[Federal Register Volume 88, Number 80 (Wednesday, April 26, 2023)]
[Proposed Rules]
[Pages 25293-25309]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-08602]
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FEDERAL HOUSING FINANCE AGENCY
12 CFR Part 1293
RIN 2590-AB29
Fair Lending, Fair Housing, and Equitable Housing Finance Plans
AGENCY: Federal Housing Finance Agency.
ACTION: Notice of proposed rulemaking.
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SUMMARY: The Federal Housing Finance Agency (FHFA or the Agency) is
seeking comments on a proposed rule that would address barriers to
sustainable housing opportunities for underserved communities by
codifying existing FHFA practices in regulation and adding new
requirements related to fair lending, fair housing, and Equitable
Housing Finance Plans. The proposed rule would improve FHFA's
fulfillment of its statutory purposes and its oversight of the Federal
National Mortgage Association (Fannie Mae), the Federal Home Loan
Mortgage Corporation (Freddie Mac), and the Federal Home Loan Banks
(Banks) (Fannie Mae and Freddie Mac collectively, the Enterprises; the
Enterprises and the Banks collectively, regulated entities), and their
fulfillment of their statutory purposes.
DATES: Comments must be received on or before June 26, 2023.
ADDRESSES: You may submit your comments on the proposed rule,
identified by regulatory information number (RIN) 2590-AB29, 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-AB29.
Hand Delivered/Courier: The hand delivery address is:
Clinton Jones, General Counsel, Attention: Comments/RIN 2590-AB29,
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-AB29, 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 any time-sensitive correspondence, please
plan accordingly.
FOR FURTHER INFORMATION CONTACT: James Wylie, Associate Director,
Office of Fair Lending Oversight, (202) 649-3209, [email protected];
Leda Bloomfield, Branch Chief for Policy and Equity, Office of Fair
Lending Oversight, (202) 649-3415, [email protected]; Annalyce
Shufelt, Branch Chief for Fair Lending Law, Supervision, and
Enforcement, (202) 717-1164, [email protected]; or Sarah
Friedman, Examination Specialist (Fair Lending), Office of Fair Lending
Oversight, (202) 807-9324, [email protected]. These are not toll-
free numbers. 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:
Comments
FHFA invites comments on all aspects of the proposed rule and will
take all comments into consideration before issuing a final rule.
Copies of all comments will be posted without change, and will include
any personal information you provide such as your name, address, email
address, and telephone number, on the FHFA website at http://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 proposed rule also located on the FHFA
website.
Table of Contents
I. Introduction
II. Background
A. FHFA, the Regulated Entities, and Their Public Purposes
B. Barriers to Sustainable Housing Opportunities
1. Disparities in Homeownership Rates and Wealth
[[Page 25294]]
2. Disparities Based on Disaggregated Data
3. Challenges Accessing Sustainable Housing Opportunities
4. Mortgage Market Disparities
5. Appraisal and Valuation Disparities
III. The Proposed Rule
A. FHFA Fair Lending Oversight of the Regulated Entities
B. Enterprise Equitable Housing Finance Plans
C. Enterprise Data Collection and Reporting to FHFA
D. Application of FHFA's Prudential Standard Framework
E. Policy Purposes for and Benefits of the Proposed Rule
IV. Section-by-Section Analysis
A. Section 1293.1 General
B. Section 1293.2 Definitions
C. Section 1293.3 Compliance and Enforcement
D. Section 1293.4 Preservation of Authority
E. Section 1293.11 Regulated Entity Compliance
F. Section 1293.12 Reports and Data
G. Section 1293.21 General
H. Section 1293.22 Plans and Updates
I. Section 1293.23 Performance Reports
J. Section 1293.24 Public Engagement
K. Section 1293.25 Program Standards
L. Section 1293.26 Enterprise Board Equitable Housing and
Mission Responsibilities
M. Section 1293.31 Required Enterprise Data Collection and
Reporting
N. Proposed Rule Timing Elements
V. Considerations of Differences Between the Banks and the
Enterprises
VI. Comments Specifically Requested
VII. Paperwork Reduction Act
VIII. Regulatory Flexibility Act
I. Introduction
Federal agency oversight of fair housing and fair lending laws, as
well as strategic planning to address barriers faced by renters and
borrowers, are important in promoting sustainable housing opportunities
\1\ for underserved communities.\2\ The proposed rule would address
barriers to sustainable housing opportunities for underserved
communities by codifying existing FHFA practices in regulation and
adding new requirements. Collectively, the actions in the proposed rule
would improve FHFA's fulfillment of its statutory purposes and its
oversight of the regulated entities and their fulfillment of their
statutory purposes.
