisories/2013/HUDNo.13-035.
---------------------------------------------------------------------------

    Availability of public subsidies. According to RHFS data, the 
availability of public subsidies for small multifamily properties is 
primarily through Section 8 rental assistance vouchers, although the 
data also shows that small multifamily properties are less likely than 
larger multifamily properties to contain subsidized rental units.\39\ 
As discussed above, this is at least in part due to the fact that 
market rents for small multifamily properties are more likely to be 
affordable to low- and moderate-income families without using rent 
subsidies.
---------------------------------------------------------------------------

    \39\ ``Rental Housing Finance Survey,'' Table 3 (March 27, 
2013), http://portal.hud.gov/hudportal/HUD?src=/press/press_releases_media_advisories/2013/HUDNo.13-035.
---------------------------------------------------------------------------

2. Enterprise Small Multifamily Performance
    The Enterprises have played a significantly smaller role in the 
market for mortgages on small multifamily properties than their role in 
the overall multifamily mortgage market, and small multifamily loans 
were a very small percentage of each Enterprise's multifamily loan 
purchases. Small multifamily properties accounted for less than three 
percent of all units in multifamily properties financed by mortgages 
purchased by Fannie Mae in 2013 and for less than one percent of the 
total units in multifamily properties financed by mortgages Freddie Mac 
purchased.
    Fannie Mae purchased mortgages financing 12,552 low-income units in 
5 to 50 unit multifamily properties in 2010, 13,480 such units in 2011, 
16,801 such units in 2012 and 13,827 such units in 2013. These volumes 
were significantly lower than Fannie Mae's volumes in the years before 
the mortgage crisis. Fannie Mae purchased mortgages financing at least 
40,000 low-income units in small multifamily properties each year 
between 2006 and 2008, peaking at 58,931 such units in 2007. Freddie 
Mac played a much smaller role than Fannie Mae in the small multifamily 
property market, purchasing mortgages financing 365 low-income units in 
small multifamily properties in 2010, 691 such units in 2011, 829 such 
units in 2012, and 1,128 such units in 2013. Table 4 reflects the 
number of low-income units in small multifamily properties financed by 
mortgages purchased by the Enterprises in 2006-2013.

                                Table 4--Enterprise Funding of Low-Income Units in Small Multifamily Properties, 2006-13
                                              [``Small multifamily properties'' are those with 5-50 units]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                    Enterprise
                                                         -----------------------------------------------------------------------------------------------
                                                                            Fannie Mae                                      Freddie Mac
                          Year                           -----------------------------------------------------------------------------------------------
                                                                            Total small                                     Total small
                                                             LI units          units       Low-income %      LI units          units       Low-income %
--------------------------------------------------------------------------------------------------------------------------------------------------------
2013....................................................          13,827          21,764            63.5           1,128           2,375            47.5
2012....................................................          16,801          26,479            63.5             829           2,194            37.8
2011....................................................          13,480          22,382            60.2             691           2,173            31.8
2010....................................................          12,552          20,810            60.3             459           1,978            23.2
2009....................................................          13,466          21,934            61.4             528           1,619            32.6
2008....................................................          43,782          82,706            52.9           1,879           3,391            55.4
2007....................................................          59,015         111,221            53.1           2,147           3,522            61.0
2006....................................................          49,631          60,174            67.5             773           1,467           52.7
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: Funding as reported by the Enterprise for 2013; as calculated by FHFA for 2006-12 ``Low-income'' refers to units affordable to renters with
  incomes no greater than 80 percent of Area Median Income (AMI), based on a rental proxy.
Note: Figures do not include units financed by the purchase of commercial mortgage-backed securities (CMBS).

3. Additional Factors: Ability of the Enterprises To Lead the Market in 
Making Small Multifamily Mortgage Credit Available and Need To Maintain 
Sound Financial Condition of the Enterprises
    In setting the proposed low-income housing subgoal for small 
multifamily properties, FHFA has considered the ability of the 
Enterprises to lead the market in making multifamily mortgage credit 
available (Factor 4). As discussed above, the Enterprises have played a 
smaller role in the market for mortgages on small multifamily 
properties than their role in the overall multifamily mortgage market. 
Both Enterprises currently purchase some mortgages on small multifamily 
properties, though Freddie Mac purchases few such mortgages at this 
time. The new low-income housing subgoal for small multifamily 
properties would encourage the Enterprises to increase their 
participation in the small multifamily mortgage market. FHFA will 
continue to assess the impact of Enterprise participation in the small 
multifamily mortgage market and may adjust the benchmark levels for the 
low-income housing subgoal for small multifamily properties as 
necessary.
    In setting the proposed low-income housing subgoal for small 
multifamily properties, FHFA has also considered the importance of 
maintaining the Enterprises in sound and solvent financial condition 
(Factor 6). The delinquency rates for Fannie Mae's overall multifamily 
loan purchases are very low, and the delinquency rates are also very 
low for the subset of those loans that are on small multifamily 
properties. There is less data available on the performance of small 
multifamily loans held by banks and thrifts, since detailed reporting 
data is not available or is combined with reporting on other income-
producing properties. However, there is no evidence to suggest that 
expanding the Enterprises' support for small multifamily properties 
will affect their financial condition or will negatively impact the 
performance of their loan portfolios as long as

[[Page 54498]]

prudential judgments about such loans continue to be made.
    FHFA continues to monitor the activities of the Enterprises, both 
in FHFA's capacity as safety and soundness regulator and as 
conservator. If necessary, FHFA will make any appropriate changes in 
the low-income housing subgoal for small multifamily properties to 
ensure their continued safety and soundness.

B. Proposed Benchmark Levels for the Low-Income Housing Subgoal for 
Small Multifamily Properties

    Proposed Sec.  1282.13(d) would establish different small 
multifamily subgoal levels for each of the Enterprises, with Fannie Mae 
having higher requirements than Freddie Mac.\40\ The annual subgoal 
proposed for Fannie Mae would be at least 20,000 low-income units for 
2015, at least 25,000 such units for 2016, and at least 30,000 such 
units for 2017. The annual subgoal proposed for Freddie Mac would be at 
least 5,000 low-income units for 2015, at least 10,000 such units for 
2016, and at least 15,000 such units for 2017.
---------------------------------------------------------------------------

    \40\ The proposed rule would also make a number of conforming 
changes throughout part 1282 to reflect the addition of this 
proposed new small multifamily subgoal.
---------------------------------------------------------------------------

    In setting the proposed benchmark levels for the low-income housing 
subgoal for small multifamily properties, FHFA has considered the 
limited role that the Enterprises have played in the past and the 
challenges in financing small multifamily properties. The proposed rule 
would gradually increase the level of activity of the Enterprises in 
this market, allowing FHFA to assess the impacts of increased 
Enterprise purchases of mortgages on small multifamily properties. The 
proposed subgoal levels for Fannie Mae are higher than the proposed 
subgoal levels for Freddie Mac because FHFA recognizes that Freddie 
Mac's entry into the small multifamily market would entail adjustments 
to its staffing, loan programs, and underwriting protocols. However, 
setting gradually increasing subgoal levels would provide an incentive 
for Freddie Mac to develop an effective small multifamily property 
lending program.
    The challenges in providing financing for small multifamily 
properties include a lack of standardization, which can make the credit 
risk of small loans more difficult and time-consuming to assess. The 
lack of standardization can also make the origination process more 
costly and can make it more difficult to include small loans in 
securitizations for sale to investors. While small multifamily 
properties may tend to be more affordable than larger properties, it 
may be relatively less profitable to originate and service small loans. 
Many small multifamily property lenders are banks that have a retail 
presence in communities and originate loans for portfolio without 
securitizing them. The variation among lenders that support small 
multifamily lending also makes sourcing, pooling and securitizing small 
multifamily loans a greater challenge for the Enterprises.\41\
---------------------------------------------------------------------------

    \41\ See Fannie Mae, ``Fannie Mae's Role in the Small 
Multifamily Loan Market'' (First Quarter 2011), https://www.fanniemae.com/content/fact_sheet/wpmfloanmkt.pdf.
---------------------------------------------------------------------------

    The challenges in supporting mortgage lending for small multifamily 
properties are even greater for properties with 24 or fewer units than 
for properties with between 25 and 50 units. While the low-income 
subgoal for small multifamily properties would include all properties 
with 5 to 50 units, FHFA expects that most Enterprise purchases of 
mortgages on small multifamily properties will be on properties between 
25 and 50 units. The 2012 Rental Housing Finance Survey (RHFS) provides 
information on the characteristics of multifamily properties that have 
5 to 24 units and properties that have 25 to 49 units.\42\ Multifamily 
properties that have 25 to 49 units, unlike smaller 5 to 24 unit 
properties, have operating characteristics that are similar to those of 
50+ unit properties. For example, 25 to 49 unit properties and 50+ unit 
properties are more likely to be operated by a third party property 
management firm, have a mortgage, and be newer than 5 to 24 unit 
properties. The Enterprises should be able to provide additional 
liquidity to these larger small multifamily properties (i.e., 25 to 50 
units), in light of the similarities of this property group to larger 
multifamily properties. In fact, data provided by Fannie Mae shows that 
about 73 percent of all small family units it financed in 2013 were in 
25 to 50 unit properties.
---------------------------------------------------------------------------

    \42\ Rental Housing Finance Survey (2012), http://portal.hud.gov/hudportal/HUD?src=/press/press_releases_media_advisories/2013/HUDNo.13-035. Although the RHFS data does not match FHFA's proposed 
definition of small multifamily properties precisely (RHFS uses 5 to 
49 units instead of 5 to 50 units), the difference is not material.
---------------------------------------------------------------------------

    While the new low-income small multifamily subgoal would require 
the Enterprises to increase their activity in the small multifamily 
markets, the proposed subgoal levels are low relative to the size of 
the overall small multifamily market. By proposing relatively low 
subgoal levels initially, FHFA will have an opportunity to assess the 
impact of the new subgoal. In the meantime, FHFA welcomes comments on 
the market impacts that are likely to result if the Enterprises 
increase their purchases of mortgages on small multifamily properties. 
For example, if there is unmet demand for different lending products, 
it is possible that additional support from the Enterprises could 
result in a wider array of long-term, fixed-rate financing options to 
small multifamily property borrowers. Fannie Mae and Freddie Mac might 
be able to offer small multifamily property owners better mortgage 
terms (10-year fixed-rate) and lower financing costs than other sources 
of financing. Owners of small multifamily properties are more likely to 
have an Adjustable Rate Mortgage (ARM) or a balloon mortgage than 
owners of large multifamily properties.\43\ ARMs usually have loan 
terms ranging from 1 to 5 years, with frequent rate adjustments that 
are based on changes to the LIBOR index, while balloon mortgages must 
be paid off after a specific time period, usually five years. Without 
long-term financing, small multifamily property owners may have to 
raise rents or reduce expenses (or defer property maintenance) if 
adjustable interest rates rise. Fixed rate financing also provides 
small multifamily property owners with a predictable monthly mortgage 
payment for a longer loan term. These savings would lock in lower owner 
expenses for a multi-year period and may result in lower and more 
stable rents for low-income tenants. On the other hand, if the current 
market for lending to small multifamily properties is providing 
adequate long-term, fixed rate financing options for small multifamily 
property owners and investors, it is possible that the Enterprises 
would simply be competing on the same terms with existing sources of 
liquidity for small multifamily properties.
---------------------------------------------------------------------------

    \43\ ``Rental Housing Finance Survey,'' Tables 2b, 2c, 2d and 3 
(March 27, 2013), http://portal.hud.gov/hudportal/HUD?src=/press/press_releases_media_advisories/2013/HUDNo.13-035.
---------------------------------------------------------------------------

    FHFA welcomes comment on all aspects of the proposed small 
multifamily subgoals, including the feasibility of the proposed goal 
levels for Fannie Mae and Freddie Mac, as well as on possible impacts 
that may result from increased Enterprise purchases of mortgages on 
small multifamily properties.

VII. Reporting Requirements for Single-Family Rental Units

    Starting in 2015, FHFA plans to require the Enterprises to submit 
more

[[Page 54499]]

detailed information regarding Enterprise purchases of mortgages 
secured by single-family rental properties, whether they are investor-
owned or owner-occupied (with one or more rental units in addition to 
the owner-occupied unit). This reporting would fall within the scope of 
the existing regulation, so no changes to the text of the regulation 
are necessary. A description of FHFA's plans for additional reporting 
is included in this section of the preamble in order to provide an 
opportunity for the public to provide feedback to FHFA.
    Single-family rental units make up a significant percentage of the 
housing stock, especially the affordable housing stock. The housing 
goals in effect since 2010 cover single-family owner-occupied 
properties and multifamily rental properties, but the housing goals do 
not include or track rental units in single-family buildings. Counting 
all single-family rental units would include rental units in owner-
occupied single-family properties and rental units in investor-owned 
single-family rental properties.
    The current housing goals regulation requires the Enterprises to 
report annually to FHFA in their Annual Mortgage Reports (AMRs) on 
their purchases of all mortgages on owner-occupied and rental 
properties, regardless of whether the mortgage may be counted for 
purposes of the housing goals.\44\ The regulation provides that the 
AMRs must include loan-level data on each mortgage purchased, as well 
as aggregations compiled by the Enterprises in a format prescribed by 
FHFA. The AMRs currently submitted to FHFA by the Enterprises include 
tables on various aspects of multifamily rental units financed, 
including the distribution of multifamily units by affordability of 
rent (AMR Table 3), by minority concentration of census tract (AMR 
Table 8), and by state (AMR Table 10B).
---------------------------------------------------------------------------

    \44\ 12 CFR 1282.62(b).
---------------------------------------------------------------------------

    FHFA plans to revise the tables that the Enterprises will be 
required to submit so that the tables include rental units in all 
single-family owner-occupied and investor-owned properties. In this 
way, the AMRs will provide more complete information on the 
Enterprises' financing of all rental units, whether in multifamily or 
in single-family rental properties. The additional information that is 
reflected in the tables will provide insight into the extent to which 
Enterprise purchases are supporting single-family rental properties 
that otherwise meet the criteria for each of the single-family housing 
goals applicable to owner-occupied properties.

