[Federal Register Volume 87, Number 159 (Thursday, August 18, 2022)]
[Proposed Rules]
[Pages 50794-50803]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-17868]


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FEDERAL HOUSING FINANCE AGENCY

12 CFR Part 1282

RIN 2590-AB21


2023-2024 Multifamily Enterprise Housing Goals

AGENCY: Federal Housing Finance Agency.

ACTION: Proposed rule.

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SUMMARY: The Federal Housing Finance Agency (FHFA or the Agency) is 
issuing a proposed rule with request for comments on the multifamily 
housing goals for Fannie Mae and Freddie Mac (the Enterprises) for 2023 
and 2024. The Federal Housing Enterprises Financial Safety and 
Soundness Act of 1992 (the Safety and Soundness Act) requires FHFA to 
establish annual housing goals for mortgages purchased by the 
Enterprises. Under FHFA's existing housing goals regulation, the 
multifamily housing goals for the Enterprises include benchmark levels 
through the end of 2022 based on the total number of affordable units 
in multifamily properties financed by mortgage loans purchased by the 
Enterprise each year. This proposed rule would amend the regulation to 
establish benchmark levels for the multifamily housing goals for 2023 
and 2024 based on a new methodology--the percentage of affordable units 
in multifamily properties financed by mortgages purchased by the 
Enterprise each year.

DATES: FHFA will accept written comments on the proposed rule on or 
before October 17, 2022.

ADDRESSES: You may submit your comments on the proposed rule, 
identified by regulatory information number (RIN) 2590-AB21, by any one 
of the following methods:
     Agency Website: 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-AB21.
     Hand Delivered/Courier: The hand delivery address is: 
Clinton Jones, General Counsel, Attention: Comments/RIN 2590-AB21, 
Federal Housing Finance Agency, 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: Clinton Jones, 
General Counsel, Attention: Comments/RIN 2590-AB21, Federal Housing 
Finance Agency, 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, 
Housing and Community Investment, Division of Housing Mission and 
Goals, (202) 649-3157, [email protected]; Padmasini Raman, 
Supervisory Policy Analyst, Housing and Community Investment, Division 
of Housing Mission and Goals, (202) 649-3633, [email protected]; 
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. For TTY/TRS users with hearing 
and speech disabilities, dial 711 and ask to be connected to any of the 
contact numbers above.

SUPPLEMENTARY INFORMATION:

I. Comments

    FHFA invites comments on all aspects of the proposed rule and will 
take all comments germane to the proposed rule into consideration 
before issuing a final rule. Copies of all such comments will be posted 
without change, including any personal information you provide such as 
your name, address, email address, and telephone number, on

[[Page 50795]]

FHFA's public website at http://www.fhfa.gov. In addition, copies of 
all such comments received will be available for examination by the 
public through the electronic rulemaking docket for this proposed rule 
also located on the FHFA website.
    Commenters are encouraged to review and comment on all aspects of 
the proposed rule, including the proposed multifamily housing goals 
benchmark levels and the proposed new multifamily housing goals 
methodology based on the percentage of affordable units in multifamily 
properties financed by mortgages purchased by the Enterprise each year.

II. Background

A. Statutory and Regulatory Background for the Housing Goals

    The Safety and Soundness Act requires FHFA to establish several 
annual housing goals for both single-family and multifamily mortgages 
purchased by the Enterprises.\1\ The achievement of the annual housing 
goals is 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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    Since 2010, FHFA has established annual housing goals for 
Enterprise purchases of both single-family and multifamily mortgages by 
rulemaking, consistent with the requirements of the Safety and 
Soundness Act. FHFA's most recent rule, issued in December 2021, 
amended the housing goals regulation to establish benchmark levels for 
the single-family housing goals for 2022 through 2024 and benchmark 
levels for the multifamily housing goals for 2022 only.\3\ FHFA 
established the multifamily housing goals for a single year in response 
to the uncertainty in housing markets associated with COVID-19 and the 
potential for unforeseen changes to multifamily market conditions in 
2023 and 2024. FHFA also considered comment letters submitted in 
response to the 2021 proposed rule that urged the Agency to establish 
one- or two-year multifamily goal benchmark levels, in part due to 
those same factors.
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    \3\ See 86 FR 73641 (December 28, 2021).
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B. Adjusting the Housing Goals

    If, after publication of the final rule establishing the 
multifamily housing goals for 2023 and 2024, FHFA determines that any 
of the single-family or multifamily housing goals or subgoals 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 the goal(s) such 
as reducing the benchmark level(s) through the processes in the 
existing regulation. FHFA may also take other actions consistent with 
the Safety and Soundness Act and the Enterprise housing goals 
regulation based on new information or developments that occur after 
publication of the final rule.
    For example, under the Safety and Soundness Act and the Enterprise 
housing goals regulation, FHFA may reduce the benchmark levels in 
response to an Enterprise petition for reduction for any of the single-
family or multifamily housing goals or subgoals in a particular year 
based on a determination by FHFA that: (1) market and economic 
conditions or the financial condition of the Enterprise require a 
reduction; or (2) 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 Enterprises' charter acts.\4\
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    \4\ See 12 CFR 1282.14(d).
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    The Safety and Soundness Act and the Enterprise housing goals 
regulation also take into account the possibility that achievement of a 
particular housing goal or subgoal may or may not have been feasible 
for an Enterprise to achieve. If FHFA determines that a housing goal or 
subgoal was not feasible for an Enterprise to achieve, then the statute 
and regulation provide for no further enforcement of that housing goal 
or subgoal for that year.\5\
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    \5\ See 12 CFR 1282.21(a); 12 U.S.C. 4566(b).
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    If FHFA determines that an Enterprise failed to meet a housing goal 
or subgoal and that achievement of the housing goal or subgoal was 
feasible, then the statute and regulation provide FHFA with 
discretionary authority to require the Enterprise to submit a housing 
plan describing the specific actions the Enterprise will take to 
improve its housing goals or subgoals performance.
    The actions described in this section provide some flexibility for 
FHFA to respond to new information or developments that occur after 
publication of the final rule. The new methodology proposed here and 
discussed further below, which would set the benchmark levels as a 
percentage share of goal-eligible units backing mortgages acquired by 
each Enterprise, could reduce the likelihood that FHFA will be required 
to modify the benchmark levels in response to unexpected market 
developments after publication of the final rule.