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\1\ Sustainable housing opportunity is defined more completely
later in the proposed rule, but generally encompasses rental or
homeownership opportunities that include one or more characteristics
important to the needs of a tenant or homeowner.
\2\ Underserved community is defined more completely later in
the proposed rule, but generally encompasses a group of people with
shared characteristics or an area that is subject to current
discrimination or has been subjected to past discrimination that has
or has had continuing adverse effects on the group or area's
participation in the housing market, historically has received or
currently receives a lower share of the benefits of Enterprise
programs and activities providing sustainable housing opportunities,
or that otherwise has had difficulty accessing these benefits
compared with groups of people without the shared characteristic or
other areas.
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The proposed rule would codify in regulation much of FHFA's
existing practices and programs regarding fair housing and fair lending
oversight of its regulated entities, the Equitable Housing Finance Plan
program for the Enterprises, and requirements for the Enterprises to
collect and report language preference, homeownership education, and
housing counseling information. The proposed rule would make changes to
the Equitable Housing Finance Plan program to promote greater
accountability for the Enterprises and public transparency, add
oversight of unfair or deceptive acts or practices to FHFA's fair
housing and fair lending oversight programs, require additional
certification of compliance by the Enterprises, and establish more
precise standards related to fair housing, fair lending, and principles
of equitable housing for regulated entity boards of directors (boards).
II. Background
A. FHFA, the Regulated Entities, and Their Public Purposes
Fannie Mae and Freddie Mac are federally chartered housing finance
enterprises whose purposes include providing stability to the secondary
market for residential mortgages; providing ongoing assistance to the
secondary market for residential mortgages (including activities
related to mortgages on housing for low- and moderate-income families)
by increasing the liquidity of mortgage investments and improving
distribution of investment capital available for residential mortgage
financing; and, promoting access to mortgage credit throughout the
United States, including central cities, rural areas, and underserved
areas, by increasing the liquidity of mortgage investments and
improving the distribution of investment capital available for
residential mortgage financing.\3\
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\3\ 12 U.S.C. 1451 (note) and 1716.
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The Federal Home Loan Bank System (the System) provides a stable
and reliable source of liquidity for its members and provides support
for affordable housing and community development for the communities
they serve. It was established in 1932 by the Federal Home Loan Bank
Act,\4\ and today consists of 11 regional Federal Home Loan Banks (the
Banks) and the System's fiscal agent, the Office of Finance. Each Bank
is a separate, government-chartered, member-owned corporation.
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\4\ 12 U.S.C. 1421 et seq.
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Congress established FHFA to oversee the regulated entities to
ensure that the purposes of the Federal Housing Enterprises Financial
Safety and Soundness Act of 1992 (Safety and Soundness Act), as
amended, the authorizing statutes, and any other applicable laws are
carried out.\5\ In doing so, Congress recognized that the regulated
entities have important public purposes reflected in their authorizing
statutes, and that they need to be managed safely and soundly so that
they continue to accomplish their public missions.\6\
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\5\ 12 U.S.C. 4511(b).
\6\ 12 U.S.C. 4501(1) (Enterprises and Federal Home Loan Banks
have important public missions), (2) (their continued ability to
accomplish their public missions is important, and effective
regulation is needed to reduce risk of failure), and (7)
(Enterprises have affirmative obligation to facilitate financing of
affordable housing for low- and moderate-income families consistent
with their public purposes, while maintaining a strong financial
condition and a reasonable economic return).
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With respect to the public purposes of the Enterprises, a number of
statutory and regulatory authorities that apply to FHFA and the
Enterprises speak to the need to advance equity for homebuyers,
homeowners, and tenants in the housing market.\7\ FHFA's principal
duties include ensuring that the Enterprises operate consistent with
safety and soundness and with the public interest.\8\ FHFA and the
Enterprises also have statutory and other commitments to advance
equitable solutions for borrowers and tenants in the housing market.
