[Federal Register Volume 85, Number 245 (Monday, December 21, 2020)]
[Proposed Rules]
[Pages 82965-82970]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-28084]
=======================================================================
-----------------------------------------------------------------------
FEDERAL HOUSING FINANCE AGENCY
12 CFR Part 1282
RIN 2590-AB12
Enterprise Housing Goals
AGENCY: Federal Housing Finance Agency.
ACTION: Advance notice of proposed rulemaking.
-----------------------------------------------------------------------
SUMMARY: The Federal Housing Finance Agency (FHFA) is publishing an
Advance Notice of Proposed Rulemaking (ANPR) requesting public comment
on a variety of questions related to potential changes to the
regulation establishing housing goals for Fannie Mae and Freddie Mac
(Enterprises). FHFA will consider public comments received on these
questions in order to inform rulemaking that is planned for 2021 to
establish single-family and multifamily housing goals benchmark levels
for 2022 and
[[Page 82966]]
beyond, and to make other changes to the Enterprise housing goals
regulation, as appropriate.
DATES: Comments must be received on or before February 28, 2021.
ADDRESSES: You may submit your comments on the ANPR, identified by
regulatory information number (RIN) 2590-AB12, by any one of the
following methods:
Agency website: https://www.fhfa.gov/open-for-comment-or-input.
Federal eRulemaking Portal: https://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-AB12.
Hand Delivered/Courier: The hand delivery address is:
Alfred M. Pollard, General Counsel, Attention: Comments/RIN 2590-AB12,
Federal Housing Finance Agency, Eighth Floor, 400 Seventh Street SW,
Washington, DC 20219. 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-AB12, Federal
Housing Finance Agency, Eighth Floor, 400 Seventh Street SW,
Washington, DC 20219. 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: Ted Wartell, Associate Director,
Office of Housing & Community Investment, Division of Housing Mission
and Goals, at (202) 649-3157, [email protected]; Padmasini Raman,
Supervisory Policy Analyst, Office of Housing & Community Investment,
Division of Housing Mission and Goals, at (202) 649-3633,
[email protected]; or Kevin Sheehan, Associate General Counsel,
Office of General Counsel, (202) 649-3086, [email protected].
These are not toll-free numbers. The mailing address is: Federal
Housing Finance Agency, 400 Seventh Street SW, Washington, DC 20219.
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 this ANPR. 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 website at https://www.fhfa.gov. In
addition, copies of all comments received will be available for
examination by the public through the electronic rulemaking docket for
this ANPR, also located on the FHFA website.
II. Advance Notice of Proposed Rulemaking
This ANPR seeks public comments on a variety of questions related
to potential changes to the Enterprise housing goals regulation.\1\
FHFA plans to issue a proposed rule in 2021 that would establish new
benchmark levels for the Enterprise housing goals for 2022 and beyond,
as well as make other changes to the regulation as appropriate. Based
on the comments received in response to this ANPR, FHFA may propose
revisions to the Enterprise housing goals regulation for comment in the
proposed rule planned for 2021 or in a later rulemaking. FHFA invites
comments on the specific questions set forth in this ANPR, and on any
other issues that commenters think should be addressed as part of the
rulemaking that will establish the housing goals benchmark levels for
2022 and beyond.
---------------------------------------------------------------------------
\1\ 12 CFR part 1282.
---------------------------------------------------------------------------
Question 1: Are there categories of loans that should be excluded
from receiving housing goals credit under the Federal Housing
Enterprises Financial Safety and Soundness Act of 1992 (Safety and
Soundness Act) provisions on ``unacceptable business and lending
practices?''
The Safety and Soundness Act requires FHFA to exclude ``segments of
the market determined to be unacceptable or contrary to good lending
practices, inconsistent with safety and soundness, or unauthorized for
purchase by the enterprises'' from consideration in setting the single-
family housing goals.\2\ FHFA may not give credit toward achievement of
the housing goals for mortgages that are ``determined to be
unacceptable or contrary to good lending practices, inconsistent with
safety and soundness, or unauthorized for purchase by the
enterprises.'' \3\
---------------------------------------------------------------------------
\2\ See 12 U.S.C. 4562(e)(1).
\3\ See 12 U.S.C. 4562(i).
---------------------------------------------------------------------------
The current exclusions under the Enterprise housing goals
regulation generally focus on types of loans or other product
characteristics, rather than loans that are unacceptable or contrary to
good lending practices. However, FHFA may also make exclusions based on
factors considered in underwriting loans. For single-family loan
purchases, the Enterprises use their own automated underwriting systems
to evaluate whether a loan is eligible for purchase based on factors
including, but not limited to, a borrower's creditworthiness. These
automated underwriting systems assess a borrower's ability to make his
or her mortgage payments over a two- or three-year time period
following origination. The Enterprises establish a cut-off threshold
based on their credit risk appetite, and only those loans for which the
borrowers' predicted risk is deemed below that threshold are eligible
to be sold to the Enterprises. The Enterprises also price loans
according to their pricing grids to partially account for the risk
profile of a loan.