VIII. Section-by-Section Analysis of Other Proposed Changes

    The proposed rule would also revise other provisions of the housing 
goals regulation, as discussed below.

A. Changes to Definitions--Proposed Sec.  1282.1

    The proposed rule includes changes to definitions used in the 
current housing goals regulation, including: (1) Definitions related to 
rent and utilities; (2) the definition of ``dwelling unit''; and (3) 
other definitions.
1. Definitions Related to Rent and Utilities
    Definition of ``rent.'' The proposed rule would consolidate and 
simplify several terms that are defined separately in the current rule. 
The proposed rule would delete the separate definitions for ``contract 
rent'' and ``utility allowance,'' and the substance of those 
definitions would be included in a revised definition of ``rent.'' In 
addition, the proposed rule would consolidate all of the current 
provisions related to unoccupied units, including model units and 
rental offices, into a single provision to be located at Sec.  
1282.15(d)(3).
    As proposed, the revised definition of rent would mean the actual 
rent for a dwelling unit, or the average rent by unit size for a 
particular property. It would include the combined rent for all 
bedrooms in the dwelling unit. To ensure comparable measurement of 
affordability, rent would take the cost of utilities into account, 
either by using rents that include utilities, or, if the rents do not 
include utilities, by adding the actual cost of utilities or a utility 
allowance.
    Utility allowances. Under the current rule, FHFA requires the 
Enterprises to take into account the cost of utilities for rental units 
in determining affordability for purposes of the housing goals. The 
current definition of ``rent'' provides that if the contract rent 
includes all utilities, the Enterprises must use the contract rent to 
determine affordability. If the contract rent does not include all 
utilities, the Enterprises may use either: (a) Data on the actual cost 
of utilities paid by the tenant but not included in the contract rent, 
or (b) a ``utility allowance.''
    The proposed rule would expand the sources of information that may 
be used for determining utility allowances. The current definition of 
``utility allowance'' allows the use of either a nationwide average 
utility allowance or the utility allowance established under the U.S. 
Department of Housing and Urban Development (HUD) Section 8 Program for 
the area where the property is located. In addition to using the actual 
cost of utilities, the proposed rule would allow the Enterprises to use 
any of the following options: (a) A nationwide average utility 
allowance provided by FHFA; (b) the utility allowance established under 
the HUD Section 8 Program for the area where the property is located; 
or (c) the utility allowance established by the state or local housing 
finance agency for use in determining the affordability of low-income 
housing tax credit properties for the area where the property is 
located.
    FHFA currently relies on nationwide utility allowances that were 
issued by HUD, the Enterprises' former mission regulator, prior to the 
creation of FHFA in 2008. These averages were based on the American 
Housing Survey (AHS) for 2005, and they also depend on the size of the 
unit and whether it is in a multifamily or single-family property. The 
current averages are as follows:

----------------------------------------------------------------------------------------------------------------
                                                                        Number of bedrooms
                Type of property                 ---------------------------------------------------------------
                                                    Efficiency           1               2           3 or more
----------------------------------------------------------------------------------------------------------------
Multifamily.....................................             $74             $79            $112            $152
Single-family...................................              74             112             158             213
----------------------------------------------------------------------------------------------------------------

    Separate from this rulemaking, FHFA plans to issue updated figures 
for the nationwide average utility allowance option, as more recent AHS 
data becomes available. Because the nationwide average utility 
allowance numbers are not included in the regulation itself, FHFA will 
provide any updated nationwide average utility

[[Page 54500]]

allowances to the Enterprises by letter. These letters will be posted 
on FHFA's Web site.
    Based on the most recent AHS data currently available, the revised 
nationwide average utility allowances would be as follows:

----------------------------------------------------------------------------------------------------------------
                                                                        Number of bedrooms
                Type of property                 ---------------------------------------------------------------
                                                    Efficiency           1               2           3 or more
----------------------------------------------------------------------------------------------------------------
Multifamily.....................................             $62             $93            $131            $177
Single-family...................................              91             125             184             253
----------------------------------------------------------------------------------------------------------------

These numbers may be updated further when new AHS data becomes 
available. Although the nationwide average utility allowance numbers 
are not included in the regulation itself, FHFA welcomes comments on 
the preliminary numbers provided above.
    Definition of ``rental unit.'' The current rule includes separate 
definitions for ``rental housing'' and ``rental unit.'' The definitions 
are substantially the same, so the proposed rule would streamline the 
rule by deleting the term ``rental housing'' in Sec.  1282.1, and by 
replacing ``rental housing'' with ``rental units'' in Sec.  1282.17, 
the only other place that the term ``rental housing'' appears.
    Definition of ``utilities.'' The current rule excludes charges for 
cable and telephone services from the definition of ``utilities.'' The 
proposed rule would revise the existing definition of ``utilities'' to 
expand the list of excluded services. The revised definition would 
exclude all subscription-based television, telephone and internet 
services (regardless of whether provided by a cable provider or other 
provider).
2. Definition of ``Dwelling Unit''--Shared Living Arrangements
    The proposed rule would revise the definition of ``dwelling unit'' 
to include only units with complete plumbing and kitchen facilities. 
The revised definition is intended to address shared living 
arrangements, where separate individuals rent separate bedrooms but 
share common areas and cooking and sanitary facilities. In those 
circumstances, all bedrooms sharing the same plumbing and kitchen 
facilities would be treated as a single dwelling unit. For example, 
four individuals living in a shared living arrangement with separate 
bedrooms but with shared bathrooms and kitchen would be considered a 
single dwelling unit with four bedrooms rather than four efficiency 
units. For purposes of determining affordability under the housing 
goals, the rent for the dwelling unit would be the aggregate of all 
rent payments made by all of the individuals residing in the dwelling 
unit, even if each individual who resides in a bedroom has entered into 
a separate lease agreement or if the bedrooms have separate locks.
    This change is intended to clarify the appropriate calculation of 
rent for dwelling units in student housing and seniors housing that 
involve group living or shared living arrangements in a single dwelling 
unit.
3. Additional Definition Changes
    This proposed rule would remove two definitions that are not used 
anywhere in the current rule, other than the definitions themselves: 
``HMDA'' and ``working day.''
    The proposed rule would also revise the definition of ``families in 
low-income areas'' to remove the reference to ``block numbering 
areas.'' This change would conform the words used in the definition to 
the terminology currently used by the U.S. Census Bureau. The proposed 
rule would also revise the existing definition of ``HOEPA mortgage'' to 
reflect renumbering in the statute cited in the definition.
    Other definitional changes in Sec.  1282.1 are discussed below in 
the corresponding section dealing with the substantive provisions to 
which the definitions relate. These changes include: (i) Deleting the 
definitions of ``mortgage with unacceptable terms or conditions'' and 
``rental housing''; and (ii) adding new definitions for ``efficiency,'' 
``seniors housing unit,'' ``skilled nursing unit,'' and ``small 
multifamily property.''

B. Determining Affordability--Proposed Sec.  1282.15

    The proposed revisions discussed below would amend the existing 
rule by revising the process for determining affordability. Some 
provisions are being revised or eliminated because they are no longer 
necessary based on the affordability information that is available to 
the Enterprises. Other provisions are being amended or added to provide 
greater clarity and to minimize cases where a unit may be treated as 
affordable when it actually is not.
1. Use of Median Incomes
    The proposed rule would revise Sec.  1282.15(b)(1) to provide that 
affordability would be determined based on the area median income as of 
the date the mortgage loan originated, rather than the date of the 
mortgage application. The data that is reported to the Enterprises 
typically includes an origination date, and this date is used by the 
Enterprises for purposes of determining affordability. This change 
would conform the regulatory language to the existing practice of the 
Enterprises.
2. No Estimation of Affordability for Single-Family Owner-Occupied 
Units
    Currently, the housing goals rule allows the Enterprises to 
estimate the affordability of single-family owner-occupied properties 
where the borrower income is not available. The proposed rule would 
revise Sec.  1282.15(b) by removing the affordability estimation 
provisions in paragraphs (b)(2) and (b)(3) and by providing that 
mortgages where the borrower's income is not available would not be 
counted in the numerator for any of the housing goals. Mortgages where 
the borrower's income is not available would still be included in the 
denominator. This treatment of mortgages with missing borrower income 
would be similar to the treatment of HOEPA loans under Sec.  
1282.16(d).
3. Multifamily Affordability Based on Rents, Not Incomes
    The proposed rule would revise Sec.  1282.15(d), including removing 
paragraph (d)(1), to provide that affordability for rental housing will 
be determined based solely on rents. The current rule provides that 
affordability for rental housing is to be determined based on the 
tenant's income, if available, and based on rents if the tenant's 
income is not available. Because lenders generally do not collect 
income information on tenants, the Enterprises use rents in all cases 
(except seniors housing units) to determine affordability for purposes 
of the housing goals. Therefore, this change would conform the rule to 
the Enterprises'

[[Page 54501]]

actual practices and would recognize the general unavailability of 
tenant income data. The proposed revision also would more closely align 
the rule language with section 1333(c) of the Safety and Soundness Act, 
which provides that FHFA shall evaluate the performance of the 
Enterprises under the multifamily housing goals ``based on whether the 
rent levels are affordable.''
4. Reduced Cap on Estimating Affordability for Multifamily Properties
    The proposed rule would also revise Sec.  1282.15(e)(3) to reduce 
the number of multifamily units for which the Enterprise is permitted 
to estimate the rental amount. An Enterprise is permitted to use 
estimated rent for purposes of determining affordability, but only in 
the case of missing data or information. Currently, Sec.  1282.15 
permits an Enterprise to estimate affordability for up to 10 percent of 
its multifamily units in a given year. The proposed rule would reduce 
this cap to 5 percent.
    Missing data rates for multifamily mortgages purchased by the 
Enterprises are generally very low, given the Enterprises' requirements 
for submission of underwriting and property level information from its 
lenders as of the date of mortgage acquisition. However, estimating 
rent affordability will continue to be necessary for seniors housing 
where expenses for resident services are included in the rent. Seniors 
housing units with such additional services are currently excluded from 
the cap on estimating affordability because of the difficulty 
separating out housing and non-housing related expenses. The proposed 
rule would no longer exclude seniors housing from the cap on estimating 
affordability. Although estimation will continue to be required to 
determine affordability for seniors housing with additional services, 
the volumes of such purchases by the Enterprises are relatively small, 
such that estimation would continue to be possible for the Enterprises 
even with a 5 percent cap.
5. Reliance on Subsidy Program Requirements for Determining 
Affordability of Rents
    FHFA is also proposing a new counting rule for rental housing where 
affordability of the rents can be determined based on affordability 
restrictions imposed by local, state or federal affordable housing 
subsidy program requirements. Proposed Sec.  1282.15(d)(2) would permit 
an Enterprise to determine affordability of the units based on the 
maximum permitted income level for a tenant or a prospective tenant or 
the maximum permitted rent in the units that are subject to an 
affordability restriction under any local, state or federal program. In 
this way, the Enterprises would be permitted to automatically receive 
goals credit for any units they finance that are deemed to be 
affordable by the applicable subsidy program. An example of an 
applicable subsidy program includes low-income housing tax credit 
units, with units restricted for occupancy by tenants at 50 percent of 
area median income receiving credit toward the very low-income 
multifamily housing subgoal and units restricted at 60 percent of area 
median income receiving credit toward the low-income multifamily 
housing goal. The Enterprises would also be required to show that the 
tax credit or other monitoring agency that exercises regulatory 
oversight has determined that the units are in compliance with the 
affordability restrictions.
6. Missing Bedroom Data
    The proposed rule would revise Sec.  1282.15(e)(1) to provide that 
rental units for which bedroom data are missing shall be considered 
efficiencies for the purposes of calculating unit affordability. 
Proposed Sec.  1282.1 would add a definition of ``efficiency'' to mean 
a dwelling unit having no separate bedrooms, or 0 bedrooms. Determining 
affordability of a rental unit requires adjustments to household size 
based on the number of bedrooms in a unit. However, this adjustment is 
not possible when bedroom data is unavailable. The proposed rule seeks 
to balance the effect of missing bedroom data with proper 
administration of the regulation by recognizing that the Enterprise in 
fact purchased the mortgage secured by the rental unit but only giving 
credit if it qualifies for the lowest-rent unit permitted to receive 
goals credit under the rule.
7. Changes To Reflect U.S. Census Bureau Terminology
    Section 1282.15(g)(2) would be revised to eliminate outdated 
terminology. Due to changes implemented by the U.S. Census Bureau, it 
is no longer necessary to include references to the ``block-group 
enumeration district'' or the ``nine-digit zip code,'' or to include 
the option to use other geographic divisions to address ``split 
areas.''

C. Skilled Nursing Units--Proposed Sec.  1282.16(b)(15)

    Proposed Sec.  1282.16(b)(15) would codify the existing treatment 
of skilled nursing units, which is to exclude them from counting for 
purposes of the housing goals. ``Skilled nursing units'' would be 
defined as units in multifamily properties that are licensed to provide 
medical services to seniors. Skilled nursing units differ substantially 
from other types of housing units in that they are intended to be used 
for medical purposes, and housing is incidental to those purposes.