The Enterprises' authorizing statutes, for example, provide that one of
their purposes is to promote access to mortgage credit throughout the
nation (including central cities, rural areas, and underserved
areas).\9\ The authorizing
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statutes require the Enterprises, as part of their annual housing
reports, to assess their underwriting standards, policies, and business
practices that affect low- and moderate-income families or cause racial
disparities, along with any revisions to these standards, policies, or
practices that promote affordable housing or fair lending.\10\
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\7\ These include providing ongoing assistance to the secondary
market for residential mortgages, including mortgages on housing for
low- and moderate-income families involving a reasonable economic
return that may be less than the return earned on other activities.
12 U.S.C. 1716(3) and (4) (Fannie Mae charter purposes); 12 U.S.C.
1451 note (b)(3) and (4) (Freddie Mac charter purposes). They also
include Enterprise affordable housing Goals, see 12 U.S.C. 4561(a),
4562, and 4563; 12 CFR part 1282, subpart B, and Enterprise Duty to
Serve affordable housing needs of certain underserved markets, see
12 U.S.C. 4565; 12 CFR part 1282, subpart C. In addition, the
Enterprises are required to report annually to Congress on, among
other things, assessments of their underwriting standards and
business practices that affect their purchases of mortgages for low-
and moderate-income families, and revisions to their standards and
practices that promote affordable housing or fair lending. 12 U.S.C.
1723a(n)(2)(G) (Fannie Mae charter), 1456(f)(2)(G) (Freddie Mac
charter).
\8\ 12 U.S.C. 4513(a)(1)(B)(i), (v).
\9\ 12 U.S.C. 1716(4) (Fannie Mae charter); 1451 note (b)(4)
(Freddie Mac charter).
\10\ 12 U.S.C. 1723a(n)(2)(G), 1456(f)(2)(G).
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The Housing Goals and Duty to Serve requirements are critical
elements for ensuring that the Enterprises fulfill their mission and
charters and serve low- and moderate-income families and underserved
populations.\11\ The Safety and Soundness Act provides that, in meeting
these requirements, the Enterprises are required to take affirmative
steps to assist primary lenders to make housing credit available in
areas with concentrations of low-income and minority families.\12\ The
Safety and Soundness Act also requires the Enterprises to transfer an
amount equal to 4.2 basis points for each dollar of unpaid principal
balance of new purchases to the U.S. Department of Housing and Urban
Development's (HUD) administration of the Housing Trust Fund and the
U.S. Department of the Treasury's administration of the Capital Magnet
Fund.\13\ Both funds are designed to support affordable housing
initiatives by providing capital for the production or preservation of
affordable housing and related economic development activities. For the
2022 year, the Enterprises transferred $545 million into the funds.\14\
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\11\ 12 U.S.C. 4561(a) (FHFA to establish annual housing goals
by regulation), 4562 (establishment of required categories of
single-family housing goals), and 4563 (establishment of required
multifamily affordable housing goals); 12 U.S.C. 4565 (Enterprise
duty to facilitate secondary mortgage market for very low-, low-,
and moderate-income families in certain underserved markets).
\12\ 12 U.S.C. 4565(b)(3)(A).
\13\ 12 U.S.C. 4567.
\14\ See https://www.fhfa.gov/Media/PublicAffairs/Pages/FHFA-Announces-545-Million-for-Affordable-Housing-Programs.aspx.
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Several provisions of the Federal Home Loan Bank Act denote the
public purposes of the Banks, including their role in making secured
long-term advances to members to support residential housing finance,
specific community support requirements, establishment of a community
investment program and an affordable housing program, compliance with
housing goals, and the requirement that certain directors have
experience in public interest areas.\15\ FHFA launched a comprehensive
review of the System in August 2022.\16\ Among the areas FHFA has
explored as part of the review are the Banks' role in promoting
affordable, sustainable, equitable, and resilient housing and community
investment, including rental housing, and in addressing the unique
needs of tribal communities, communities of color, rural communities,
and other financially vulnerable and underserved communities. Numerous
commenters during the public input phases of the initiative suggested
establishing or expanding requirements for housing and community
development lending plans for the Banks, and these and other
suggestions are currently under consideration separately and apart from
this proposed rulemaking.