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. Proposed Change in Methodology for Measuring the Multifamily 
Housing Goals

    Since publication of the December 2021 final housing goals rule, 
FHFA has considered alternative ways to measure Enterprise performance 
on the multifamily housing goals. As a result, FHFA is now proposing 
multifamily housing goals for both 2023 and 2024 that would measure 
Enterprise performance as the percentage of affordable units in 
multifamily properties financed by mortgages purchased by the 
Enterprises, rather than using the current methodology of measuring 
performance based on the absolute number of affordable units in the 
properties. The requirements for determining which multifamily mortgage 
purchases are counted, or not counted, continue to be defined in the 
existing housing goals regulation and this proposed rule would not make 
any changes to those requirements. This proposed rule specifically 
requests comment on the proposed new methodology for measuring 
Enterprise performance on the multifamily housing goals, as well as on 
the proposed benchmark levels for 2023 and 2024 under this new 
methodology.
    The multifamily goals, as defined under the Safety and Soundness 
Act, include categories for mortgages on multifamily properties 
(properties with five or more dwelling units) with rental units 
affordable to low-income families and mortgages on multifamily 
properties with rental units affordable to very low-income families. 
The Enterprise housing goals regulation also

[[Page 50796]]

includes a small multifamily low-income subgoal for properties with 5 
to 50 units. Under the current regulation, the performance of the 
Enterprises on the multifamily goals is evaluated based on the number 
of affordable units in properties backing mortgages purchased by an 
Enterprise.
    Under the proposed rule, the Enterprises would continue to report 
on the number of multifamily units acquired each year, including data 
on units that are affordable to low-income households, very low-income 
households, and low-income households in small multifamily properties. 
In order to meet each of the multifamily goals, each Enterprise would 
be required to ensure that the percentage of units that are affordable 
meets or exceeds the benchmark level. By changing to a percentage share 
of the total multifamily units in properties securing goal-eligible 
mortgages acquired by each Enterprise in a year, the proposed 
multifamily housing goals would adjust automatically to the volume of 
the Enterprise's multifamily business each year, while ensuring that 
each Enterprise's focus remains on affordable segments.
    FHFA is not proposing any changes to the current rules in 
Sec. Sec.  1282.13, 1282.15, and 1282.16 of the Enterprise housing 
goals regulation for determining which multifamily mortgages are 
eligible to be counted towards the goals, and of those, which meet the 
affordability criteria. FHFA is proposing technical revisions to Sec.  
1282.15 to reflect the new proposed methodology. Section 1282.15(c) 
would be revised to express the percentage of affordable units in 
multifamily properties financed by mortgages purchased by the 
Enterprises in terms of a defined numerator and denominator. Proposed 
Sec.  1282.15(c) would mirror the description of the single-family 
housing goals that currently exists in Sec.  1282.15(a), which already 
measures the single-family housing goals as percentages.
    In addition, proposed Sec.  1282.15(e)(3) would clarify the 
treatment of rental units with missing affordability information. Under 
the current regulation, an Enterprise is permitted to estimate the 
affordability of such units, up to a maximum of 5 percent of the total 
number of rental units in properties securing multifamily mortgages 
purchased by the Enterprise in the current year. Rental units with 
missing affordability information are not counted for purposes of the 
multifamily housing goals to the extent that the number of such units 
exceeds the nationwide maximum of 5 percent. Rental units also are 
excluded if it is not possible to estimate the affordability of such 
units. The proposed rule would clarify that under the new methodology, 
any units with missing affordability information in excess of the 5 
percent nationwide maximum would be excluded from the numerator of the 
multifamily goals but would be included in the denominator. This 
treatment would be consistent with the objective of the current 
regulation to encourage the Enterprises to obtain affordability 
information whenever possible. The proposed rule would exclude rental 
units with missing affordability information from both the numerator 
and the denominator if it is not possible to estimate the affordability 
of such units. This treatment would reflect the fact that the 
availability of information needed to estimate affordability is outside 
the control of the Enterprises.
    In this preamble, ``goal-eligible units'' is used as a synonym for 
``denominator,'' to refer to all dwelling units that are financed by 
mortgage purchases that could be counted for purposes of the 
multifamily housing goals and subgoals. ``Goal-qualifying units'' is 
used as a synonym for ``numerator,'' to refer to the goal-eligible 
units that meet the respective affordability requirements of each 
multifamily goal.\6\ The counting rules in Sec.  1282.16(b) exclude 
certain types of mortgages from eligibility for housing goals credit, 
such as multifamily mortgages with federal guarantees and subordinate 
lien multifamily mortgages. FHFA specifically requests comment on 
whether any other changes to the existing rules for counting 
multifamily mortgages should be made to address any unintended 
interactions that the proposed change to the methodology for measuring 
the multifamily housing goals might have on the market or affordable 
market segments.
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    \6\ See 12 CFR 1282.15(c).
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    The proposed change to the methodology would address recurring 
issues that arise under the existing housing goals structure. Under the 
current methodology, FHFA sets the multifamily housing goal benchmark 
levels based on the absolute number of units in properties securing 
goal-eligible mortgages that the Enterprise acquire in order to meet 
the benchmark levels. This requires FHFA to be able to forecast the 
multifamily market and the Enterprise volume of multifamily mortgage 
purchases when setting the benchmark levels. Attempting to forecast 
multifamily market conditions and Enterprise purchase volumes three or 
four years into the future is an exceedingly difficult exercise, made 
even more complicated by the lack of a comprehensive dataset of 
multifamily loan origination volume similar to the Home Mortgage 
Disclosure Act (HMDA) data available for the single-family mortgage 
market. Under the proposed new methodology, FHFA would set the 
benchmark levels as a percentage share of the goal-eligible units in 
properties securing mortgages acquired by each Enterprise in a year. 
This would encourage the Enterprises to continue focusing on serving 
low-income renter families in a prudent and deliberate manner within 
the context of their loan acquisitions. The proposed new percentage-
based benchmark levels would also mean that the absolute number of 
affordable units needed to meet each of the housing goals each year 
would adjust automatically based on the Enterprise's multifamily loan 
purchase volume and reflect actual multifamily market conditions, as 
the number of goal-qualifying units needed would scale up or down in 
proportion with Enterprise loan acquisitions. Operationally, the 
proposed change to the methodology would have minimal impact as it 
would not change the existing counting rules, reporting requirements, 
or definitions used for the housing goals in the housing goals 
regulation.
    Setting the multifamily goal benchmark levels as the percentage of 
affordable units among all goal-eligible units backing mortgages 
acquired by the Enterprise is consistent with the percentage-based 
methodology followed for the single-family housing goals and should be 
familiar to both Enterprises and external stakeholders. The proposed 
change in methodology would continue to allow FHFA to track, report, 
and verify data on multifamily units backing mortgages purchased by the 
Enterprises, including data on affordable units by income level.
    Although FHFA believes the proposed change to the methodology for 
measuring the multifamily housing goals will make the multifamily 
housing goals more responsive to market conditions and minimize 
operational impact on FHFA and the Enterprises, FHFA recognizes that 
there may be some drawbacks associated with the proposed change. For 
example, by setting the benchmark levels as a percentage share of goal-
eligible units, the benchmark levels will no longer specify a minimum 
number of affordable units backing mortgages acquired by the 
Enterprises.
    However, there are a number of other factors that support the 
proposed change to percentage-based multifamily