D. Determining Affordability for Blanket Loans on Cooperative Housing--
Proposed Sec.  1282.16(c)(5)

    As discussed elsewhere, the proposed rule would revise Sec.  
1282.15(d) to require the Enterprises to use rent levels to determine 
the affordability of rental units. In the case of blanket loans on 
housing cooperatives (i.e., a loan that is secured by the entire 
property), there are no rent data available because all units are owned 
by the cooperative in which each unit resident owns shares. Owning 
shares allows the holder to occupy one or more units in the property. 
Shareholders pay a monthly fee to cover expenses for common area upkeep 
and maintenance and to pay their pro rata share of any blanket loan 
payments. In 2013, blanket loans on cooperative housing accounted for 
2.7 percent and 1.4 percent of multifamily mortgages purchased by 
Fannie Mae and Freddie Mac, respectively.
    Historically, the Enterprises have used an estimated rent 
methodology (or ``rent proxy'') to determine the percentage of low- and 
very low-income eligible units in cooperative properties without rent 
information.\45\ This estimate permitted the Enterprises to use the 
percentage of low- and very low-income affordable rental units (by unit 
size) located in the census tract where the cooperative property is 
located. For example, if a cooperative property is in a census tract 
where properties average a certain percentage of low- and very low-
income units, then the cooperative property would be assumed to have 
the same percentage of low- and very low-income units.
---------------------------------------------------------------------------

    \45\ 12 CFR 1282.15(e).
---------------------------------------------------------------------------

    In some geographic areas, particularly in some parts of New York 
City, the rent estimation methodology may significantly overstate the 
number of low- and very low-income units eligible for goals credit in a 
specific cooperative property. This is because some census tracts in 
these geographic areas have great variations in unit rents, resulting 
from the large number of subsidized, rent controlled, and rent 
stabilized units that are in close proximity to luxury market rate 
housing.

[[Page 54502]]

    Due to these concerns, proposed Sec.  1282.16(c)(5) would provide 
that the affordability of units securing a blanket loan on a 
cooperative property be determined solely on the basis of comparable 
market rents that were used by the lender in underwriting the blanket 
loan. If the underwriting rents are not available for the blanket loan 
on a cooperative property, the units may not be counted toward 
achievement of the multifamily housing goals.
    Share loans used by residents to finance the purchase of a 
cooperative unit would remain eligible for credit under the single-
family housing goals, even if the Enterprise also holds a blanket loan 
on the same cooperative property that may be eligible for multifamily 
housing goals credit.

E. Seniors Housing--Proposed Sec.  1282.16(c)(15)

    The proposed rule would codify the existing treatment of seniors 
housing under the housing goals rule. Proposed Sec.  1282.1 would 
define a ``seniors housing unit'' as a dwelling unit in a multifamily 
property in which occupancy is restricted to households with at least 
one individual age 55 or above. In 2013, mortgages backed by seniors 
housing units accounted for 2.6 percent and 2.2 percent of multifamily 
mortgages purchased by Fannie Mae and Freddie Mac, respectively.
    The proposed rule would not permit seniors housing units with large 
up-front fees to be counted for purposes of the multifamily housing 
goals. Currently, seniors housing units are counted for purposes of the 
housing goals, provided that the units meet the requirements that apply 
generally for multifamily housing. However, some seniors housing units 
require that prospective residents pay a large up-front fee as a 
condition of occupancy in addition to the monthly rent. Such up-front 
fees are a form of prepaid rent and can amount to tens or even hundreds 
of thousands of dollars. The proposed rule would exclude such units 
from the housing goals because the existence of the large up-front fees 
makes it difficult to assess affordability, and because in most 
instances the large up-front fees mean that the units would not be 
affordable to low-income or very low-income families anyway.
    For purposes of determining affordability, the proposed rule would 
differentiate between seniors housing units based on whether additional 
services are included in the monthly rent paid by the tenant. Seniors 
housing units with no additional services would be treated as ordinary 
multifamily units with affordability determined based on the unit rent. 
Seniors housing units for which additional services are included in the 
monthly rent would be treated as units with missing data, allowing the 
Enterprises to estimate unit affordability using the rent proxy method.

F. Mortgages With Unacceptable Terms or Conditions--Proposed Sec.  
1282.16(d)

    The proposed rule would amend the housing goals provision in Sec.  
1282.16(d) that prohibits the Enterprises from receiving housing goals 
credit for purchases of certain types of mortgages. The proposed rule 
would eliminate the reference to ``mortgages with unacceptable terms or 
conditions'' in Sec.  1282.16(d), and it would also remove the 
definition of ``mortgage with unacceptable terms or conditions'' in 
Sec.  1282.1. The proposed rule would maintain the current prohibition 
on receiving housing goals credit for purchases of HOEPA mortgages.
    The current rule defines ``mortgages with unacceptable terms or 
conditions'' to include single-family mortgages with excessive interest 
rates or costs, mortgages with certain prepayment penalties, and 
mortgages with prepaid credit life insurance. ``Mortgages with 
unacceptable terms or conditions'' also currently include mortgages 
with terms contrary to banking regulator guidance on nontraditional and 
subprime lending and mortgages originated using practices that do not 
comply with fair lending requirements.
    FHFA is proposing to eliminate the provisions related to 
``mortgages with unacceptable terms or conditions'' in order to reflect 
the regulatory changes in effect as a result of the Dodd-Frank Wall 
Street Reform and Consumer Protection Act. The Dodd-Frank Act seeks to 
promote responsible lending practices by, for example, prohibiting no 
documentation lending and single-premium credit insurance financing. In 
addition, the law defines a class of mortgages as ``Qualified 
Mortgages'' that restrict certain mortgage terms. FHFA has required the 
Enterprises to limit purchases to those that meet Qualified Mortgage 
product characteristics. As a result of this FHFA requirement and the 
Enterprises' own mortgage purchase eligibility criteria, the 
Enterprises purchase virtually no mortgages that would have been 
considered ``mortgages with unacceptable terms and conditions'' under 
the current housing goals.
    In addition, the housing goals are not the most effective 
regulatory tool available for FHFA to discourage purchases of predatory 
or otherwise unsuitable mortgages. FHFA has regulatory authority to 
directly prohibit purchases of any types of mortgages it determines are 
unsuitable. To the extent FHFA identifies any types of mortgages that 
meet Qualified Mortgage product criteria yet are not suitable for the 
Enterprises or for borrowers, FHFA may restrict Enterprise purchases of 
such mortgages in the future.

G. Housing Goals Guidance--Proposed Sec.  1282.16(e)

    Section 1282.16(e) of the current rule provides that FHFA may from 
time to time issue determinations regarding the appropriate treatment 
of particular transactions or classes of transactions under the housing 
goals. The proposed rule would renumber this paragraph as Sec.  
1282.16(d) and would add a new provision requiring FHFA to make any 
determinations issued under the paragraph available to the public on 
FHFA's Web site, www.fhfa.gov.
    This change is intended to ensure that both Enterprises and any 
other interested parties are aware of any guidance that FHFA provides 
to either Enterprise regarding the appropriate housing goals treatment 
of any transactions in which they may engage, whether or not those 
transactions are covered in the housing goals regulation. FHFA and its 
predecessor agency, HUD, from time to time have issued guidance on 
particular issues. This proposed rule would incorporate a number of 
those past determinations, such as the appropriate treatment of seniors 
housing units or skilled nursing units, into the text of the 
regulation. To promote clear and consistent treatment of all 
transactions engaged in by either Enterprise, FHFA will make any other 
guidance that is issued available on FHFA's Web site.

IX. Comments Requested on Specific Topics

    As noted above, FHFA encourages commenters to address all aspects 
of the proposed rule, including the proposed benchmark levels for each 
of the housing goals, the possible changes to the retrospective market 
approach, and the other changes described in this preamble and rule. In 
addition, FHFA requests comments on the specific topics described in 
this section.

A. Blanket Loans on Manufactured Housing Parks

    A blanket loan on a manufactured housing park is a loan secured by 
land that has been developed for the placement of manufactured homes. 
Fannie Mae currently purchases blanket loans on manufactured housing 
parks, and Freddie Mac has also recently announced a loan program to do 
so.

[[Page 54503]]

However, blanket loans on manufactured housing parks are currently 
excluded from the housing goals. This treatment is different from the 
treatment of blanket loans on cooperative buildings and condominium 
projects, purchases of which are treated as mortgage purchases for 
purposes of the multifamily housing goals.
    The proposed rule would not change the current treatment of blanket 
loans on manufactured housing parks under the housing goals. However, 
FHFA is requesting comment on whether this policy should be changed. 
FHFA may make a determination in the final rule on whether or not to 
allow blanket loans on manufactured housing parks to be counted for 
purposes of the multifamily housing goals. Alternatively, FHFA may 
instead defer consideration of the appropriate treatment of blanket 
loans on manufactured housing parks under the housing goals and instead 
address it as part of the separate, upcoming proposed rulemaking on the 
duty to serve underserved markets under section 1335 of the Safety and 
Soundness Act.\46\
---------------------------------------------------------------------------

    \46\ 12 U.S.C. 4565.
---------------------------------------------------------------------------

    Allowing blanket loans on manufactured housing parks to be counted 
for purposes of the multifamily housing goals could encourage 
additional support for a form of housing that is particularly important 
for low-income and very low-income families. In addition, many parks 
are in rural areas where real estate loans are difficult to obtain or 
have unfavorable interest rates and terms. Additional Enterprise 
purchases of blanket loans on manufactured housing parks may increase 
access to fixed rate, long term financing at a relatively low interest 
rate.
    If FHFA determines to include such loans, FHFA invites comments on 
whether goals eligibility for manufactured housing parks should be 
considered only for parks that are cooperatively owned by their 
residents, or if goals eligibility should also include investor-owned 
rental parks. Many investor-owned parks do not provide resident 
protections against steep rent increases, lease cancellations, or 
redevelopment of the property for other uses. It is more difficult and 
costly for a manufactured housing park resident to move than a resident 
of a typical ``brick and mortar'' rental property. However, it is 
possible that increased Enterprise activity in this area could result 
in more favorable loan terms for park owners, which could in turn 
reduce the need for owners to raise rents. Residents could also benefit 
from additional eligibility standards for manufactured housing parks 
that, for example, Fannie Mae currently imposes.
    If FHFA allows blanket loans on manufactured housing parks to be 
counted for purposes of the housing goals under the final rule, FHFA 
would consider defining ``manufactured housing park'' as ``a tract of 
land under unified ownership developed for the purpose of providing 
individual rental spaces for the placement of manufactured homes within 
its boundaries.'' FHFA would also consider limiting housing goals 
credit to occupied units located in the park, rather than the total 
number of rental spaces available. FHFA also requests comment on how to 
determine whether units are affordable or not, particularly if rents 
are not available or do not include the full cost of housing for 
residents.
    Finally, if FHFA allows blanket loans on manufactured housing parks 
to be counted for purposes of the housing goals, the proposed goal 
levels would be relatively easier for the Enterprises to achieve. For 
example, between 2011 and 2013, Fannie Mae's annual volume of purchases 
of blanket loans on manufactured housing parks ranged from $500 million 
to $1 billion.\47\ While those volumes are small relative to Fannie 
Mae's overall multifamily purchases, they are large enough that 
counting blanket loans on manufactured housing parks could increase to 
the measured performance of Fannie Mae on the multifamily housing 
goals. As a result, FHFA encourages commenters to address whether the 
proposed levels of the multifamily housing goals should be increased to 
reflect the expanded scope of the goals if FHFA allows blanket loans on 
manufactured housing parks to be counted.
---------------------------------------------------------------------------

    \47\ Fannie Mae, Fact Sheet, ``Fannie Mae Multifamily Mortgage 
Business Information'' (May 2014), https://www.fanniemae.com/content/fact_sheet/multifamily-business-information-may-2014.pdf.
---------------------------------------------------------------------------

B. Measurement of the Market

    FHFA's measurement of the single-family mortgage market, which is 
used to set the benchmark levels and determine the retrospective market 
share for the single-family housing goals, is intended to reflect the 
portion of the overall single-family market that is eligible for 
purchase by the Enterprises. However, in defining the measurement of 
the market, FHFA currently excludes mortgages with ``rate spreads of 
150 basis points or more above the applicable average prime offer rate 
as reported in the Home Mortgage Disclosure Act data.'' \48\ Some 
mortgages purchased by the Enterprises may have rate spreads that 
exceed 150 basis points above the average prime offer rate while still 
meeting the Enterprises' established underwriting criteria (which 
exclude HOEPA loans) and the limitation on purchasing loans that do not 
meet the Qualified Mortgage product characteristics. FHFA requests 
comment on whether mortgages with rate spreads that exceed 150 basis 
points above the average prime offer rate should continue to be 
excluded from FHFA's measurement of the market. FHFA encourages 
commenters to also address whether the current cut-off of 150 basis 
points above the applicable average prime offer rate should be 
maintained, or whether a higher rate spread threshold should be 
established.
---------------------------------------------------------------------------

    \48\ 12 CFR 1282.12(b)(5).
---------------------------------------------------------------------------

X. Paperwork Reduction Act

    The proposed rule would not contain any information collection 
requirement that would require the approval of the Office of Management 
and Budget (OMB) under the Paperwork Reduction Act (44 U.S.C. 3501 et 
seq.). Therefore, FHFA has not submitted any information to OMB for 
review.

XI. 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 entities because the regulation applies to Fannie Mae 
and Freddie Mac, which are not small entities for purposes of the 
Regulatory Flexibility Act.

List of Subjects in 12 CFR Part 1282

    Mortgages, Reporting and recordkeeping requirements.

Authority and Issuance

    For the reasons stated in the SUPPLEMENTARY INFORMATION, under the 
authority of 12 U.S.C. 4511, 4513 and

[[Page 54504]]

4526, FHFA proposes to amend part 1282 of Title 12 of the Code of 
Federal Regulations as follows:

CHAPTER XII--FEDERAL HOUSING FINANCE AGENCY

Subchapter E--Housing Goals and Mission

PART 1282--ENTERPRISE HOUSING GOALS AND MISSION

0
1. The authority citation for part 1282 continues to read as follows:

    Authority: 12 U.S.C. 4501, 4502, 4511, 4513, 4526, 4561-4566.