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\15\ See, e.g., 12 U.S.C. 1427(a)(3)(B)(ii), 12 U.S.C. 1430(g),
(i), (j); 12 U.S.C. 1430c.
\16\ See https://www.fhfa.gov/Media/PublicAffairs/Pages/FHFA-Announces-Comprehensive-Review-of-the-FHLBank-System.aspx.
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Under the Fair Housing Act, all Federal agencies having regulatory
or supervisory authority over financial institutions, including FHFA,
are required to administer their programs and activities relating to
housing and urban development in a manner that affirmatively furthers
the purposes of the Fair Housing Act, which includes providing for fair
housing throughout the United States.\17\ FHFA has included
considerations of fair housing and fair lending in rulemaking since its
establishment.\18\ FHFA has also issued a policy statement on fair
lending which describes its regulatory and oversight authorities to
supervise and enforce fair lending laws with respect to its regulated
entities.\19\ FHFA has issued orders to Fannie Mae and Freddie Mac for
regular and special reports related to fair housing and fair
lending.\20\ FHFA has issued guidance for the Enterprises on fair
housing and fair lending supervisory expectations.\21\ FHFA coordinates
with HUD on fair lending and fair housing oversight,\22\ and has
established a fair lending oversight data system in part to facilitate
cooperation in interagency fair housing and fair lending oversight.\23\
FHFA has also implemented the referral program for potential mortgage
pricing disparities across mortgage lenders based on the Enterprises'
data, as required by Congress in section 1128 of the Housing and
Economic Recovery Act of 2008 (HERA).\24\ FHFA also established the
Equitable Housing Finance Plan program for the Enterprises to develop a
framework for addressing barriers to sustainable housing opportunity
for underserved communities through strategic planning and public
participation.\25\ FHFA joined other agencies in issuing the
Interagency Statement on Special Purpose Credit Programs Under the
Equal Credit Opportunity Act and Regulation B in 2022.\26\
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\17\ 42 U.S.C. 3608(d); 42 U.S.C. 3601 et seq.
\18\ See, e.g., 12 CFR 1253.4(b)(3)(viii); 74 FR 31602, 31603,
31606 (Jul. 2, 2009), 12 CFR 1254.6(a)(2) and 1254.8(b)(2); 84 FR
41886, 41905, 41906, 41907 (Aug. 16, 2019), and 12 CFR 1291.23(e);
83 FR 61186, 61208, 61238 (Nov. 28, 2018).
\19\ 86 FR 36199 (Jul. 9, 2021).
\20\ See FHFA Orders In Re: Enterprise Compliance and
Information Submission with Respect to Fair Lending, Nos. 2021-OR-
FNMA-2 and 2021-OR-FHLMC-2 (FHFA's Fair Lending Orders), available
at https://www.fhfa.gov/PolicyProgramsResearch/Programs/Pages/Fair-
Lending-Oversight-
Program.aspx#:~:text=Fair%20Lending%20Reporting%20Orders&text=The%20o
rders%20require%20the%20Enterprises,lending%20supervision%20and%20mon
itoring%20capabilities.
\21\ Advisory Bulletin AB-2021-04, Enterprise Fair Lending and
Fair Housing Compliance (Dec. 20, 2021), available at https://www.fhfa.gov/SupervisionRegulation/AdvisoryBulletins/AdvisoryBulletinDocuments/AB%202021-04%20Enterprise%20Fair%20Lending%20and%20Fair%20Housing%20Compliance.pdf.
\22\ Memorandum of Understanding by and between the U.S.
Department of Housing and Urban Development and the Federal Housing
Finance Agency regarding Fair Housing and Fair Lending Coordination
(Aug. 12, 2021), available at https://www.fhfa.gov/Media/PublicAffairs/PublicAffairsDocuments/FHFA-HUD-MOU_8122021.pdf.
\23\ Fair Lending Oversight Data System of Records Notice, 87 FR
30947 (May 20, 2022), available at https://www.govinfo.gov/content/pkg/FR-2022-05-20/pdf/2022-10798.pdf.