[[Page 50797]]

housing goals. For example, the existing methodology for measuring the 
multifamily housing goals does not incentivize or require that an 
Enterprise continue to acquire mortgages backed by goal-qualifying 
units after the Enterprise has purchased enough mortgages to meet the 
minimum numeric benchmark levels. The proposed percentage-based 
benchmark levels would require the Enterprises to continue to support 
the affordable segment of the market as their mortgage acquisitions 
increase, rather than potentially reducing their focus on supporting 
affordable multifamily properties once the minimum numeric benchmark 
levels are achieved.
    Furthermore, the proposed change in methodology for measuring the 
multifamily housing goals would help address concerns raised in a 
number of comment letters received in response to the 2022-2024 
Enterprise housing goals proposed rule published in August 2021.\7\ 
FHFA received several comment letters suggesting that the Agency create 
and implement an alternative multifamily goal structure. A trade 
association proposed an alternative goal structure to align the 
multifamily housing goals, the Conservatorship Scorecard cap on 
multifamily volume, which includes requirements for supporting 
affordable multifamily properties, and limits on multifamily lending 
under the January 14, 2021 letter agreements amending the Preferred 
Stock Purchase Agreements (PSPAs) \8\ into a single set of standards, 
as these three standards are not aligned and measure Enterprise 
multifamily loan purchase performance differently. A policy advocacy 
group similarly suggested aligning the multifamily housing goals with 
the Conservatorship Scorecard requirements for supporting affordable 
multifamily properties, stating that fixed-unit goals do not vary based 
on the actual size of the market and could lead the Enterprises to 
stretch to meet the goals, particularly in an inflationary or rising 
interest rate environment. Another trade association commented that 
fixed-unit goals require periodic adjustment to incorporate unknown 
market factors, can become disjointed from actual market conditions, 
and can incentivize erratic Enterprise competitive behavior. In 
addition to the comments received in response to the 2022-2024 proposed 
rule, FHFA has received comments in response to prior rulemakings 
suggesting that the multifamily goals should be flexible based on 
market dynamics.\9\
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    \7\ See comments received in response to the 2022-2024 
Enterprise Housing Goals Proposed Rule, 86 FR 47398 (August 25, 
2021), https://www.fhfa.gov/SupervisionRegulation/Rules/Pages/Comment-List.aspx?RuleID=706.
    \8\ FHFA announced on September 14, 2021, that certain 
provisions of the January 14, 2021 letter agreements, including the 
limits on multifamily lending, were being suspended pending further 
review. See FHFA Press Release, ``FHFA and Treasury Suspending 
Certain Portions of the 2021 Preferred Stock Purchase Agreements,'' 
https://www.fhfa.gov/Media/PublicAffairs/Pages/FHFA-and-Treasury-Suspending-Certain-Portions-of-the-2021-Preferred-Stock-Purchase-Agreements.aspx.
    \9\ See comments received in response to the 2015-2017 
Enterprise Housing Goals Proposed Rule, 79 FR 54481 (September 11, 
2014), https://www.fhfa.gov/SupervisionRegulation/Rules/Pages/Comment-List.aspx?RuleID=498.
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    FHFA specifically requests comment on the proposal to change the 
methodology for measuring the multifamily housing goals from a fixed 
number of goal-qualifying units to a goal-qualifying percentage share 
of all goal-eligible units, as well as any other changes that might be 
appropriate if a change to percentage-based multifamily housing goals 
is adopted in the final rule.