FHFA generally considers all conventional conforming first lien
mortgages that are owner-occupied as potentially eligible for single-
family housing goals credit, subject to certain exclusions. For
instance, under the Safety and Soundness Act, investor loans are
excluded, and under the Enterprise housing goals regulation, investor
loans and second loans (i.e., any subordinate lien mortgages) are
excluded, from consideration for the single-family housing goals.\4\ As
another example, mortgages for secondary residences are excluded from
consideration for the single-family housing goals.\5\
---------------------------------------------------------------------------
\4\ See 12 U.S.C. 4562(a) and 12 CFR 1282.16(b)(10).
\5\ See 12 CFR 1282.16(b)(8).
---------------------------------------------------------------------------
FHFA requests comment on whether there are other categories of
loans that should be excluded from receiving housing goals credit under
the statute's ``unacceptable business and lending practices''
provisions. For example, should FHFA consider factors to promote
borrower sustainability? How would FHFA determine and measure
sustainability? Should risk-layering be considered in a manner that is
distinct from the eligibility requirements of the Enterprises? \6\ What
criteria should be used to identify such loans? What public policies
should FHFA consider when assessing certain categories of loans? Are
there other loan characteristics that could be, in some instances, not
in the long-term interest
[[Page 82967]]
of the borrower, even if they are not treated as abusive or unfair
under existing consumer protection statutes?
---------------------------------------------------------------------------
\6\ Some examples of factors associated with higher risk include
high debt-to-income ratio, high loan-to-value ratio, or low credit
score, among others. ``Risk-layering'' refers to loans with more
than one such factor.
---------------------------------------------------------------------------
Question 2: Are there ways to determine whether the low-income
areas home purchase subgoal has resulted in the displacement of
residents from certain communities, or to measure the extent of any
such displacement? Should FHFA consider modifying the low-income areas
home purchase subgoal to address such concerns? If so, how?
Concerns have been raised about gentrification in low-income areas
and high-minority census tracts, and the potential displacement of
long-time low-income residents from such areas and tracts. The current
Enterprise housing goals regulation does not restrict the income of
borrowers whose mortgages qualify for the low-income areas home
purchase subgoal if the mortgages are on properties located in a low-
income census tract. Under the regulation, the Enterprises can meet the
low-income areas home purchase subgoal by acquiring home purchase
mortgages that are either: (1) Originated for borrowers located in low-
income census tracts (defined as census tracts with median income less
than or equal to 80 percent of area median income (AMI)); or (2)
originated for borrowers with incomes less than or equal to AMI 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 AMI).\7\ There are no borrower income
requirements for criterion (1). While Enterprise mortgage acquisitions
could qualify under either or both criteria, the share of the
Enterprises' mortgage acquisitions satisfying criterion (1) has been
consistently higher than the share of Enterprise mortgage acquisitions
satisfying criterion (2) in recent years. For example, among the
Enterprises' mortgage acquisitions in 2019, 15.0 percent of mortgages
met only criterion (1), 10.2 percent met only criterion (2), and 6.4
percent met both criteria, as can be seen in Table 1 below. All of
these shares have been increasing steadily since 2010.
---------------------------------------------------------------------------
\7\ See 12 CFR 1281.1 and 1282.12(f).
[GRAPHIC] [TIFF OMITTED] TP21DE20.051
[[Page 82968]]
FHFA's analysis of Home Mortgage Disclosure Act (HMDA) data in
Table 2 shows that both low-income areas and high-minority areas have
increasing shares of borrowers with incomes at or above 100 percent of
AMI, although loans to borrowers with incomes over 100 percent of AMI
do not qualify for the minority areas component of the goal. For
instance, the share of loans made to borrowers with incomes greater
than 100 percent of AMI and residing in these low-income census tracts
increased from 38.8 percent in 2010 to 44.2 percent in 2016, after
dropping to 36.5 percent in 2012. This share has been relatively stable
since then, with a 43.3 percent share in 2019. Nonetheless, borrowers
with higher incomes have made up an increasing share of the mortgage
market in low-income areas.
A similar trend exists among borrowers residing in high minority
census tracts, with the share of higher income borrowers increasing
from 42.5 percent in 2010 to 50 percent in 2016. That share declined to
47.8 percent in 2019 after hovering around 49 percent in 2018 and 2019.
[GRAPHIC] [TIFF OMITTED] TP21DE20.052
Table 3 shows that the share of loans made to borrowers with
incomes greater than 100 percent of AMI and residing in low-income
census tracts increased from 40.7 percent in 2010 to 42.8 percent in
2016. However, that share has declined since then, dropping to a low of
37 percent in 2019. This trend is similar among borrowers residing in
high minority census tracts, with the share of higher income borrowers
increasing from 45.4 percent in 2010 to 48.5 percent in 2016, after
dropping to a low of 42.8 percent in 2012. This share has since
declined to 42.8 percent in 2019.