0
2. Amend Sec.  1282.1 as follows:
0
a. Remove the definitions of ``Contract rent,'' ``HMDA,'' ``Mortgage 
with unacceptable terms or conditions,'' ``Rental housing,'' ``Utility 
allowance,'' and ``Working day'';
0
b. Revise the definitions of ``Dwelling unit,'' ``Families in low-
income areas,'' ``HOEPA mortgage,'' ``Rent,'' and ``Utilities''; and
0
c. Add definitions for ``Efficiency,'' ``Seniors housing unit,'' 
``Skilled nursing unit,'' and ``Small multifamily property'' in 
alphabetical order.
    The revisions and additions read as follows:


Sec.  1282.1  Definitions.

* * * * *
    Dwelling unit means a room or unified combination of rooms with 
complete plumbing and kitchen facilities 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 property, multifamily property, or other 
residential or mixed-use property.
    Efficiency means a dwelling unit having no separate bedrooms, or 0 
bedrooms.
* * * * *
    Families in low-income areas means:
    (i) Any family that resides in a census tract in which the median 
income does not exceed 80 percent of the area median income;
    (ii) Any family with an income that does not exceed area median 
income that resides in a minority census tract; and
    (iii) Any family with an income that does not exceed area median 
income that resides in a designated disaster area.
* * * * *
    HOEPA mortgage means a mortgage covered by section 103(bb) of the 
Home Ownership and Equity Protection Act (HOEPA) (15 U.S.C. 1602(bb)), 
as implemented by the Bureau of Consumer Financial Protection.
* * * * *
    Rent means the actual rent or average rent by unit size for a 
dwelling unit.
    (i) Rent is determined based on the total combined rent for all 
bedrooms in the dwelling unit, including fees or charges for management 
and maintenance services and any utility charges that are included.
    (A) Rent concessions shall not be considered, i.e., the contract 
rent is not decreased by any rent concessions.
    (B) Rent is net of rental subsidies, i.e., the contract rent is 
decreased by any rental subsidy.
    (ii) When the contract rent does not include all utilities, the 
rent shall also include:
    (A) The actual cost of utilities not included in the contract rent;
    (B) The nationwide average utility allowance, as issued 
periodically by FHFA;
    (C) The utility allowance established under the HUD Section 8 
Program (42 U.S.C. 1437f) for the area where the property is located; 
or
    (D) The utility allowance for the area in which the unit is 
located, as established by the state or local housing finance agency 
for determining the affordability of low-income housing tax credit 
properties under section 42 of the Internal Revenue Code (26 U.S.C. 
42).
* * * * *
    Seniors housing unit means a dwelling unit in multifamily housing 
where the property is restricted to occupancy by households with 
individuals who are age 55 and over.
* * * * *
    Skilled nursing unit means a unit in a multifamily property that is 
dedicated to providing licensed medical care services to individuals 
who are age 55 and over.
    Small multifamily property means any multifamily property with at 
least 5 dwelling units but no more than 50 dwelling units.
    Utilities means charges for electricity, piped or bottled gas, 
water, sewage disposal, fuel (oil, coal, kerosene, wood, solar energy, 
or other), and garbage and trash collection. Utilities do not include 
charges for subscription-based television, telephone or internet 
service.
* * * * *
0
3. Amend Sec.  1282.11 by revising paragraph (a)(1) to read as follows:


Sec.  1282.11  General.

    (a) * * *
    (1) Three single-family owner-occupied purchase money mortgage 
housing goals, a single-family owner-occupied purchase money mortgage 
housing subgoal, a single-family refinancing mortgage housing goal, a 
multifamily special affordable housing goal and two multifamily special 
affordable housing subgoals;
* * * * *
0
4. Revise Sec.  1282.12 to read as follows:

Alternative 1--Sec.  1282.12


Sec.  1282.12  Single-family housing goals.

    (a) Single-family housing goals. An Enterprise shall be in 
compliance with a single-family housing goal if its performance under 
the housing goal meets or exceeds either:
    (1) The share of the market that qualifies for the goal; or
    (2) The benchmark level for the goal.
    (b) Size of market. The size of the market for each goal shall be 
established annually by FHFA 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 shall be determined based on 
the following criteria:
    (1) Only owner-occupied, conventional loans shall be considered;
    (2) Purchase money mortgages and refinancing mortgages shall only 
be counted for the applicable 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 150 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. The percentage share of each 
Enterprise's total purchases of purchase money mortgages on owner-
occupied single-family housing that consists of mortgages for low-
income families shall meet or exceed either:
    (1) The share of such mortgages in the market as defined in 
paragraph (b) of this section in each year; or
    (2) The benchmark level, which for 2015, 2016 and 2017 shall be 23 
percent of the total number of purchase money mortgages purchased by 
that Enterprise in each year that finance owner-occupied single-family 
properties.
    (d) Very low-income families housing goal. The percentage share of 
each Enterprise's total purchases of purchase money mortgages on owner-
occupied single-family housing that consists of

[[Page 54505]]

mortgages for very low-income families shall meet or exceed either:
    (1) The share of such mortgages in the market as defined in 
paragraph (b) of this section in each year; or
    (2) The benchmark level, which for 2015, 2016 and 2017 shall be 7 
percent of the total number of purchase money mortgages purchased by 
that Enterprise in each year that finance owner-occupied single-family 
properties.
    (e) Low-income areas housing goal. The percentage share of each 
Enterprise's total purchases of purchase money mortgages on owner-
occupied single-family housing that consists of mortgages for families 
in low-income areas shall meet or exceed either:
    (1) The share of such mortgages in the market as defined in 
paragraph (b) of this section in each year; or
    (2) A benchmark level which shall be set annually by FHFA notice 
based on the benchmark level for the low-income areas housing subgoal, 
plus an adjustment factor reflecting the additional incremental share 
of mortgages for moderate-income families in designated disaster areas 
in the most recent year for which such data is available.
    (f) Low-income areas housing subgoal. The percentage share of each 
Enterprise's total purchases of purchase money mortgages on owner-
occupied single-family housing that consists of mortgages for families 
in low-income census tracts or for moderate-income families in minority 
census tracts shall meet or exceed either:
    (1) The share of such mortgages in the market as defined in 
paragraph (b) of this section in each year; or
    (2) The benchmark level, which for 2015, 2016 and 2017 shall be 14 
percent of the total number of purchase money mortgages purchased by 
that Enterprise in each year that finance owner-occupied single-family 
properties.
    (g) Refinancing housing goal. The percentage share of each 
Enterprise's total purchases of refinancing mortgages on owner-occupied 
single-family housing that consists of refinancing mortgages for low-
income families shall meet or exceed either:
    (1) The share of such mortgages in the market as defined in 
paragraph (b) of this section in each year; or
    (2) The benchmark level, which for 2015, 2016 and 2017 shall be 27 
percent of the total number of refinancing mortgages purchased by that 
Enterprise in each year that finance owner-occupied single-family 
properties.

Alternative 2--Sec.  1282.12


Sec.  1282.12  Single-family housing goals.

    (a) Single-family housing goals. An Enterprise shall be in 
compliance with a single-family housing goal if its performance under 
the housing goal meets or exceeds the benchmark level for the goal.
    (b) Low-income families housing goal. For 2015, 2016 and 2017, the 
benchmark level for each Enterprise's purchases of purchase money 
mortgages on owner-occupied single-family housing that consist of 
mortgages for low-income families shall be 23 percent of the total 
number of purchase money mortgages purchased by that Enterprise in each 
year that finance owner-occupied single-family properties.
    (c) Very low-income families housing goal. For 2015, 2016 and 2017, 
the benchmark level for each Enterprise's purchases of purchase money 
mortgages on owner-occupied single-family housing that consist of 
mortgages for very low-income families shall be 7 percent of the total 
number of purchase money mortgages purchased by that Enterprise in each 
year that finance owner-occupied single-family properties.
    (d) Low-income areas housing goal. For 2015, 2016 and 2017, the 
benchmark level for each Enterprise's purchases of purchase money 
mortgages on owner-occupied single-family housing that consist of 
mortgages for families in low-income areas shall be set annually by 
FHFA notice based on the benchmark level for the low-income areas 
housing subgoal, plus an adjustment factor reflecting the additional 
incremental share of mortgages for moderate-income families in 
designated disaster areas in the most recent year for which such data 
is available.
    (e) Low-income areas housing subgoal. For 2015, 2016 and 2017, the 
benchmark level for each Enterprise's purchases of purchase money 
mortgages on owner-occupied single-family housing that consist of 
mortgages for families in low-income census tracts or for moderate-
income families in minority census tracts shall be 14 percent of the 
total number of purchase money mortgages purchased by that Enterprise 
in each year that finance owner-occupied single-family properties.
    (f) Refinancing housing goal. For 2015, 2016 and 2017, the 
benchmark level for each Enterprise's purchases of refinancing 
mortgages on owner-occupied single-family housing that consist of 
refinancing mortgages for low-income families shall be 27 percent of 
the total number of refinancing mortgages purchased by that Enterprise 
in each year that finance owner-occupied single-family properties.

Alternative 3--Sec.  1282.12


Sec.  1282.12  Single-family housing goals.

    (a) Single-family housing goals. An Enterprise shall be in 
compliance with a single-family housing goal if its performance under 
the housing goal meets or exceeds the share of the market that 
qualifies for the goal.
    (b) Size of market. The size of the market for each goal shall be 
established annually by FHFA 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 shall be determined based on 
the following criteria:
    (1) Only owner-occupied, conventional loans shall be considered;
    (2) Purchase money mortgages and refinancing mortgages shall only 
be counted for the applicable 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 150 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. Each year, the percentage 
share of each Enterprise's total purchases of purchase money 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) Very low-income families housing goal. Each year, the 
percentage share of each Enterprise's total purchases of purchase money 
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.
    (e) Low-income areas housing goal. Each year, the percentage share 
of each Enterprise's total purchases of purchase money mortgages on 
owner-occupied single-family housing that consists of

[[Page 54506]]

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.
    (f) Low-income areas housing subgoal. Each year, the percentage 
share of each Enterprise's total purchases of purchase money mortgages 
on owner-occupied single-family housing that consists of mortgages for 
families in low-income census tracts or for moderate-income families in 
minority census tracts shall meet or exceed the share of such mortgages 
in the market as defined in paragraph (b) of this section.
    (g) Refinancing housing goal. Each year, the percentage share of 
each Enterprise's total purchases of refinancing 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.
0
5. Revise Sec.  1282.13 to read as follows:


Sec.  1282.13  Multifamily special affordable housing goal and 
subgoals.

    (a) Multifamily housing goal and subgoals. An Enterprise shall be 
in compliance with a multifamily housing goal or subgoal if its 
performance under the housing goal or subgoal meets or exceeds the 
benchmark level for the goal or subgoal, respectively.
    (b) Multifamily low-income housing goal. (1) For the year 2015, the 
benchmark level for each Enterprise's purchases of mortgages on 
multifamily residential housing affordable to low-income families shall 
be, for Fannie Mae, at least 250,000 dwelling units affordable to low-
income families in multifamily residential housing financed by 
mortgages purchased by Fannie Mae, and for Freddie Mac, at least 
210,000 such dwelling units.
    (2) For the year 2016, the benchmark level for each Enterprise's 
purchases of mortgages on multifamily residential housing affordable to 
low-income families shall be, for Fannie Mae, at least 250,000 dwelling 
units affordable to low-income families in multifamily residential 
housing financed by mortgages purchased by Fannie Mae, and for Freddie 
Mac, at least 220,000 such dwelling units.
    (3) For the year 2017, the benchmark level for each Enterprise's 
purchases of mortgages on multifamily residential housing affordable to 
low-income families shall be, for Fannie Mae, at least 250,000 dwelling 
units affordable to low-income families in multifamily residential 
housing financed by mortgages purchased by Fannie Mae, and for Freddie 
Mac, at least 230,000 such dwelling units.
    (c) Multifamily very low-income housing subgoal. (1) For the year 
2015, the benchmark level for each Enterprise's purchases of mortgages 
on multifamily residential housing affordable to very low-income 
families shall be, for Fannie Mae, at least 60,000 dwelling units 
affordable to very low-income families in multifamily residential 
housing financed by mortgages purchased by Fannie Mae, and for Freddie 
Mac, at least 43,000 such dwelling units.
    (2) For the year 2016, the benchmark level for each Enterprise's 
purchases of mortgages on multifamily residential housing affordable to 
very low-income families shall be, for Fannie Mae, at least 60,000 
dwelling units affordable to very low-income families in multifamily 
residential housing financed by mortgages purchased by Fannie Mae, and 
for Freddie Mac, at least 46,000 such dwelling units.
    (3) For the year 2017, the benchmark level for each Enterprise's 
purchases of mortgages on multifamily residential housing affordable to 
very low-income families shall be, for Fannie Mae, at least 60,000 
dwelling units affordable to very low-income families in multifamily 
residential housing financed by mortgages purchased by Fannie Mae, and 
for Freddie Mac, at least 50,000 such dwelling units.
    (d) Small multifamily low-income housing subgoal. (1) For the year 
2015, the benchmark level for each Enterprise's purchases of mortgages 
on small multifamily properties affordable to low-income families shall 
be, for Fannie Mae, at least 20,000 dwelling units affordable to low-
income families in small multifamily properties financed by mortgages 
purchased by Fannie Mae, and for Freddie Mac, at least 5,000 such 
dwelling units.
    (2) For the year 2016, the benchmark level for each Enterprise's 
purchases of mortgages on small multifamily properties affordable to 
low-income families shall be, for Fannie Mae, at least 25,000 dwelling 
units affordable to low-income families in small multifamily properties 
financed by mortgages purchased by Fannie Mae, and for Freddie Mac, at 
least 10,000 such dwelling units.
    (3) For the year 2017, the benchmark level for each Enterprise's 
purchases of mortgages on small multifamily properties affordable to 
low-income families shall be, for Fannie Mae, at least 30,000 dwelling 
units affordable to low-income families in small multifamily properties 
financed by mortgages purchased by Fannie Mae, and for Freddie Mac, at 
least 15,000 such dwelling units.
0
6. Amend Sec.  1282.15 by revising paragraphs (b), (c), (d), (e) and 
(g)(2), to read as follows:


Sec.  1282.15  General counting requirements.