\24\ Public Law 110-289, 122 Stat. 2696, 2697 (2008) (codified
at 12 U.S.C. 4561(d)).
\25\ See https://www.fhfa.gov/Media/PublicAffairs/Pages/FHFA-
Announces-Equitable-Housing-Finance-Plans_for-Fannie-Mae-and-
Freddie-Mac.aspx.
\26\ See Interagency Statement on Special Purpose Credit
Programs Under the Equal Credit Opportunity Act and Regulation B
(Feb. 22, 2022), available at https://www.federalreserve.gov/supervisionreg/caletters/CA%2022-2%20Attachment%20SPCP_Interagency_Statement_for_release.pdf.
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B. Barriers to Sustainable Housing Opportunities
Ongoing disparities and challenges in the housing market persist,
limiting sustainable housing opportunities for underserved communities.
The following section discusses some of these disparities and
challenges by way of example. Both Enterprises' 2022-2024 Equitable
Housing Finance Plans also include extensive discussions of barriers to
sustainable housing opportunities.\27\ The inclusion or discussion of a
particular disparity, challenge, or underserved community is not an
indication of FHFA's views on
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the needs of a community or what actions FHFA's regulated entities
should take.
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\27\ See Freddie Mac 2022-2024 Equitable Housing Finance Plan
(Apr. 2023), available at https://www.freddiemac.com/about/pdf/Freddie-Mac-Equitable-Housing-Finance-Plan.pdf; Fannie Mae 2022-2024
Equitable Housing Finance Plan (June 2022), available at https://www.fanniemae.com/media/43636/display.
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1. Disparities in Homeownership Rates and Wealth
The national homeownership rate has ranged from around 45 percent
in some eras to around 65 percent in recent years.\28\ However, there
have been persistent gaps in the homeownership rate by race and
ethnicity. In the fourth quarter of 2022, the White homeownership rate
was 74.5 percent, the Black homeownership rate was 44.9 percent, the
Latino homeownership rate was 48.5 percent, and the Asian, Native
Hawaiian and Pacific Islander homeownership rate was 61.9 percent.\29\
The Black and White homeownership gap, at 29.6 percentage points as of
the fourth quarter of 2022, has persisted over time, though there have
been some modest reductions in the gap since 2019. Even when the racial
homeownership rate is stratified by household income, there continue to
be significant disparities in homeownership amongst racial groups, even
in the highest income brackets. For example, for households with an
income over $150,000, there exists a 10 percentage point gap between
Black and White families.\30\
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\28\ See Don Layton, ``The Homeownership Rate and Housing
Finance Policy, Part 1: Learning from the Rate's History,'' August
2021, available at https://www.jchs.harvard.edu/sites/default/files/research/files/harvard_jchs_homeownership_rate_layton_2021.pdf.
\29\ Federal Reserve Economic Data, Federal Reserve Bank of St.
Louis; Housing and Homeownership: Homeownership Rate (retrieved
February 11, 2023) available at https://fred.stlouisfed.org/release/tables?rid=296&eid=784188#snid=784199.
\30\ See Fannie Mae 2022-2024 Equitable Housing Finance Plan
(June 2022), p. 7, available at https://www.fanniemae.com/media/43636/display.
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A household's home is often its largest financial asset and key to
wealth building and intergenerational wealth transfers. The
homeownership gap therefore contributes significantly to wealth gaps
for underserved communities. The Federal Reserve, in a 2019 survey,
found that White families have the highest level of both median and
mean family wealth: $188,200 and $983,400, respectively.\31\ In
contrast, Black families' median and mean wealth is less than 15
percent that of White families, at $24,100 and $142,500, respectively.
These wealth disparities have grown between 2003 and 2018.\32\ One
study estimated that the total racial wealth gap is $10.14
trillion.\33\ This lack of intergenerational wealth transfers reduces
the likelihood that older generations can assist with down payments,
educational costs, and unexpected financial events, including natural
disasters and medical emergencies. Black families are also less likely
to receive or expect to receive an inheritance, and, if they do, it is,
on average, less than that of White households.\34\ Moreover, many
Black, Latino, and Asian households provide financial assistance to
older generations, which slows their ability to save for a down
payment.\35\
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\31\ See Neil Bhutta et al., Board of Governors of the Federal
Reserve System, ``Disparities in Wealth by Race and Ethnicity in the
2019 Survey of Consumer Finances,'' (Sept. 28, 2020), available at
https://www.federalreserve.gov/econres/notes/feds-notes/disparities-in-wealth-by-race-and-ethnicity-in-the-2019-survey-of-consumer-finances-20200928.html.