IV. Multifamily Housing Goals

A. Factors Considered for the Proposed Multifamily Housing Goal 
Benchmark Levels

    In proposing benchmark levels for the multifamily housing goals for 
2023 and 2024, FHFA has considered the statutory factors outlined in 
section 1333(a)(4) of the Safety and Soundness Act. The statutory 
factors are:

    1. National multifamily mortgage credit needs and the ability of 
the Enterprises to provide additional liquidity and stability for 
the multifamily mortgage market;
    2. The performance and effort of the Enterprises 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 Enterprises 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 
Enterprises.\10\
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    \10\ See 12 U.S.C. 4563(a)(4).

    This section analyzes key data related to several of the factors 
that impact each of the multifamily goals, including the overall 
economic outlook, multifamily mortgage market conditions, affordability 
concerns in the multifamily mortgage market, the role of the 
Enterprises in supporting the multifamily mortgage market, and the need 
to maintain the sound financial condition of the Enterprises. The 
following sections include additional analysis specific to each 
multifamily goal and subgoal, including data on the past performance of 
the Enterprises and the size of the market for each multifamily goal 
and subgoal.
    Overall economic outlook. There are many factors that impact the 
affordable housing market as a whole, and changes to any one of them 
could significantly impact the ability of the Enterprises to meet the 
housing goals. FHFA will continue to monitor the affordable housing 
market and take these factors into account when considering the 
feasibility of the goals.
    On June 15, 2022, the Federal Reserve noted that despite recent 
strong job gains and a low unemployment rate, inflation remains 
elevated.\11\ The Federal Reserve noted that the invasion of Ukraine by 
Russia and related events are causing additional upward pressure on 
inflation and affecting global economic activity. The Federal Reserve 
added that COVID-19 pandemic-related lockdowns in China are likely to 
worsen supply chain disruptions. In an effort to achieve maximum 
employment and inflation of 2 percent in the long run, the Federal Open 
Market Committee (FOMC) raised its target range for the federal funds 
rate to 1.5 percent to 1.75 percent, with plans to increase the target 
range as appropriate until its goals are achieved.\12\
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    \11\ See https://www.federalreserve.gov/newsevents/pressreleases/monetary20220615a.htm.
    \12\ Ibid.
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    Interest rates are very important determinants of mortgage market 
trajectory. Moody's May 2022 consensus forecast projects that 30-year 
fixed-rate mortgage interest rates will rise from an annual average 
rate of 3.0 percent in 2021 to 4.8 percent in 2022, then stabilize at 
4.9 percent in 2023 and 2024. As of June 16, 2022, the weekly average 
rate for a 30-year fixed-rate mortgage was 5.78 percent.\13\ Moody's 
forecast also projects that the unemployment rate will be 3.6 percent 
from 2022 to 2024. In addition, Moody's projects a modest increase in 
per capita disposable nominal income growth--from $55,700 in 2021 to 
$61,400 in 2024. Furthermore, Moody's forecast estimates that the 
annual average inflation rate will decline from a projected 40-year 
high of 6.9 percent in 2022 to 2.2 percent in 2024. The year-over-year 
inflation rate for May 2022 was 8.6 percent.\14\
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    \13\ See https://www.freddiemac.com/pmms/docs/historicalweeklydata.xls.
    \14\ See https://data.bls.gov/timeseries/CUUR0000SA0&output_view=pct_12mths.

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[GRAPHIC] [TIFF OMITTED] TP18AU22.002