* * * * *
    (b) Counting owner-occupied units. (1) 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 the mortgage was originated, using the appropriate 
percentage factor provided under Sec.  1282.17.
    (2) Mortgage purchases financing owner-occupied single-family 
properties for which the income of the mortgagors is not available 
shall be included in the denominator for the single-family housing 
goals and subgoal, but such mortgages shall not be counted in the 
numerator of any single-family housing goal or subgoal.
    (c) Counting dwelling units for multifamily housing goal and 
subgoals. Performance under the multifamily housing goal and subgoals 
shall be measured by counting the number of dwelling units that count 
toward achievement of a particular housing goal or subgoal in all 
multifamily properties financed by mortgages purchased by an Enterprise 
in a particular year. Only dwelling units that are financed by mortgage 
purchases, as defined by FHFA, and that are not specifically excluded 
as ineligible under Sec.  1282.16(b), may be counted for purposes of 
the multifamily housing goal and subgoals.
    (d) Counting rental units.--(1) Use of rent. For purposes of 
counting rental units toward achievement of the multifamily housing 
goal and subgoals, mortgage purchases financing such units shall be 
evaluated based on rent and whether the rent is affordable to the 
income group targeted by the housing goal and subgoals. A rent is 
affordable if the rent does not exceed the maximum levels as provided 
in Sec.  1282.19.
    (2) Affordability of rents based on subsidy program requirements. 
Where a multifamily property is subject to an affordability restriction 
under a housing subsidy program that establishes the maximum permitted 
income level for a tenant or a prospective tenant or the maximum 
permitted rent, the

[[Page 54507]]

affordability of units in the property may be determined based on the 
maximum permitted income level or maximum permitted rent established 
under such housing program for those units. This income level shall be 
compared to the median income for the area, adjusted for family size as 
provided in Sec.  1282.17, or as provided in Sec.  1282.18 if family 
size is not known.
    (3) Unoccupied units. Anticipated rent for unoccupied units may be 
the market rent for similar units in the neighborhood as determined by 
the lender or appraiser for underwriting purposes. A unit in a 
multifamily property that is unoccupied because it is being used as a 
model unit or rental office may be counted for purposes of the 
multifamily housing goal and subgoals only if an Enterprise determines 
that the number of such units is reasonable and minimal considering the 
size of the multifamily property.
    (4) Timeliness of information. In evaluating affordability under 
the multifamily housing goal and subgoals, each Enterprise shall use 
tenant and rental information as of the time of mortgage acquisition.
    (e) Missing data or information for multifamily housing goal and 
subgoals. (1) Rental units for which bedroom data are missing shall be 
considered efficiencies for purposes of calculating unit affordability.
    (2) When an Enterprise lacks sufficient information to determine 
whether a rental unit in a property securing a multifamily mortgage 
purchased by an Enterprise counts toward achievement of the multifamily 
housing goal or subgoals because rental data is not available, an 
Enterprise's performance with respect to such unit may be evaluated 
using estimated affordability information by multiplying the number of 
rental units with missing affordability information in properties 
securing multifamily mortgages purchased by the Enterprise in each 
census tract by the percentage of all rental dwelling units in the 
respective tracts that would count toward achievement of each goal and 
subgoal, as determined by FHFA based on the most recent decennial 
census.
    (3) The estimation methodology in paragraph (e)(2) of this section 
may be used up to a nationwide maximum of 5 percent of the total number 
of rental units in properties securing multifamily mortgages purchased 
by the Enterprise in the current year. Multifamily rental units in 
excess of this maximum, and any units for which estimation information 
is not available, shall not be counted for purposes of the multifamily 
housing goal and subgoals.
* * * * *
    (g) * * *
    (2) When an Enterprise cannot precisely determine whether a 
mortgage is on dwelling unit(s) located in one area, the Enterprise 
shall determine the median income for the split area in the manner 
prescribed by the Federal Financial Institutions Examination Council 
for reporting under the Home Mortgage Disclosure Act (12 U.S.C. 2801 et 
seq.), if the Enterprise can determine that the mortgage is on dwelling 
unit(s) located in:
    (i) A census tract; or
    (ii) A census place code.
* * * * *
0
7. Amend Sec.  1282.16 as follows:
0
a. Remove the second ``and'' from paragraph (b)(14);
0
b. Revise paragraph (b)(15) and add new paragraph (b)(16);
0
c. Revise paragraph (c)(5) and add new paragraph (c)(15);
0
d. Revise paragraph (d); and
0
e. Revise paragraph (e).
    The revisions and additions read as follows:


Sec.  1282.16  Special counting requirements.

* * * * *
    (b) * * *
    (15) Skilled nursing units; and
    (16) Any combination of factors in paragraphs (b)(1) through 
(b)(15) of this section.
    (c) * * *
    (5) Cooperative housing and condominiums. (i) The purchase 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. Such a purchase shall be counted in the 
same manner as a mortgage purchase of single-family owner-occupied 
units.
    (ii) The purchase of a mortgage on a cooperative building or a 
mortgage on a condominium project shall be treated as a mortgage 
purchase for purposes of the housing goals. The purchase of a mortgage 
on a cooperative building shall be counted in the same manner as a 
mortgage purchase of a multifamily rental property, except that 
affordability must be determined based solely on the comparable market 
rents used in underwriting the blanket loan. If the underwriting rents 
are not available, the loan shall not be treated as a mortgage purchase 
for purposes of the housing goals. The purchase of a mortgage on a 
condominium project shall be counted in the same manner as a mortgage 
purchase of a multifamily rental property.
    (iii) Where an Enterprise purchases both a mortgage on a 
cooperative building and share loans for units in the same building, 
both the mortgage on the cooperative building and the share loans shall 
be treated as mortgage purchases for purposes of the housing goals. 
Where an Enterprise purchases both a mortgage on a condominium project 
and mortgages on individual dwelling units in the same project, both 
the mortgage on the condominium project and the mortgages on individual 
dwelling units shall be treated as mortgage purchases for purposes of 
the housing goals.
* * * * *
    (15) Seniors housing units. The purchase of a mortgage on seniors 
housing units where life or health care services are included in the 
rent shall be treated as a mortgage purchase for purposes of the 
housing goals, unless prospective residents are required to pay an 
entrance fee (other than application processing fees, first-month 
advanced rent payments, or security deposit fees), in addition to any 
monthly rent or service fee. Seniors housing units that do not include 
additional services in the rent shall be treated as multifamily 
dwelling units for purposes of the housing goals. Seniors housing units 
that include additional services in the rent shall be treated as 
multifamily dwelling units with missing data for purposes of 
determining affordability.
    (d) HOEPA mortgages. HOEPA mortgages 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, including treatment of missing data. FHFA will 
notify each Enterprise in writing of any determination regarding the 
treatment of any transaction or class of transactions under the housing 
goals. FHFA will make any such determinations available to the public 
on FHFA's Web site, www.fhfa.gov.
0
8. Amend Sec.  1282.17 by replacing the phrase ``rental housing'' with 
``rental units''.
0
9. Amend Sec.  1282.20 by revising paragraph (b) to read as follows:


Sec.  1282.20  Determination of compliance with housing goals; notice 
of determination.

* * * * *
    (b) Multifamily housing goal and subgoals. The Director shall 
evaluate

[[Page 54508]]

each Enterprise's performance under the multifamily low-income housing 
goal, the multifamily very low-income housing subgoal, and the small 
multifamily low-income housing subgoal, on an annual basis. If the 
Director determines that an Enterprise has failed, or there is a 
substantial probability that an Enterprise will fail, to meet a 
multifamily housing goal or subgoal established by this subpart, the 
Director shall notify the Enterprise in writing of such preliminary 
determination.
* * * * *

    Note:  The following Appendix will not appear in the Code of 
Federal Regulations.

Appendix: Additional Discussion Concerning The Proposed Single-Family 
Housing Goals

    This Appendix provides additional discussion concerning FHFA's 
proposed benchmark levels for the single-family goals and subgoals. 
FHFA uses market models, which incorporate economic and housing data 
variables, to predict market performance for each goal and subgoal. 
FHFA's consideration of the required statutory factors when setting 
the proposed benchmark levels includes the estimates from these 
models and the Enterprises' past performance. The first section in 
this Appendix examines the factors considered as part of FHFA's 
market model. The second section discusses additional factors 
considered in FHFA's review. The third and final section discusses 
the performance of the Enterprises against the single-family goals 
and FHFA's estimates of market performance for the years 2010 
through 2013.

I. Factors Considered in FHFA's Market Models

    FHFA uses a market model to project the future market size for 
each of the goals and subgoals for each year from 2015 through 2017. 
These projections are referred to as the ``estimated market 
performance.'' A full discussion of these estimates is included in 
the supporting document: The Size of the Affordable Mortgage Market: 
2015-2017 Enterprise Single-Family Housing Goals.\49\
---------------------------------------------------------------------------

    \49\ For more information (specifically which economic 
indicators each entity forecasts), see ``The Size of the Affordable 
Mortgage Market: 2015-2017 Enterprise Single-Family Housing Goals,'' 
published at FHFA's Web site, http://www.fhfa.gov/PolicyProgramsResearch/Research.
---------------------------------------------------------------------------

    ``Market size'' is one of the seven statutory factors considered 
by FHFA in setting the single-family housing goals. In addition to 
market size, the market model also incorporates FHFA's consideration 
of three more of the seven statutory factors: National housing 
needs; economic, housing, and demographic conditions; and other 
reliable mortgage data. FHFA uses a variety of data sources to 
obtain current data and future forecasts on the key variables used 
in the market model. These sources include: the American Housing 
Survey (AHS); U.S. Census Bureau demographics; commercial sources 
such as Moody's and other industry and trade research sources, such 
as the Mortgage Bankers Association (MBA), Inside Mortgage Finance 
Publications, National Association of Realtors (NAR), National 
Association of Home Builders (NAHB), and the Commercial Mortgage 
Securities Association. The FHFA Monthly Interest Rate Survey (MIRS) 
is used to complement forecast models for home purchase loan 
originations by making intra-annual adjustments prior to the public 
release of Home Mortgage Disclosure Act (HMDA) mortgage data. FHFA 
also uses data and information from Wells Fargo, PNC Bank, Fannie 
Mae, Freddie Mac, and The Wall Street Journal Survey, as well as 
market and economic data from the Bureau of Labor Statistics, the 
Federal Reserve Board, the Department of Commerce Bureau of Economic 
Analysis, and FedStats.
    Each of the variables used in the market models is discussed in 
more detail below.
    Unemployment rate. The unemployment rate is included in the 
market models for estimating market size for the low-income home 
purchase goal, the very low-income home purchase goal, and the low-
income areas home purchase subgoal. Unemployment rates and the 
ability of borrowers to find and maintain jobs are key factors in 
the decision of buyers to purchase homes, as well as in the 
decisions of financial institutions to lend, since employment 
impacts income levels, debt levels, and credit scores. The 
unemployment rate has steadily fallen from 9.1 percent in August 
2011 to 6.1 percent in June 2014. The unemployment rate is expected 
to fall to an average of 5.9 percent in 2015, 5.6 percent in 2016, 
and 5.7 percent in 2017. Nevertheless, the labor force participation 
rate has declined from 66.1 percent in June 2004 to 64 percent in 
June 2011 and 63.5 percent in June 2013.\50\ It remains at 62.8 
percent for the third consecutive month as of June 2014,\51\ 
significantly lower than the labor force participation rate in June 
2004 (66.1 percent).
---------------------------------------------------------------------------

    \50\ Bureau of Labor Statistics, ``Labor Force Statistics from 
the Current Population Survey'' (Series ID: LNS 11300000).
    \51\ Bureau of Labor Statistics, News Release, ``The Employment 
Situation--June 2014'' (July 3, 2014).
---------------------------------------------------------------------------

    Home sales. Home sales are included in the market models for 
estimating market size for the low-income home purchase goal. For a 
given level of market demand for housing, when there are more homes 
for sale, potential home buyers have more options, houses are priced 
more competitively, and the search costs to find affordable housing 
decrease. Historical volumes for sales of both new and existing 
houses are shown in Table 5 along with forecasts for 2014-2017. For 
2013, NAR reported that existing single-family home sales were 4.48 
million, up by 8.6 percent from 2012. Although existing home sales 
increased by 2.6 percent in June 2014, the sales pace is still 2.3 
percent lower than in June 2013.\52\ New home sales for 2013, as 
reported by the Department of Housing and Urban Development (HUD) 
and the U.S. Census Bureau, were 429,000, up by 16.6 percent from 
2012. Nevertheless, new home sales fell 3.2 percent in the first 
quarter of 2014 relative to the prior quarter. New home sales in 
June 2014 fell 8.1 percent from the previous month and were 11.5 
percent below new home sales in June 2013.\53\
---------------------------------------------------------------------------

    \52\ National Association of Realtors, News Release, ``Existing 
Home Sales Up in June'' (July 22, 2014).
    \53\ U.S. Census Bureau News (Joint Release with U.S. Department 
of Housing and Urban Development), ``New Residential Sales in June 
2014'' (July 24, 2014); HUD PD&R ``National Housing Market 
Summary,'' First Quarter 2014 (May 2014).
---------------------------------------------------------------------------