[[Page 82969]]
[GRAPHIC] [TIFF OMITTED] TP21DE20.053
The presence of higher-income borrowers in these areas may be a
sign of improved economic indicators for the community, but there is
some concern that such a trend as seen particularly in the HMDA data
analysis could also be accompanied by the displacement of lower income
households. Change in the mix of renters to owner-occupied households
often precedes and accompanies these trends. FHFA is aware that this
particular subgoal may encourage the Enterprises to focus on purchasing
loans for higher-income households in low-income and high-minority
areas, and FHFA is also aware of concerns about the impact of rising
housing costs on current residents in low-income or higher-minority
areas. However, it is possible that higher-income households would have
moved into these areas even in the absence of the subgoal. In
recognition of these issues, FHFA has been very conservative in setting
the benchmark levels for this subgoal.
Recently, in response to the issuance of FHFA's proposed rule for
the 2021 Enterprise housing goals, FHFA received two comment letters
from policy advocacy organizations that referenced concerns about
displacement and gentrification related to this subgoal. The comment
letters supported and encouraged FHFA's efforts to monitor and analyze
trends regarding this subgoal. The comment letters also requested
release of additional data on borrower incomes associated with goals-
qualifying loans.
FHFA requests comment on how best to achieve the policy objectives
of this subgoal. Should FHFA shift the focus of this subgoal to lower-
income households? Should FHFA impose an AMI limit on borrowers for
mortgages that qualify for the subgoal? Should FHFA set a limit on the
number or share of mortgages for borrowers with incomes over 100
percent of AMI that count towards the subgoal?
Question 3: Should FHFA revise the low-income areas home purchase
subgoal to consider loans on properties located in Opportunity Zones,
and if so, how should such loans be treated?
Opportunity Zones were created by the 2017 Tax Cuts and Jobs Act,
and are designed to spur economic development and job creation in
distressed communities by providing tax benefits to investors who
invest in these communities.\8\ Investors may defer tax on eligible
capital gains by making a qualifying investment (including real estate)
in a Qualified Opportunity Fund (QOF). A QOF is an investment vehicle
with at least 90 percent of its holdings in a Qualified Opportunity
Zone (QOZ) property. QOZs are census tracts that meet certain poverty
rate and median family income requirements and that have been
designated as such by the U.S. Department of the Treasury, based on
nominations from the Chief Executive Officers of each State. There are
around 8,700 QOZ tracts, the majority of which are low-income tracts.
---------------------------------------------------------------------------
\8\ Public Law 115-97, section 13823, 131 Stat. 2054, 2183,
codified at 26 U.S.C. 1400Z-1 and 1400Z-2 (Dec. 22, 2017). Note:
Public Law 115-97 is commonly referred to as the ``Tax Cuts and Jobs
Act,'' but that short title was omitted from the law as enacted.
---------------------------------------------------------------------------
Because the Opportunity Zones program is new, its impact is still
largely unknown. FHFA has noted that in 2019, over 17 percent of low-
income area home purchase goal loans are in QOZs. Additionally, 12
percent of multifamily low-income goal units and 20 percent of small
multifamily low-income goal units are in QOZs. To help track how QOF
projects are achieving the program's intended goal of community
revitalization, the U.S. Impact the U.S. Impact [MB1] Investing
Alliance, the Beeck Center for Social Impact + Innovation at Georgetown
University, and the Federal Reserve Bank of New York partnered to
create the Opportunity Zones Reporting Framework, a tool that may be
used to
[[Page 82970]]
assess the intended goal of community revitalization.\9\
---------------------------------------------------------------------------
\9\ See https://ozframework.org/about-index.
---------------------------------------------------------------------------
FHFA requests comment on whether and how the objectives of the
Opportunity Zones program would align with the purpose of the
Enterprise low-income areas home purchase subgoal. Should FHFA consider
giving credit under this subgoal for loans on properties located in
Opportunity Zones? What criteria should FHFA use to focus on
Opportunity Zones that would have the largest benefit to a community?
If included in the subgoal, how can FHFA ensure that the loans on
properties in Opportunity Zones benefit these communities? How can FHFA
use this subgoal to target slow-growing communities that need these
loans? Should FHFA require the use of the Opportunity Zone Reporting
Framework for impact tracking? Are there other public policy
considerations related to Opportunity Zones that FHFA should consider?
Question 4: Is there evidence that the Enterprise housing goals
have helped expand low-income homeownership in the marketplace?
The Safety and Soundness Act directs FHFA to evaluate Enterprise
support for low-income homeownership by measuring the low-income share
of the mortgages that the Enterprises have acquired.\10\
---------------------------------------------------------------------------
\10\ See 12 U.S.C. 4562(a)(1).
---------------------------------------------------------------------------
FHFA requests comment on the factors it should consider in
assessing the effectiveness of the Enterprises' activities in expanding
low-income homeownership. In order to improve the housing goals, how
should impacts be evaluated? What are the appropriate counterfactuals
to consider? Is it possible to determine whether acquired mortgages
that count toward achievement of the goals would have been originated
in the absence of the housing goals? FHFA specifically requests comment
on whether--and under the statute, how--other support activities
undertaken by the Enterprises should be considered when FHFA reviews
the Enterprises' performance on the single-family housing goals.
Mark A. Calabria,
Director, Federal Housing Finance Agency.
[FR Doc. 2020-28084 Filed 12-18-20; 8:45 am]
BILLING CODE 8070-01-P