    Multifamily mortgage 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 mortgage market affordable to low-income and very low-
income families. In July 2022, the Mortgage Bankers Association (MBA) 
forecast that multifamily mortgage originations would decline from the 
2021 record of $487 billion to $436 billion in 2022, and would rise to 
$454 billion in 2023.\15\
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    \15\ See https://www.mba.org/news-and-research/newsroom/news/2022/07/19/higher-rates-economic-uncertainty-to-slow-commercial-multifamily-lending-in-the-second-half-of-2022.
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    Rising interest rates, rising rent growth, and the decline of 
alternative real estate investment opportunities such as commercial and 
retail lending during the pandemic have resulted in an influx of new 
market participants and competition in the multifamily market. Renewed 
interest from debt funds and other institutional investors in the 
multifamily market has created additional competition for the 
Enterprises, particularly around their ability to compete for 
multifamily affordable deals.
    Low vacancy rates in the multifamily market pushed rents upwards in 
2021. Based on the nationwide CoStar data, on a year-over-year basis, 
rent growth increased sharply from less than 1 percent in 2020 during 
the COVID-19 pandemic to 11.3 percent in 2021.\16\ CoStar's 2022 Q1 
Base Case forecast projects national rent growth to be 6.6 percent in 
2022, then slow down to 3.5 percent by 2024. While rent increases were 
most significant for 4 & 5 Star properties, which had a rent increase 
of 13.9 percent in 2021, the more affordable buildings also experienced 
significant rent increases.\17\ For example, 3 Star building rents 
increased by 11.7 percent in 2021, and are projected to increase by 
still-strong 6.7 percent in 2022, and by 5.2 percent and 3.5 percent in 
the following two years, respectively. In addition, 1 & 2 Star building 
rent growth is forecast to rise from a two-decade high of 5.2 percent 
in 2021 to 5.7 percent in 2022, and remain high at 5.1 percent in 2023. 
The 1 & 2 Star building rents are forecast to grow by 3.6 percent in 
2024.
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    \16\ FHFA tabulations of CoStar data.
    \17\ CoStar building ratings definitions are available at 
https://www.costar.com/docs/default-source/brs-lib/costar_buildingratingsystem-definition.pdf.
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    Vacancy rates are expected to remain low through 2024, only 
increasing from 4.8 percent in 2021 to 5.3 percent in 2023 then 
slightly declining to 5.2 percent in 2024. As with rents, this 
tightening can be observed in all building classes, including the more 
affordable segments. Vacancies in 3 Star properties are forecast to 
expand from 4.3 percent in 2021 to 4.9 percent in 2023, then decline to 
4.6 percent in 2024, while 1 & 2 Star property vacancies are expected 
to rise from a very tight 3.8 percent in 2021 to 4.1 percent in 2024.
    The path for these various economic trends is uncertain, and 
whether the projected trends materialize remains to be seen. In this 
context, the Federal Reserve's monetary policy, other domestic economic 
policies, and developments in the global economy will also have an 
impact on the multifamily mortgage market.
    Affordability in the multifamily mortgage market. There are several 
factors that impact the affordable share of the multifamily mortgage 
market in any given year, such as the overall multifamily mortgage 
market origination volume, competition between purchasers of mortgages 
within the affordable multifamily mortgage market segment, and the 
availability of affordable housing subsidies.
    The Safety and Soundness Act requires FHFA to determine 
affordability for purposes of the Enterprise housing goals based on a 
family's rent and utility expenses not exceeding 30 percent of area 
median income (AMI).\18\ Using this measure, affordability for families 
living in rental units has decreased in recent years for many families. 
The Joint Center for Housing Studies of Harvard University's (JCHS) 
State of the Nation's Housing Report 2022 noted the growing presence of 
cost-burdened renters in certain income segments.\19\ The report shows 
that the share of cost-burdened renters rose by 2.6 percent--from 43.6 
percent in 2019 to 46.2 percent in 2020.\20\ The report states that 
82.6 percent of renters earning less than $15,000 and 77.9 percent of 
renters earning between $15,000 and $29,999 were cost-burdened in 2020. 
The share of cost-burdened renters earning between $30,000 and $44,999 
increased the most, rising approximately 9.0 percent--from 49.2 percent 
in 2019 to 58.3 percent in 2020.\21\
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    \18\ See 12 U.S.C. 4563(c).
    \19\ See ``The State of the Nation's Housing 2022,'' Joint 
Center for Housing Studies of Harvard University, June 2022, p.6, 
available at https://www.jchs.harvard.edu/sites/default/files/reports/files/Harvard_JCHS_State_Nations_Housing_2022.pdf.
    \20\ See ``The State of the Nation's Housing 2022: Appendix and 
Web Tables,'' Joint Center for Housing Studies of Harvard 
University, June 2022, Table W-2, available at https://www.jchs.harvard.edu/sites/default/files/interactive-item/files/Harvard_JCHS_State_Nations_Housing_2022_Appendix_Tables_0.xlsx.
    \21\ Ibid.
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    Multifamily housing assistance is primarily available in two 
forms--demand-side subsidies which either directly assist low-income 
tenants (e.g., Section 8 vouchers) or provide project-based rental 
assistance (e.g., Section 8

[[Page 50799]]

contracts), and supply-side subsidies which support the creation and 
preservation of affordable housing (e.g., public housing and low-income 
housing tax credits (LIHTC)). The availability of public subsidies 
impacts the overall affordable multifamily housing market, and 
significant changes to long-standing programs could impact the ability 
of the Enterprises to meet the housing goals. The Enterprises also play 
a role in providing liquidity to facilitate the preservation of public 
subsidies such as expiring Section 8 Housing Assistance Payment 
contracts and LIHTC properties reaching the end of the use-restricted 
affordability period.
    Financing for affordable multifamily buildings, particularly those 
that are affordable to very low-income families, often uses an array of 
state and federal housing subsidies, such as LIHTC, tax-exempt bonds, 
Section 8 rental assistance, or soft subordinate financing.\22\ 
Investor interest in tax credit equity projects of all types and in all 
markets has been strong in recent years, 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 mortgage market to provide permanent financing for 
properties with LIHTC during 2023 and 2024. Additionally, there should 
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 Housing Assistance 
Payment contracts.)
---------------------------------------------------------------------------