    Interest rates and mortgage interest rates. Interest rates and 
mortgage interest rates are included in the market models for 
estimating market size for the low-income home purchase goal and the 
low-income refinancing goal. Affordability in the mortgage market 
depends in part on the interest rate environment. Mortgage interest 
rates are affected by many factors. Trends in interest rates on 
longer term financial instruments, such as mortgages, typically 
follow the fluctuations of the 10-Year Treasury note yield, with 
approximately a 165 to 170 basis point (i.e., 1.65 percent to 1.70 
percent) interest rate spread between the 30-year mortgage rate and 
the 10-Year Treasury note yield, reflecting the differences in 
liquidity and credit risk expected for the 2015 through 2017 period. 
This is similar to the past five years, but lower than the 181 basis 
point average spread during 2005 through 2008.
    Mortgage interest rates are included in the market models for 
estimating market size for the low-income home purchase goal and the 
low-income refinancing goal. The longer-term 30-year fixed-rate 
mortgage interest rate, after falling to a low of 3.4 percent in the 
fourth quarter of 2012, has gradually risen to 4.2 percent in the 
second quarter of 2014.\54\ Shorter term fixed- and adjustable-rate 
mortgage interest rates remain at historical lows. Freddie Mac 
reported that the one-year adjustable-rate mortgage rate averaged 
2.4 percent in the second quarter of 2014.\55\ As the economic 
recovery continues, it is expected that interest rates, particularly 
longer term interest rates, will rise. For the 2015-2017 period, as 
shown in Table 5, forecasts show that all interest rates are 
expected to increase, including the interest rate on a 30-year 
fixed-rate mortgage, which is expected to increase to 4.9 percent by 
2015 and 5.4 percent by 2016.
---------------------------------------------------------------------------

    \54\ Freddie Mac, ``Primary Mortgage Market Survey'' (2012-
2014); Freddie Mac, ``U.S. Economic and Housing Market Outlook'' 
(July 2014).
    \55\ Freddie Mac, ``Primary Mortgage Market Survey'' (July 3, 
2014).
---------------------------------------------------------------------------

    Inflation rate. The inflation rate is included in the market 
models for estimating market size for the very low-income home 
purchase goal. The monthly Consumer Price Index, excluding food and 
energy (Core CPI), has risen at an average year-over-year rate of 
1.9 percent in 2012, 1.7 percent in 2013 and 1.8 percent in the 
first half of 2014. The increase in the Core CPI is expected to 
remain at or below 2.0 percent through 2017.\56\
---------------------------------------------------------------------------

    \56\ Bureau of Labor Statistics, News Release--Consumer Price 
Index, June, 2014 (July 22, 2014).
---------------------------------------------------------------------------

    Affordability index. The NAR Housing Affordability Index is 
included in the market models for estimating market size for the 
low-income areas home purchase subgoal.

[[Page 54509]]

Affordability is interrelated with other factors in the models, such 
as home prices and mortgage rates.
    NAR's composite index of housing affordability for December 2013 
showed that families earning the median income had 168.4 percent of 
the income needed to purchase a median-priced existing single-family 
home, which is lower than the peak annual level of 196.5 percent 
reached in 2012, but still very high by historical standards.\57\ 
The housing affordability index rose in the first quarter of 2014, 
but subsequently fell to 159.3 percent for May 2014. Zillow research 
has indicated that the share of income needed to afford the mortgage 
payments on a median-priced home has risen from a low of under 13 
percent at the end of 2012 to 15.1 percent in the fourth quarter of 
2013.
---------------------------------------------------------------------------

    \57\ See National Association of Realtors, ``Housing 
Affordability Index,'' http://www.realtor.org/research/research/housinginx.
---------------------------------------------------------------------------

    The impact of rising mortgage rates, as well as higher home 
prices, could impact borrowers in lower income brackets to a greater 
degree than borrowers in higher income brackets due to the higher 
payments needed with rising house prices and higher mortgage 
interest rates. This, in turn, could lead to fewer borrowers in 
lower income brackets relative to the number of borrowers in higher 
income brackets.
    While few recent studies have examined the impact of house price 
changes on affordability for borrowers by income bracket, a recent 
study examined the impact of mortgage interest rate increases on 
housing affordability. The study found that various metropolitan 
statistical areas (MSAs) have significant differences in 
affordability and that, using DTI (debt-to-income ratios) and LTV 
(loan-to-value ratios) to measure affordability, in 19 of the 37 
largest MSAs the median house price was above the maximum affordable 
price as of August 2013. If mortgage rates rose to 6 percent, only 4 
of the 37 would be affordable.\58\
---------------------------------------------------------------------------

    \58\ Lan Shi and Laurie Goodman. ``The Impact of Mortgage Rate 
Increases on Housing Affordability,'' Urban Institute, Housing 
Finance Policy Center (November, 2013).
---------------------------------------------------------------------------

    Median house prices. Median house prices are included in the 
market models for estimating market size for the low-income home 
purchase goal, and the FHFA House Price Index is included in the 
market models for estimating market size for the very low-income 
home purchase goal. In periods of house price appreciation, home 
sales and mortgage originations increase as the expected return on 
investment rises. In periods of price depreciation or price 
uncertainty, home sales and mortgage originations decrease as risk-
averse homebuyers are reluctant to enter the market. House prices 
generally fell during 2009 through 2011, but turned around in 2012 
with an increase of 5.6 percent in FHFA's Purchase Only House Price 
Index. In 2013, home prices increased at a rate of 7.6 percent. 
House prices are expected to continue to increase through 2017 (see 
Table 5), although price gains may be slowing. Indeed, although the 
FHFA House Price Index in the first quarter of 2014 rose 1.3 percent 
and had risen for 11 consecutive quarters, it rose by less than the 
1.9 percent increase in the first quarter of 2013. The FHFA House 
Price Index rose 0.5 percent in May 2014 relative to the prior month 
and was up 5.5 percent from the previous year.\59\ Similarly, the 
median sales price of existing homes in June 2014 was up 4.3 percent 
from the prior year.\60\
BILLING CODE 8070-01-P
---------------------------------------------------------------------------

    \59\ FHFA News Release, ``U.S. House Prices Up 0.4% in May'' 
(July 22, 2014).
    \60\ National Association of Realtors, News Release, ``Existing 
Home Sales Up in June'' (July 22, 2014).

---------------------------------------------------------------------------

[[Page 54510]]

[GRAPHIC] [TIFF OMITTED] TP11SE14.018

BILLING CODE 8070-01-C
    Refinance rate. The refinance rate is included in the market 
models for estimating market size for the low-income refinancing 
goal. The size of the entire refinance

[[Page 54511]]

mortgage market has an impact on the share of affordable refinance 
mortgages (defined as refinance mortgages for borrowers making 80 
percent or less of area median income) and thus on the development 
of the benchmark for the Enterprises for the low-income refinancing 
goal. Refinance mortgage volume has historically increased when the 
refinancing of mortgages is motivated by low interest rates, i.e., 
``rate-and-term refinances,'' and this increased volume is typically 
dominated by higher-income borrowers. Consequently, in periods of 
low interest rates, the share of lower-income borrowers often 
decreases. Because interest rates and mortgage rates are currently 
increasing after an extended period of low rates, the low-income 
share of borrowers who are refinancing increases.\61\
---------------------------------------------------------------------------

    \61\ The Home Affordable Refinance Program (HARP), which became 
effective in March 2009 and was expanded in 2011, is an effort to 
enhance the opportunity for many homeowners to refinance. Homeowners 
with loan-to-value ratios above 80 percent whose mortgages are owned 
or guaranteed by Fannie Mae or Freddie Mac and who are current on 
their mortgages have the opportunity to reduce their monthly 
mortgage payments to take advantage of historically low mortgage 
interest rates.
---------------------------------------------------------------------------

II. Additional Factors Considered

    FHFA has also considered other variables that indirectly impact 
the variables in the market model. For example, homeowner vacancy 
rates impact the supply of homes, which, in turn, impacts home 
prices. Home prices are key in several of the market models for 
various goals and subgoals. The homeowner vacancy rate--the 
proportion of housing inventory for homeowners that is vacant and 
for sale--was 1.7 percent in 2004, but increased thereafter, to 2.8 
percent in 2008. This rate has declined to 2.0 percent in 2012 and 
2013, but is still somewhat elevated.\62\ The housing supply may 
also be impacted by the inventory of distressed and at-risk homes 
that have not yet completed the foreclosure process, and so may not 
be reflected in the vacancy rate.
---------------------------------------------------------------------------

    \62\ Federal Reserve Bank of St. Louis, ``Home Vacancy Rate for 
the United States,'' http://research.stlouisfed.org/fred2/series/USHVAC.
---------------------------------------------------------------------------

    Foreclosure filings and negative equity indirectly impact other 
variables in the market model, such as house prices. Although the 
number of homes with foreclosure filings fell 34 percent relative to 
the peak level of 2.87 million in 2010, 1.89 million homes were 
foreclosed on in 2011.\63\ Foreclosure filings have fallen since 
2011, to 1.84 million in 2012 and 1.36 million in 2013, but they 
still remain high by historical standards.\64\ FHFA has estimated 
that in 2011, less than 10 percent of borrowers with Enterprise 
loans had negative equity in their homes (9.9 percent in June 2011), 
whereas loans backing private label securities were more than three 
times more likely to have negative equity (35.5 percent in June 
2011).\65\ The figures were lower for December 2013 (7.2 percent for 
Fannie Mae and 10 percent for Freddie Mac), which were both below 
CoreLogic's figure for all mortgaged homes, estimated at 13.3 
percent in the fourth quarter of 2013. Since the latter figure 
includes homes with mortgages backed by the Enterprises, the 
negative equity share was much higher for non-Enterprise loans.
---------------------------------------------------------------------------

    \63\ See ``2011 Year-End Foreclosure Report: Foreclosures on the 
Retreat'' (January 9, 2012), http://www.realtytrac.com/content/foreclosure-market-report/2011-year-end-foreclosure-market-report-6984.
    \64\ See ``1.4 Million U.S. Properties with Foreclosure Filings 
in 2013 Down 26 Percent to Lowest Annual Total Since 2007'' (January 
13, 2014), http://www.realtytrac.com/content/foreclosure-market-report/2013-year-end-foreclosure-market-report-7963.
    \65\ See http://www.fhfa.gov/Media/PublicAffairs/Documents/Letter-To-Congress-Principal-Forgiveness_12312.pdf.
---------------------------------------------------------------------------

    House prices and other variables in the market model may also be 
indirectly affected by changes in underwriting standards. According 
to the Board of Governors of the Federal Reserve System's Senior 
Loan Officer Opinion Survey, many surveyed lenders reported 
tightening underwriting standards between 2007 and 2009. As of the 
January 2014 survey, lenders had not reported easing underwriting 
standards in significant numbers.\66\ Stricter and less flexible 
underwriting standards are likely to affect overall mortgage 
origination volumes, and are likely to have a significant impact on 
low-income and very low-income borrowers.
---------------------------------------------------------------------------

    \66\ See Board of Governors of the Federal Reserve System, 
``January 2014 Senior Loan Officer Opinion Survey'' (Feb. 3, 2014), 
http://www.federalreserve.gov/boarddocs/snloansurvey/201402/fullreport.pdf.
---------------------------------------------------------------------------

    Demographic characteristics are considered by FHFA, although 
they are not directly included in the market models. Assessment of 
demographic conditions is helpful in understanding trends in the 
performance of the Enterprises in the single-family and multifamily 
goals, as well as in understanding the trends in house prices and 
sales in particular geographic areas. The share of minority 
households has grown relative to white households between 1993 and 
2013.\67\ The Harvard University Joint Center for Housing Studies 
has provided household projections for various demographic groups 
and age groups from 2015-2035 which suggest significant estimated 
growth in Hispanic households, followed by Asian households. Their 
middle projections for households suggest that Hispanic households 
will grow from 16.4 million in 2015 to 27 million in 2035, while 
Asian and other households will grow from 8.3 million households in 
2015 to 12.9 million households in 2035. Black households are 
projected to expand from 15.7 million households in 2015 to 19.9 
million households in 2035. White households are forecast to grow 
most slowly, expanding from 84.8 million in 2015 to 88.2 million in 
2035.\68\
---------------------------------------------------------------------------

    \67\ Joint Center for Housing Studies, Harvard University, ``The 
State of the Nation's Housing: 2014,'' p. 18.
    \68\ Daniel McCue, ``Baseline Household Projections for the Next 
Decade and Beyond,'' Harvard University Joint Center for Housing 
Studies, Table A-1b, p. 30 (March, 2014).
---------------------------------------------------------------------------

    While overall homeownership rates have declined by 0.3 
percentage points in 2012-2013, dropping to 65.1 percent, declines 
have been greater for minority families, with a 4 percentage point 
decline from the peaks for Asian and other households and Hispanic 
households and a 6 percentage point decline from the peak for black 
households. The gap between the homeownership rates for white and 
black households has expanded from 25.9 percentage points in 2001 to 
29.5 percentage points in 2013.\69\ The denial rate for conventional 
loan applications in the demographic category for white households 
was 11.6 percent in 2012, which was significantly lower than the 
denial rates in the respective demographic categories for black (32 
percent), Hispanic (20.5 percent), and Asian (14.5 percent) 
households.\70\
---------------------------------------------------------------------------

    \69\ Joint Center for Housing Studies, Harvard University, ``The 
State of the Nation's Housing: 2014,'' p. 17.
    \70\ Neil Bhutta and Glenn B. Canner, ``Mortgage Market 
Conditions and Borrower Outcomes: Evidence from the 2012 HMDA Data 
and Matched HMDA-Credit Record Data,'' Federal Reserve Bulletin, 
Vol. 99, No. 4, Table 13A, p. 29 (November 2013).
---------------------------------------------------------------------------

III. The Performance and Effort of the Enterprises Toward Achieving the 
Single-Family Housing Goals in Previous Years and Future Market 
Estimates

    This portion of the Appendix is divided into two sections. The 
first section discusses the performance, benchmark levels, and 
single-family goals and subgoal for the Enterprises for 2010-2013. 
The second section discusses FHFA's estimates of market performance.