\32\ See Earl Fitzhugh et al., McKinsey Institute for Black
Economic Mobility, ``It's time for a new approach to racial
equity,'' (Dec. 2, 2020), available at https://www.mckinsey.com/bem/our-insights/its-time-for-a-new-approach-to-racial-equity.
\33\ See Fred Dews, ``Charts of the Week: The racial wealth gap;
the middle-class income slump,'' Brookings Institution (Jan. 8,
2021), available at https://www.brookings.edu/blog/brookings-now/2021/01/08/charts-of-the-week-the-racial-wealth-gap-the-middle-class-income-slump/.
\34\ See Freddie Mac 2022-2024 Equitable Housing Finance Plan
(Apr. 2023), available at https://www.freddiemac.com/about/pdf/Freddie-Mac-Equitable-Housing-Finance-Plan.pdf.
\35\ See Mike Dang, ``Their Children Are Their Retirement
Plans,'' New York Times (Feb. 24, 2023), available at https://www.nytimes.com/2023/01/21/business/retirement-immigrant-families.html.
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2. Disparities Based on Disaggregated Data
For many underserved communities, it is critical to examine
disaggregated data and data at the community level.\36\ Failing to
disaggregate may result in failure to identify significant disparities
facing unique race/ethnicity subgroups for the purpose of identifying
barriers and improving housing policy. For example, although Asians and
Pacific Islanders as a whole have homeownership rates above 60 percent,
Korean Americans' homeownership rate is 54 percent and Nepalese
Americans' homeownership rate is 33 percent.\37\ Geographically, while
the overall homeownership gap between Black and White homeowners is
29.6 percentage points, in Minneapolis the gap rises to 50 percentage
points.\38\
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\36\ See Leda Bloomfield et al., FHFA Insights Blog, ``Latino
Diversity and Complexity: The Importance of Data Disaggregation,''
(Sept. 23, 2021), available at https://www.fhfa.gov/Media/Blog/Pages/Latino-Diversity-and-Complexity-The-Importance-of-Data-Disaggregation.aspx.
\37\ See Asian Real Estate Association, 2023-2024 State of Asia
America Report, available at https://areaa.org/resource-asia-america-report.
\38\ See Alanna McCargo et al., ``Mapping the black
homeownership gap,'' (Feb. 26, 2018), available at https://www.urban.org/urban-wire/mapping-black-homeownership-gap.
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There are also disparities in mortgage underwriting that may be
obscured by looking at aggregated data.\39\ For Latino communities,
Mexican applicants have slightly higher approval rates than Latino
applicants as a whole, but Puerto Rican and ``Other Hispanic''
applicants have lower approval rates. Among Asian applicants, the
Vietnamese, Filipino, and ``Other Asian'' communities experience lower
approval rates than White applicants, despite Asian applicants, as a
whole, having similar approval rates to White applicants. Similarly,
when the Pacific Islander group is disaggregated, it becomes clear that
Samoan and ``Other Pacific Islander'' applicants have significantly
lower approval rates than Native Hawaiian and Chamorro applicants.
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\39\ See Leda Bloomfield et al., FHFA Insights Blog, ``Latino
Diversity and Complexity: The Importance of Data Disaggregation,''
(Sept. 23, 2021), available at https://www.fhfa.gov/Media/Blog/Pages/Latino-Diversity-and-Complexity-The-Importance-of-Data-Disaggregation.aspx.
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3. Challenges Accessing Sustainable Housing Opportunities
In addition to racial and ethnic gaps across homeownership and
wealth, there are other underserved communities experiencing
significant challenges in accessing sustainable housing opportunities.