    \22\ LIHTCs are a supply-side subsidy created under the Tax 
Reform Act of 1986 and are the main source of new affordable housing 
construction in the United States. LIHTCs are used for the 
acquisition, rehabilitation, and/or new construction of rental 
housing for low-income households. LIHTCs have facilitated the 
creation or rehabilitation of approximately 2.4 million affordable 
units since inception of the program in 1986.
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    The need for public subsidies persists as the number of cost-
burdened renters remains high, at over 20.4 million renter households 
in 2019.\23\ The Center for Budget Policy Priorities estimates that 
only one in four households eligible for federal housing assistance 
currently receives it.\24\
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    \23\ ``America's Rental Housing 2022,'' Joint Center for Housing 
Studies of Harvard University, January 2022, p.32, available at 
https://www.jchs.harvard.edu/sites/default/files/reports/files/Harvard_JCHS_Americas_Rental_Housing_2022.pdf.
    \24\ See https://www.cbpp.org/research/housing/more-housing-vouchers-most-important-step-to-help-more-people-afford-stable-homes.
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    Role of the Enterprises. In proposing the multifamily housing goal 
benchmark levels for 2023 and 2024, FHFA has considered the ability of 
the Enterprises to lead the market in making multifamily mortgage 
credit available. The share of the overall multifamily mortgage 
origination market that is purchased by the Enterprises increased in 
the years immediately following the financial crisis, but their share 
has declined more recently in response to growing private sector 
participation. The share of the multifamily mortgage origination market 
that was purchased by the Enterprises was over 70 percent in 2008 and 
2009, compared to 36 percent in 2015.\25\ The total share was at 40 
percent or higher from 2016 to 2020.\26\ In 2021, a record multifamily 
volume year, the combined Enterprise share was estimated to have been 
around 29 percent.27 28 29
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    \25\ See Fannie Mae, ``Multifamily Business Information 
Presentation,'' May 2022, pg. 3, available at https://multifamily.fanniemae.com/media/9131/display.
    \26\ Ibid.
    \27\ See https://www.mba.org/news-and-research/newsroom/news/2022/07/19/higher-rates-economic-uncertainty-to-slow-commercial-multifamily-lending-in-the-second-half-of-2022.
    \28\ See https://freddiemac.gcs-web.com/news-releases/news-release-details/freddie-mac-hits-2021-multifamily-cap-707-billion-total-housing.
    \29\ See https://multifamily.fanniemae.com/news-insights/multifamily-wire/fannie-mae-multifamily-reports-2021-financial-results.
---------------------------------------------------------------------------

    FHFA recognizes that there are numerous Enterprise activities that 
impact how the Enterprises contribute to and participate in the 
multifamily market, including through their Duty to Serve Underserved 
Markets Plans, their Equitable Housing Finance Plans, and the mission-
driven elements of the Conservatorship Scorecard. FHFA will continue to 
monitor these initiatives and priorities to ensure appropriate focus by 
the Enterprises and compliance with the Enterprises charter acts and 
safety and soundness considerations.
    FHFA expects the Enterprises to continue to demonstrate leadership 
in multifamily affordable housing lending by providing liquidity and 
supporting housing for tenants at different income levels in various 
geographic markets and in various market segments. This support should 
continue throughout the economic cycle, with the Enterprises providing 
steady support even as the overall volume of the multifamily mortgage 
market fluctuates.
    Maintaining the sound financial condition of the Enterprises. In 
proposing multifamily housing goals benchmark levels for 2023 and 2024, 
FHFA must balance the role that the Enterprises play in providing 
liquidity and supporting various multifamily mortgage market segments 
with the need to maintain the Enterprises' sound and solvent financial 
condition. The Enterprises have served as a stabilizing force in the 
multifamily mortgage market. During conservatorship, the Enterprises' 
portfolios of loans on multifamily affordable housing properties have 
experienced low levels of delinquency and default, similar to the 
performance of multifamily loans on market rate properties.
    FHFA continues to monitor the activities of the Enterprises in 
FHFA's capacity as safety and soundness regulator and as conservator. 
As discussed above, FHFA may take any steps it determines necessary and 
appropriate to address the multifamily housing goals benchmark levels 
to ensure the Enterprises' continued safety and soundness.

B. Proposed Multifamily Housing Goals Benchmark Levels

    Based on FHFA's consideration of the statutory factors described 
above and the performance of the Enterprises described in this section, 
the proposed rule would establish the benchmark levels for the 
multifamily housing goal and subgoals for 2023 and 2024 as follows:

----------------------------------------------------------------------------------------------------------------
                                                                                                     Proposed
                                                                                                  benchmark for
                     Goal                                           Criteria                      2023 and 2024
                                                                                                       (%)
----------------------------------------------------------------------------------------------------------------
Low-Income Goal...............................  Percent of all goal-eligible units in                         61
                                                 multifamily properties financed by mortgages
                                                 purchased by the Enterprises in that year that
                                                 are affordable to low-income families, defined
                                                 as families with incomes less than or equal to
                                                 80 percent of AMI.

[[Page 50800]]

 
Very Low-Income Subgoal.......................  Percent of all goal-eligible units in                         12
                                                 multifamily properties financed by mortgages
                                                 purchased by the Enterprises in that year that
                                                 are affordable to very low-income families,
                                                 defined as families with incomes less than or
                                                 equal to 50 percent of AMI.
Small Multifamily Low-Income Subgoal..........  Percent of all goal-eligible units in                          2
                                                 multifamily properties of all sizes financed
                                                 by mortgages purchased by the Enterprises that
                                                 are units in small multifamily properties
                                                 affordable to low-income families, defined as
                                                 families with incomes less than or equal to 80
                                                 percent of AMI.
----------------------------------------------------------------------------------------------------------------