A. Enterprise Benchmark Levels and Performance: 2010-2013

    The figures shown in Tables 6-9 for 2010-2012 are official 
performance results as determined by FHFA, based on analysis of 
loan-level information submitted by the Enterprises. The figures 
shown for 2013 are performance numbers as reported by the 
Enterprises to FHFA in March 2014. Official performance results for 
2013 will be determined and reported by FHFA later in 2014, after 
release of the 2013 HMDA data in September.
    The Safety and Soundness Act requires FHFA to consider the 
percentage of goal-qualifying mortgages under each housing goal, as 
calculated based on HMDA data for the three most recent years for 
which data are available.\71\ FHFA has incorporated these 
measurements in the goals themselves, through the retrospective 
market levels. The HMDA performance numbers are given in the tables 
below for each of the single-family housing goals.
---------------------------------------------------------------------------

    \71\ 12 U.S.C. 4562(e)(2)(A).
---------------------------------------------------------------------------

    Low-income home purchase goal. The low-income home purchase goal 
applies to mortgages made to ``low-income families,'' defined as 
families with incomes no greater than 80 percent of area median 
income. As indicated in Table 6, the benchmark level for this goal 
was 27 percent for both 2010 and 2011, but both Enterprises' 
performance fell short of this level in both years. Both 
Enterprises' performance on this goal also lagged that of the 
primary mortgage market in both 2010 and 2011 (27.2 percent and 26.5 
percent, respectively). This market share figure is included in the 
last column in Table

[[Page 54512]]

6, which reflects the low-income share of all conventional 
conforming home purchase mortgages originated in the primary 
mortgage market for the corresponding year, based on FHFA's analysis 
of HMDA data.
    The low-income home purchase benchmark level was lowered from 27 
percent for 2010-2011 to 23 percent for 2012-2014. As indicated in 
Table 6, both Enterprises' performance exceeded this level for 2012. 
Fannie Mae's reported performance of 23.8 percent exceeded this 
benchmark level for 2013, while Freddie Mac's reported performance 
of 21.8 percent for 2013 fell short of the benchmark level. Later in 
2014, FHFA will determine the Enterprises' official performance 
figures for 2013 and the low-income share of the primary home 
purchase mortgage market for 2013, based on 2013 HMDA data.
    Fannie Mae's performance on this goal was essentially unchanged 
between 2010 and 2012, before falling in 2013. Freddie Mac's 
performance was more uneven, falling in 2011, rising in 2012, and 
falling again in 2013.

               Table 6--Enterprise Past Performance on the Low-Income Home Purchase Goal, 2006-13
----------------------------------------------------------------------------------------------------------------
                                                                                  Performance           Market
             Year                Type of home purchase (HP)    Benchmark  --------------------------    share
                                          mortgages                         Fannie Mae  Freddie Mac     (HMDA)
----------------------------------------------------------------------------------------------------------------
2013..........................  Low-income HP Mortgages.....  ...........      193,660       93,425  ...........
                                Total HP Mortgages..........  ...........      814,066      429,086  ...........
                                Low-Inc. % of HP Mortgages..          23%        23.8%        21.8%           NA
----------------------------------------------------------------------------------------------------------------
2012..........................  Low-Income HP Mortgages.....  ...........      162,486       70,393  ...........
                                Total HP Mortgages..........  ...........      633,627      288,007  ...........
                                Low-Inc. % of HP Mortgages..          23%        25.6%        24.4%        26.6%
----------------------------------------------------------------------------------------------------------------
2011..........................  Low-Income HP Mortgages.....  ...........      120,597       60,682  ...........
                                Total HP Mortgages..........  ...........      467,066      260,796  ...........
                                Low-Inc. % of HP Mortgages..          27%        25.8%        23.3%        26.5%
----------------------------------------------------------------------------------------------------------------
2010..........................  Low-Income HP Mortgages.....  ...........      120,430       82,443  ...........
                                Total HP Mortgages..........  ...........      479,200      307,555  ...........
                                Low-Inc. % of HP Mortgages..          27%        25.1%        26.8%        27.2%
----------------------------------------------------------------------------------------------------------------
2009..........................  Low-Income HP Mortgages.....  ...........      148,423      105,719  ...........
                                Total HP Mortgages..........  ...........      582,673      415,897  ...........
                                Low-Inc. % of HP Mortgages..           NA        25.5%        25.4%        29.6%
----------------------------------------------------------------------------------------------------------------
2008..........................  Low-Income HP Mortgages.....  ...........      226,290      158,896  ...........
                                Total HP Mortgages..........  ...........      977,852      655,156  ...........
                                Low-Inc. % of HP Mortgages..           NA        23.1%        24.3%        25.5%
----------------------------------------------------------------------------------------------------------------
2007..........................  Low-Income HP Mortgages.....  ...........      383,129      248,434  ...........
                                Total HP Mortgages..........  ...........    1,471,242    1,008,064  ...........
                                Low-Inc. % of HP Mortgages..           NA        26.0%        24.6%        26.1%
----------------------------------------------------------------------------------------------------------------
2006..........................  Low-Income HP Mortgages.....  ...........      359,609      197,900  ...........
                                Total HP Mortgages..........  ...........    1,295,956      895,049  ...........
                                Low-Inc. % of HP Mortgages..           NA        27.7%        22.1%        24.2%
----------------------------------------------------------------------------------------------------------------
Source: Performance as reported by the Enterprises for 2013; official performance as determined by FHFA for 2010-
  12; performance as if the goal had been in effect, as calculated by FHFA, for 2006-09.
``Low-income'' refers to borrowers with incomes no greater than 80 percent of Area Median Income (AMI).
Note: An Enterprise passes a goal if (1) its performance matches or exceeds the pre-set benchmark level, or (2)
  if its performance falls short of the benchmark level but equals or exceeds the corresponding share of
  conventional conforming mortgages originated in the primary mortgage market, as determined by FHFA's analysis
  of Home Mortgage Disclosure Act (HMDA) data for the year, shown in the last column.

    Very low-income home purchase goal. The very low-income home 
purchase goal applies to mortgages made to ``very low-income 
families,'' defined as families with incomes no greater than 50 
percent of area median income.
    The very low-income home purchase goal was lowered from 8 
percent for 2010-2011 to 7 percent for 2012-2014. As shown in Table 
7, both Enterprises' performance exceeded this level for 2012 with 
Fannie Mae's performance of 7.3 percent and Freddie Mac's 
performance of 7.1 percent. However, both Enterprises fell short of 
the benchmark level for 2013, when Fannie Mae's reported performance 
was 6.0 percent and Freddie Mac's reported performance was 5.5 
percent. Later in 2014, FHFA will determine the Enterprises' 
official performance figures for 2013 and the very low-income share 
of the primary home purchase mortgage market for 2013, based on 2013 
HMDA data.
    While the recovery in the home purchase market between 2012 and 
2013 resulted in significantly higher volumes of home purchase 
mortgages at the Enterprises, the volume of very low-income home 
purchase mortgages did not increase by nearly as much. Between 2012 
and 2013, the volume of Fannie Mae's purchases of very low-income 
home purchase mortgages increased by 5 percent, while its overall 
volume of home purchase mortgages increased by 28 percent. As a 
result, Fannie Mae's goal performance fell from 7.3 percent in 2012 
to 6.0 percent in 2013. Similarly, the volume of Freddie Mac's 
purchases of very low-income home purchase mortgages increased by 16 
percent, while its overall volume of home purchase mortgages 
increased by 49 percent. As a result, Freddie Mac's goal performance 
fell from 7.1 percent in 2012 to 5.5 percent in 2013.

[[Page 54513]]



             Table 7--Enterprise Past Performance on the Very Low-Income Home Purchase Goal, 2006-13
----------------------------------------------------------------------------------------------------------------
                                                                                  Enterprise            Market
             Year                Type of home purchase (HP)    Benchmark  --------------------------    share
                                          mortgages                         Fannie Mae  Freddie Mac     (HMDA)
----------------------------------------------------------------------------------------------------------------
2013..........................  Very Low-Income HP Mortgages  ...........       48,810       23,705  ...........
                                Total HP Mortgages..........  ...........      814,066      429,086  ...........
                                Very Low-Inc. % of HP                  7%         6.0%         5.5%           NA
                                 Mortgages.
----------------------------------------------------------------------------------------------------------------
2012..........................  Very Low-Income HP Mortgages  ...........       46,519       20,469  ...........
                                Total HP Mortgages..........  ...........      633,627      288,007  ...........
                                Very Low-Inc. % of HP                  7%         7.3%         7.1%         7.7%
                                 Mortgages.
----------------------------------------------------------------------------------------------------------------
2011..........................  Very Low-Income HP Mortgages  ...........       35,443       17,303  ...........
                                Total HP Mortgages..........  ...........      467,066      260,796  ...........
                                Very Low-Inc. % of HP                  8%         7.6%         6.6%         8.0%
                                 Mortgages.
----------------------------------------------------------------------------------------------------------------
2010..........................  Very Low-Income HP Mortgages  ...........       34,673       24,276  ...........
                                Total HP Mortgages..........  ...........      479,200      307,555  ...........
                                Very Low-Inc. % of HP                  8%         7.2%         7.9%         8.1%
                                 Mortgages.
----------------------------------------------------------------------------------------------------------------
2009..........................  Very Low-Income HP Mortgages  ...........       42,571       29,870  ...........
                                Total HP Mortgages..........  ...........      582,673      415,897  ...........
                                Very Low-Inc. % of HP                  NA         7.3%         7.2%         8.8%
                                 Mortgages.
----------------------------------------------------------------------------------------------------------------
2008..........................  Very Low-Income HP Mortgages  ...........       54,263       40,009  ...........
                                Total HP Mortgages..........  ...........      977,852      655,156  ...........
                                Very Low-Inc. % of HP                  NA         5.5%         6.1%         6.5%
                                 Mortgages.
----------------------------------------------------------------------------------------------------------------
2007..........................  Very Low-Income HP Mortgages  ...........       93,543       60,549  ...........
                                Total HP Mortgages..........  ...........    1,471,242    1,008,064  ...........
                                Very Low-Inc. % of HP                  NA         6.4%         6.0%         6.2%
                                 Mortgages.
----------------------------------------------------------------------------------------------------------------
2006..........................  Very Low-Income HP Mortgages  ...........      100,148       47,008  ...........
                                Total HP Mortgages..........  ...........    1,295,986      895,049  ...........
                                Very Low-Inc. % of HP                  NA         7.7%         5.3%         5.9%
                                 Mortgages.
----------------------------------------------------------------------------------------------------------------
Source: Performance as reported by the Enterprises for 2013; official performance as determined by FHFA for 2012-
  12; performance if the goal had been in effect, as calculated by FHFA, for 2006-09. ``Very Low-income''
  refersd to borrowers with incomes no greater than 50 percent of Area Median Income (AMI).
Note: An Enterprise passes a goal if (1) its performance matches or exceeds the pre-set benchmark level, or (2)
  if its performance falls short of the benchmark level but equals or exceeds the corresponding share of
  conventional conforming mortgages originated in the primary mortgage market, as determined by FHFA's analysis
  of Home Mortgage Disclosure Act (HMDA) data for the year, shown in the last column.

    Low-income areas home purchase goal and subgoal. Three 
categories of mortgages, listed below, qualify for the low-income 
areas housing goal. The current rule also has a low-income areas 
home purchase subgoal, which includes only categories (1) and (2) 
below:
    1. Home purchase mortgages for families in low-income census 
tracts, defined as tracts with median family income no greater than 
80 percent of area median income;
    2. Home purchase mortgages for families with incomes no greater 
than 100 percent of area median income who reside in minority census 
tracts, defined as tracts with minority population of at least 30 
percent and a median family income less than 100 percent of area 
median income; and
    3. Home purchase mortgages for families with incomes no greater 
than 100 percent of area median income who reside in Federally-
declared disaster areas (regardless of the minority share of the 
population in the tract or the ratio of tract median family income 
to area median income).
    The Enterprise performance for this subgoal is addressed below, 
followed by the performance for the overall goal.
    Low-income areas home purchase subgoal. As shown in Table 8, the 
benchmark level for this subgoal (categories (1) and (2)) was 
established at 13 percent of all home purchases mortgages acquired 
in 2010 and 2011. Both Enterprises' performance fell short of the 
benchmark level in each year. However, as shown in Table 8, Fannie 
Mae's performance in 2010 (12.4 percent) exceeded the corresponding 
market share (12.1 percent), and its performance in 2011 (11.6 
percent) exceeded the corresponding market share (11.4 percent). 
Freddie Mac's performance in both 2010 (10.4 percent) and 2011 (9.2 
percent) fell short of both the 2010 and 2011 benchmark levels and 
the corresponding market shares.
    Based on 2012 projections from FHFA's market estimation model, 
FHFA lowered the subgoal benchmark level from 13 percent for 2010-
2011 to 11 percent for 2012-2014. Both Enterprises' official 
performance exceeded the subgoal benchmark level in 2012 (with 
Fannie Mae at 13.1 percent and Freddie Mac at 11.4 percent), and 
based on the performance numbers reported by the Enterprises, this 
was also the case for 2013 (with Fannie Mae at 14.0 percent and 
Freddie Mac at 12.3 percent).
    Low-income areas home purchase goal. The low-income areas home 
purchase goal includes all three categories listed above: Families 
in low-income census tracts, moderate-income families in minority 
census tracts, and moderate-income families in designated disaster 
areas. Designated disaster areas include counties declared by the 
Federal Emergency Management Agency (FEMA) to be disaster areas 
during the previous three years. This is referred to as the 
``disaster areas increment.'' It is established through an FHFA 
analysis of HMDA data for the most recent three years period 
available. Given the lag in release of the HMDA data, the disaster 
areas increment for 2010 was based on disaster areas declared 
between 2007 and 2009, but the increment was calculated using HMDA 
data for 2006-2008, because 2009 HMDA was not available until later 
in 2010. The disaster areas increment used in setting the benchmark 
level of the goal for 2011 was based on disaster areas declared 
between 2008 and 2010, but the increment was calculated using HMDA 
data for 2007-2009. Thus, the disaster areas increment, and the 
resulting low-income areas goal, can vary from one year to the next.
    In practice, the disaster areas increment was the same for both 
2010 and 2011, at 11 percent; thus, the overall low-income areas 
goal was 24 percent for both years. As indicated in Table 8, Fannie 
Mae's performance (24.1 percent) exceeded this level for 2010, but 
Freddie Mac's performance (23.1 percent) did not. For 2011, both 
Enterprises' performance fell short of

[[Page 54514]]

the benchmark level, but Fannie Mae's performance (22.4 percent) 
exceeded the market share (22.0 percent), while Freddie Mac's 
performance (19.2 percent) fell short of the market share.
    The disaster areas increment was 9 percent for 2012 and 10 
percent for 2013, thus, the overall low-income areas goal was 20 
percent for 2012 and 21 percent for 2013. Both Enterprises' official 
performance exceeded the benchmark level for 2012, with Fannie Mae 
at 22.3 percent and Freddie Mac at 20.6 percent. Fannie Mae reported 
that its performance numbers exceeded the benchmark level for 2013, 
at 21.6 percent. Freddie Mac's reported performance fell short of 
the benchmark level for 2013, at 20.0 percent.