    Before finalizing the benchmark levels for the multifamily housing 
goals, FHFA will review any additional data that becomes available 
about the multifamily housing goals performance of the Enterprises, any 
other information about the multifamily mortgage market or other 
factors, and comments received in response to the proposed rule.
    Each of the proposed multifamily housing goals benchmark levels is 
discussed further below.
1. Multifamily Low-Income Housing Goal
    The proposed multifamily low-income housing goal would be based on 
the percentage of rental units in multifamily properties financed by 
mortgages purchased by the Enterprises in that year that are affordable 
to low-income families, defined as families with incomes less than or 
equal to 80 percent of AMI. The proposed rule would set the annual 
benchmark level for this goal for both 2023 and 2024 at 61 percent of 
goal-eligible units acquired. For example, if an Enterprise acquires 
100,000 goal-eligible multifamily units in 2023, 61 percent of those 
goal-eligible units (or 61,000 units) must be for low-income households 
in order to meet the goal. FHFA has calculated what the Enterprise 
performance would have been in previous years if the multifamily 
housing goals had been based on this percentage-based approach. The 
historic performance average for the pre-pandemic years of 2017-2019 
would have been 65.1 percent for Fannie Mae and 67.3 percent for 
Freddie Mac. FHFA believes the proposed benchmark level of 61 percent 
is appropriate to ensure a strong focus on affordability by the 
Enterprises in 2023-2024 while recognizing the increased competitive 
pressures described above. The proposed benchmark level of 61 percent 
would take into account the rising interest rate environment and the 
additional challenges the Enterprises currently face in the competitive 
market, without diminishing the Enterprises' focus on affordability.
    Table 2 shows the Enterprise acquisitions of goal-qualifying low-
income multifamily units, as well as the goal-qualifying low-income 
units as a percentage of the total goal-eligible units that were 
acquired in each year. It is difficult to compare the proposed 
benchmark level of 61 percent to the current numeric benchmark level of 
415,000 units because the percentage depends on the volume of 
Enterprise business as well as the composition of that business. 
However, the recent performance of the Enterprises indicates that the 
number of goal-qualifying units in properties backing mortgages 
purchased by the Enterprises varies more widely from year-to-year than 
the percentage of goal-qualifying units, as seen in Table 2. This is 
especially true as the market expands and contracts from year-to-year 
illustrating one of the major advantages of shifting from numeric 
benchmark levels to percentage-based benchmark levels.
    The proposed benchmark level of 61 percent may be adjusted as 
needed in the final rule based on any comments received and any new 
information that becomes available before publication of the final 
rule. FHFA welcomes comments on the proposed benchmark level of 61 
percent, the role of the Enterprises in this market, and any other 
matters related to the multifamily low-income housing goal.
[GRAPHIC] [TIFF OMITTED] TP18AU22.003

2. Multifamily Very Low-Income Housing Subgoal
    The proposed multifamily very low-income housing subgoal would be 
based on the percentage 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 AMI. The proposed rule would set the annual 
benchmark level for this subgoal for 2023 and 2024 at 12 percent of 
goal-eligible units acquired. FHFA has calculated what the Enterprise 
performance would have been in previous years if the subgoal had been 
based on this percentage-based

[[Page 50801]]

approach. The average performance of the Enterprises under this subgoal 
during the pre-pandemic years of 2017-2019 would have been 13.1 percent 
for Fannie Mae and 15.6 percent for Freddie Mac. FHFA believes that the 
proposed benchmark level of 12 percent is appropriate to ensure that 
the Enterprises continue to adequately serve very low-income families 
while accounting for the challenges associated with increasing interest 
rates and uncertain economic conditions.
    It is difficult to compare this proposed benchmark level of 12 
percent to the current numeric benchmark level of 88,000 units because 
the percentage depends on the volume of Enterprise business as well as 
the composition of that business. Nevertheless, Table 3 lays out the 
percentage shares and the number of units that qualify for the very 
low-income subgoal at both Enterprises from 2015 to 2021. As with the 
multifamily low-income goal, the recent performance of the Enterprises 
on the multifamily very low-income subgoal indicates that the number of 
goal-qualifying units in properties backing mortgages purchased by the 
Enterprises varies more widely from year-to-year than the percentage of 
goal-qualifying units.
    The proposed benchmark level of 12 percent may be adjusted as 
needed in the final rule based on any comments received and any new 
information that becomes available before publication of the final 
rule. FHFA welcomes comments on the proposed benchmark level of 12 
percent, the role of the Enterprises in this market, and any other 
matters related to the multifamily very low-income housing subgoal.
[GRAPHIC] [TIFF OMITTED] TP18AU22.004

3. Small Multifamily Low-Income Housing Subgoal
    The proposed small multifamily low-income housing subgoal would be 
based on the percentage of rental units in all multifamily properties 
financed by mortgages purchased by the Enterprises that are units in 
small multifamily properties affordable to low-income families, defined 
as families with incomes less than or equal to 80 percent of AMI. The 
Enterprise housing goals regulation defines a small multifamily 
property as a property with 5 to 50 units. The proposed rule would set 
this subgoal as a percentage of the overall Enterprise multifamily loan 
purchases each year rather than as a percentage of the small 
multifamily properties only, consistent with the objectives FHFA has 
previously expressed for this subgoal. The proposed rule would set the 
annual benchmark level for affordable units in small multifamily 
properties for 2023 and 2024 at 2 percent of goal-eligible units in all 
multifamily properties securing mortgages acquired by an Enterprise 
each year.
    This subgoal was created in the 2015-2017 housing goals rulemaking 
to position the Enterprises to respond quickly to potential need in 
this segment.\30\ Due to increased private sector financing and current 
market conditions in the small multifamily market, FHFA is interested 
in ensuring that the Enterprises remain positioned to support this 
market when needed without crowding out other sources of financing for 
small multifamily properties. The proposed benchmark level would be set 
as a share of total goal-eligible units and not the affordable share of 
units in small multifamily properties to ensure that the Enterprises 
maintain a minimum level of engagement in the small multifamily segment 
of the market.
---------------------------------------------------------------------------

    \30\ See 80 FR 53392 (Sept. 3, 2015).
---------------------------------------------------------------------------

    The small low-income multifamily housing market historically has 
been challenging to size and monitor. FHFA is aware that conditions in 
the small multifamily market may have changed recently in part due to 
the return of private sector financing since its pandemic-related 
slowdown in 2020.\31\ As a result, the need for a significant presence 
by the Enterprises in this market may no longer be necessary. 
Furthermore, as reflected by the different numeric benchmark levels for 
each Enterprise in the 2021 final rule, FHFA recognizes that the 
Enterprises have different multifamily business models and each 
Enterprise sets its own credit risk tolerance for multifamily products. 
As a result, Fannie Mae and Freddie Mac perform very differently on 
this subgoal.
---------------------------------------------------------------------------

    \31\ See https://www.walkerdunlop.com/insights/2021/07/19/small-balance-multifamily-sizable-and-resilient/. FHFA defines small 
multifamily properties as properties with 5 to 50 units, while this 
article defines small multifamily properties to include properties 
with 5 to 99 units and multifamily properties with a principal loan 
balance at origination between $1 and $10 million.
---------------------------------------------------------------------------

    Taking all of these factors into account, FHFA is proposing a 
benchmark level for this subgoal for each Enterprise of 2 percent of 
goal-eligible units in all multifamily properties securing mortgages 
acquired by an Enterprise each year. FHFA believes that this proposed 
benchmark level would reflect a reduced level of Enterprise 
participation that would adjust with Enterprise loan acquisitions but 
also maintain Enterprise participation in this small, but specialized, 
segment. Furthermore, the benchmark level could be increased in future 
notice-and-comment rulemaking should the need arise.
    It is difficult to compare the proposed percentage-based benchmark 
level to the current numeric benchmark level of 17,000 units for Fannie 
Mae and 23,000 units for Freddie Mac because the percentage depends on 
the volume of Enterprise business as well as the composition of that 
business. Table 4 shows Enterprise performance on this subgoal both in 
terms of the actual numeric benchmark levels applicable through 2022, 
as well as the proposed

[[Page 50802]]

subgoal metric that would be based on percentages.
    The proposed benchmark level of 2 percent may be adjusted as needed 
in the final rule based on any comments received and any new 
information that becomes available before the publication of the final 
rule. FHFA welcomes comments on the proposed benchmark level of 2 
percent, the effectiveness of this subgoal, small multifamily market 
dynamics, and the role of the Enterprises in this market.
[GRAPHIC] [TIFF OMITTED] TP18AU22.005

V. 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 the proposed rule to OMB for 
review.

VI. 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. FHFA need not undertake such an 
analysis 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 and FHFA certifies 
that the proposed rule, if adopted as a final rule, will not have a 
significant economic impact on a substantial number of small entities 
because the regulation only 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 Preamble, under the authority of 12 
U.S.C. 4511, 4513, and 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.  1282.13 by revising paragraphs (b) through (d) to read 
as follows:


Sec.  1282.13  Multifamily special affordable housing goal and 
subgoals.

* * * * *
    (b) Multifamily low-income housing goal. The percentage share of 
dwelling units in multifamily residential housing financed by mortgages 
purchased by each Enterprise that consists of dwelling units affordable 
to low-income families shall meet or exceed 61 percent of the total 
number of dwelling units in multifamily residential housing financed by 
mortgages purchased by the Enterprise in each year for 2023 and 2024.
    (c) Multifamily very low-income housing subgoal. The percentage 
share of dwelling units in multifamily residential housing financed by 
mortgages purchased by each Enterprise that consists of dwelling units 
affordable to very low-income families shall meet or exceed 12 percent 
of the total number of dwelling units in multifamily residential 
housing financed by mortgages purchased by the Enterprise in each year 
for 2023 and 2024.
    (d) Small multifamily low-income housing subgoal. The percentage 
share of dwelling units in small multifamily properties financed by 
mortgages purchased by each Enterprise that consists of dwelling units 
affordable to low-income families shall meet or exceed 2 percent of the 
total number of dwelling units in all multifamily residential housing 
financed by mortgages purchased by the Enterprise in each year for 2023 
and 2024.
0
3. Amend Sec.  1282.15 by revising paragraphs (c) and (e)(3) to read as 
follows:


Sec.  1282.15  General counting requirements.

* * * * *
    (c) Calculating the numerator and denominator for multifamily 
housing goals. Performance under the multifamily housing goal and 
subgoals shall be measured using a fraction that is converted into a 
percentage. Neither the numerator nor the denominator shall include 
Enterprise transactions or activities that are not mortgage purchases 
as defined by FHFA or that are specifically excluded as ineligible 
under Sec.  1282.16(b).

[[Page 50803]]

    (1) The numerator. The numerator of each fraction is the number of 
dwelling units that count toward achievement of a particular 
multifamily housing goal or subgoal in properties financed by mortgages 
purchased by an Enterprise in a particular year.
    (2) The denominator. The denominator of each fraction is the total 
number of dwelling units in properties financed by mortgages purchased 
by an Enterprise in a particular year.
* * * * *
    (e) * * *
    (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 with 
missing affordability information in excess of this maximum shall be 
included in the denominator for the multifamily housing goal and 
subgoals, but such rental units shall not be counted in the numerator 
of any multifamily housing goal or subgoal. Multifamily rental units 
with missing affordability information for which estimation information 
is not available shall be excluded from both the numerator and the 
denominator for purposes of the multifamily housing goal and subgoals.
* * * * *

Sandra L. Thompson,
Director, Federal Housing Finance Agency.
[FR Doc. 2022-17868 Filed 8-17-22; 8:45 am]
BILLING CODE 8070-01-P