      Table 8--Enterprise Past Performance on the Low-Income Areas Home Purchase Goal and Subgoal, 2010-13
----------------------------------------------------------------------------------------------------------------
                                                                                  Enterprise            Market
             Year                Type of home purchase (HP)    Benchmark  --------------------------    share
                                          mortgages                         Fannie Mae  Freddie Mac     (HMDA)
----------------------------------------------------------------------------------------------------------------
2013..........................  Low-income Tract HP           ...........       86,430       40,444  ...........
                                 Mortgages.
                                High-Minority Tract HP        ...........       27,425       12,177  ...........
                                 Mortgages.
                                Subgoal Qualifying Mortgages  ...........      113,855       52,621  ...........
                                Total HP Mortgages..........  ...........      814,066      429,086  ...........
                                Subgoal Qualifying % of               11%        14.0%        12.3%           NA
                                 Mortgages.
                                Disaster Area HP Mortgages..  ...........       62,314       33,123  ...........
                                Goal-Qualifying Mortgages...  ...........      176,169       85,744  ...........
                                Goal Qualifying % of                  21%        21.6%        20.0%           NA
                                 Mortgages.
----------------------------------------------------------------------------------------------------------------
2012..........................  Low-Income Tract HP           ...........       60,927       24,588  ...........
                                 Mortgages.
                                High-Minority Tract HP        ...........       22,275        8,164  ...........
                                 Mortgages.
                                Subgoal Qualifying Mortgages  ...........       83,202       32,752  ...........
                                Total HP Mortgages..........  ...........      633,627      288,007  ...........
                                Subgoal Qualifying % of               11%        13.1%        11.4%        13.6%
                                 Mortgages.
                                Disaster Area HP Mortgages..  ...........       58,085       26,486  ...........
                                Goal-Qualifying Mortgages...  ...........      141,287       59,238  ...........
                                Goal Qualifying % of                  20%        22.3%        20.6%        23.2%
                                 Mortgages.
----------------------------------------------------------------------------------------------------------------
2011..........................  Low-Income Tract HP           ...........       40,736       18,270  ...........
                                 Mortgages.
                                High-Minority Tract HP        ...........       13,549        5,632  ...........
                                 Mortgages.
                                Subgoal Qualifying Mortgages  ...........       54,285       23,902  ...........
                                Total HP Mortgages..........  ...........      467,070      260,796  ...........
                                Subgoal Qualifying % of               13%        11.6%         9.2%        11.4%
                                 Mortgages.
                                Disaster Area HP Mortgages..  ...........       50,209       26,232  ...........
                                Goal-Qualifying Mortgages...  ...........      104,494       50,134  ...........
                                Goal Qualifying % of                  24%        22.4%        19.2%        22.0%
                                 Mortgages.
----------------------------------------------------------------------------------------------------------------
2010..........................  Low-Income Tract HP           ...........       44,467       23,928  ...........
                                 Mortgages.
                                High-Minority Tract HP        ...........       14,814        8,161  ...........
                                 Mortgages.
                                Subgoal Qualifying Mortgages  ...........       59,281       32,089  ...........
                                Total HP Mortgages..........  ...........      479,201      307,556  ...........
                                Subgoal Qualifying % of               13%        12.4%        10.4%        12.1%
                                 Mortgages.
                                Disaster Area HP Mortgages..  ...........       56,076       38,898  ...........
                                Goal-Qualifying Mortgages...  ...........      115,357       70,987  ...........
                                Goal Qualifying % of                  24%        24.1%        23.1%        24.0%
                                 Mortgages.
----------------------------------------------------------------------------------------------------------------
Source: Performance as reported by the Enterprises for 2013; official performance as determined by FHFA for 2010-
  12. See definitions of ``Low-income Tract'' and ``High-Minority Tract'' in text. Tracts which meet both
  criteria are included as ``low-income units.'' The goal and subgoal were set for 2010-11 based on low-income
  and high-minority tracts from the 2000 census, and for 2012-14 based on such tracts from the 2010 census.
  Disaster areas are defined at the county level.
Note: An Enterprise passes a goal if (1) its performance matches or exceeds the pre-set benchmark level, or (2)
  if its performance falls short of the benchmark level but equals or exceeds the corresponding share of
  conventional conforming mortgages originated in the primary mortgage market, as determined by FHFA's analysis
  of Home Mortgage Disclosure Act (HMDA) data for the year, shown in the last column.

    Low-income refinancing goal. The refinancing housing goal is 
targeted to low-income families--families with incomes no greater 
than 80 percent of AMI--and applies to mortgages that are given to 
pay off or prepay an existing loan secured by the same property. 
Qualifying permanent modifications of loans for low-income families 
under the Administration's Home Affordable Modification Program 
(HAMP) are also counted toward the refinance housing goal. HAMP 
modifications are the only type of modifications eligible for 
counting for purposes of the housing goals. The impact of such 
modifications on goal performance is shown in Table 9.
    The low-income refinancing goal was set at 21 percent for 2010 
and 2011. As indicated, Freddie Mac's performance exceeded this 
level for both years, while Fannie Mae barely fell short in 2010 (at 
20.9 percent), but exceeded the level in 2011 (23.1 percent).
    FHFA lowered the low-income refinancing goal slightly, to 20 
percent, for 2012-2014. Both Enterprises' performance surpassed this 
level, even without taking into account HAMP loan modifications, for 
2012. Both Enterprises reported that this was also true for 2013. 
When including HAMP modifications, reported performance exceeded the 
goal for both years by wide margins, as shown in Table 9: 24.3 
percent for Fannie Mae and 24.1 percent for Freddie Mac in 2013.
    The data in Table 9 indicate that HAMP loan modifications have 
increased the reported performance of the Enterprises on the low-
income refinancing goal. This was especially true for 2011, when 
Fannie Mae's performance was 21.3 percent without HAMP 
modifications, but 23.1 percent with HAMP modifications. The impact 
was even larger for Freddie Mac, whose performance was 21.2 percent 
without HAMP modifications, but 23.4 percent with HAMP modifications 
in 2011.
    In every year from 2010 through 2013, low-income families 
received at least 67 percent of HAMP modifications at each 
Enterprise.

[[Page 54515]]

However, HAMP modifications have had a smaller impact on low-income 
refinancing goal performance in recent years as volume has fallen, 
as shown in Table 9--for Fannie Mae, from a high of 64,124 
modifications in 2011 to 16,478 modifications in 2013, and for 
Freddie Mac, from 52,910 modifications in 2011 to 21,599 
modifications in 2013.

                 Table 9--Enterprise Past Performance on the Low-Income Refinances Goal, 2010-13
----------------------------------------------------------------------------------------------------------------
                                                                                  Enterprise            Market
             Year                Type of refinance mortgages   Benchmark  --------------------------    share
                                                                            Fannie Mae  Freddie Mac     (HMDA)
----------------------------------------------------------------------------------------------------------------
2013..........................  Low-Income Refinance          ...........      519,753      306,205  ...........
                                 Mortgages.
                                Total Refinance Mortgages...  ...........    2,170,063    1,309,435  ...........
                                Low-Inc. % of Refinance                NA        24.0%        23.4%           NA
                                 Mortgages.
                                Low-Income Loan               ...........       11,858       14,757  ...........
                                 Modifications.
                                Total Loan Modifications....  ...........       16,478       21,599  ...........
                                Low-Inc. % of Loan                     NA        72.0%        68.3%           NA
                                 Modifications.
                                Low-Income Refi + Mod Total.  ...........      531,611      320,962  ...........
                                Refi + Mod Total............  ...........    2,186,541    1,331,034  ...........
                                Low-Inc. % Refinance Total..          20%        24.3%        24.1%           NA
----------------------------------------------------------------------------------------------------------------
2012..........................  Low-Income Refinance          ...........      582,505      323,822  ...........
                                 Mortgages.
                                Total Refinance Mortgages...  ...........    2,742,560    1,508,186  ...........
                                Low-Inc. % of Refinance                NA        21.2%        21.5%        22.3%
                                 Mortgages.
                                Low-Income Loan               ...........       22,806       21,753  ...........
                                 Modifications.
                                Total Loan Modifications....           NA       31,288       31,390  ...........
                                Low-Inc. % of Loan            ...........        72.9%        69.3%           NA
                                 Modifications.
                                Low-Income Refi + Mod Total.  ...........      605,311      345,575  ...........
                                Refi + Mod Total............  ...........    2,773,848    1,539,576  ...........
                                Low-Inc. % Refinance Total..          20%        21.8%        22.4%           NA
----------------------------------------------------------------------------------------------------------------
2011..........................  Low-Income Refinance          ...........      384,598      231,948  ...........
                                 Mortgages.
                                Total Refinance Mortgages...  ...........    1,802,131    1,092,894  ...........
                                Low-Inc. % of Refinance                NA        21.3%        21.2%        21.5%
                                 Mortgages.
                                Low-Income Loan               ...........       45,656       35,625  ...........
                                 Modifications.
                                Total Loan Modifications....  ...........       64,124       52,910  ...........
                                Low-Inc. % of Loan                     NA        71.2%        67.3%           NA
                                 Modifications.
                                Low-Income Refi + Mod Total.  ...........      430,254      267,573  ...........
                                Refi + Mod Total............  ...........    1,866,255    1,145,804  ...........
                                Low-Inc. % Refinance Total..          21%        23.1%        23.4%           NA
----------------------------------------------------------------------------------------------------------------
2010..........................  Low-Income Refinance          ...........      373,105      286,741  ...........
                                 Mortgages.
                                Total Refinance Mortgages...  ...........    1,934,270    1,378,578  ...........
                                Low-Inc. % of Refinance                NA        19.3%        20.8%        20.2%
                                 Mortgages.
                                Low-Income Loan               ...........       44,343       25,244  ...........
                                 Modifications.
                                Total Loan Modifications....  ...........       63,428       37,411  ...........
                                Low-Inc. % of Loan                     NA        69.9%        67.5%           NA
                                 Modifications.
                                Low-Income Refi + Mod Total.  ...........      417,448      311,985  ...........
                                Refi + Mod Total............  ...........    1,997,698    1,415,989  ...........
                                Low-Inc. % Refinance Total..          21%        20.9%        22.0%           NA
----------------------------------------------------------------------------------------------------------------
Source: Performance as reported by the Enterprises for 2013; official performance as determined by FHFA for 2012-
  12. ``Low-income'' refers to borrowers with incomes no greater than 80 percent of Area Median Income (AMI).
Note: An Enterprise passes a goal if (1) its performance matches or exceeds the pre-set benchmark level, or (2)
  if its performance falls short of the benchmark level but equals or exceeds the corresponding share of
  conventional conforming mortgages originated in the primary mortgage market, as determined by FHFA's analysis
  of Home Mortgage Disclosure Act (HMDA) data for the year, is shown in the last column.

B. Projections From the Market Estimation Models

    The projections from FHFA's market estimation models for the two 
single-family owner-occupied home purchase housing goals, one home 
purchase subgoal, and the refinancing mortgage housing goal, are 
provided in Table 10. For 2015 through 2017, FHFA's model projects 
that the low-income borrower shares of the home purchase mortgage 
market will be a point estimate of 20.9 percent, 20.2 percent and 
19.8 percent, respectively. The ranges for 2015 are between 14.2 
percent and 27.6 percent; the ranges for 2016 are between 12.3 
percent and 28.1 percent; and the ranges for 2017 are between 10.8 
percent and 28.8 percent.
    FHFA's model projects that the very low-income borrower share of 
the home purchase mortgage market will be a point estimate of 5.8 
percent for 2015, 5.7 percent for 2016 and 5.6 percent for 2017. The 
ranges for 2015 are between 3.8 percent and 7.8 percent; the ranges 
for 2016 are between 3.3 percent and 8.1 percent; and the ranges for 
2017 are between 2.8 percent and 8.4 percent.
    FHFA's model projects that the share of subgoal-qualifying 
mortgages in low-income areas in the home purchase mortgage market, 
excluding designated disaster areas, will be a point estimate of 
14.7 percent for 2015, 14.7 percent for 2016 and 14.2 percent for 
2017. The ranges for 2015 are between 10.6 percent and 18.8 percent; 
the ranges for 2016 are between 9.6 percent and 19.8 percent; and 
the ranges for 2017 are between 8.3 percent and 20.1 percent.
    FHFA's model projects that the share of refinancing mortgages 
made to low-income borrowers will be a point estimate of 31.0 
percent in 2015, 33.5 percent in 2016 and 34.2 percent in 2017. The 
ranges for 2015 are between 24.2 percent and 37.8 percent; the 
ranges for 2016 are between 25.4 percent and 41.6 percent; and the 
ranges for 2017 are between 25.1 percent and 43.3 percent.

[[Page 54516]]

[GRAPHIC] [TIFF OMITTED] TP11SE14.019


    Dated: August 29, 2014.
Melvin L. Watt,
Director, Federal Housing Finance Agency.

[FR Doc. 2014-21118 Filed 9-10-14; 8:45 am]
BILLING CODE 8070-01-P