This includes families living on tribal land, in rural areas, and in
rental homes. Almost half of renters are cost-burdened, paying more
than 30 percent of their income on housing, compared to only 22 percent
of homeowners.\40\ As an increasing proportion of households wish to
age in place, there is often a lack of housing opportunities that
provide for mobility and other physical impairments. By 2035, the
population 80 and over is expected to double from its level in 2016.
More than 10 million households headed by someone over 65 are cost-
burdened, with the median older renter having net wealth under $6,000
in 2019.\41\ Two percent of total housing inventory is accessible for
people with mobility disabilities, while 14 percent of Americans have
mobility disabilities.\42\ Other populations, including persons
identifying as lesbian, gay, bisexual, transgender, or queer (LGBTQ+),
continue to report facing challenges in
[[Page 25297]]
accessing the housing finance system. A study found that same-sex
applicants are 73.12 percent more likely to be denied for a
mortgage.\43\ Households with limited English proficiency (LEP), or who
are more comfortable transacting in a language other than English, may
also experience barriers to housing opportunities and housing
sustainability. Often, LEP borrowers will rely on their English-
proficient child, who may not be familiar with mortgage lending terms,
as a translator.\44\ As a result, this can leave the borrower without a
full understanding of mortgage terms and conditions.
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\40\ See National Equity Atlas, ``Housing Burden: All residents
should have access to quality, affordable homes), (retrieved Mar. 5,
2023) available at https://nationalequityatlas.org/indicators/Housing_burden#/?rentown01=2.
\41\ See Jennifer Molinsky, ``Housing for America's Older
Adults: Four Problems We Must Address,'' Joint Center for Housing
Studies of Harvard University (Aug. 18, 2022), available at https://www.jchs.harvard.edu/blog/housing-americas-older-adults-four-problems-we-must-address.
\42\ See Freddie Mac 2022-2024 Equitable Housing Finance Plan
(Apr. 2023), available at https://www.freddiemac.com/about/pdf/Freddie-Mac-Equitable-Housing-Finance-Plan.pdf.
\43\ See Hua Sun et al., ``Lending practices to same-sex
borrowers,'' (Apr. 16, 2019), available at https://www.pnas.org/doi/10.1073/pnas.1903592116.
\44\ See Freddie Mac and Fannie Mae, ``Language Access for
Limited English Proficiency Borrowers: Final Report,'' (Apr. 2017),
available at https://www.fhfa.gov/PolicyProgramsResearch/Policy/Documents/Borrower-Language-Access-Final-Report-June-2017.pdf.
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4. Mortgage Market Disparities
Disparities are present in the mortgage market for several
underserved communities. For example, in 2022 Black families comprised
about 14 percent of the total U.S. population, but only about 7 percent
of the loans that Fannie Mae and Freddie Mac purchased. American Indian
and Alaska Native families comprised about 3 percent of the total U.S.
population, but only about 1 percent of the loans that Fannie Mae and
Freddie Mac purchased. In contrast, White families comprised about 62
percent of the U.S. population, but they comprised about 68 percent of
Fannie Mae and Freddie Mac acquisitions.\45\
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\45\ Loan purchase data sourced from Enterprise data released by
FHFA at https://www.fhfa.gov/DataTools/Downloads/Pages/Fair-Lending-Data.aspx. Total population statistics are drawn from 2020 Census
data summarized at https://www.census.gov/library/stories/2021/08/improved-race-ethnicity-measures-reveal-united-states-population-much-more-multiracial.html. Total population statistics for White
are provided as White alone. Total population statistics for Black
and American Indian and Alaska Native are provided as alone or in
combination with another race or ethnicity category.
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FHFA has released data on Fannie Mae and Freddie Mac's automated
underwriting systems, presenting gaps in approval rates for applicants
from certain groups over time compared to other groups. These
underwriting tools complete credit risk assessments on loan applicants
to determine whether a loan is eligible for sale to the Enterprises.
Although the move to a more automated, less subjective system to assess
creditworthiness in mortgage market underwriting was an important step
in eliminating bias in subjective underwriting decisions, further
improvements in automated underwriting to reduce gaps would promote
better access to sustainable housing opportunities. In 2022, White
applicants' automated underwriting system applications had approval
rates of about 84 and 85 percent for the automated underwriting systems
of Fannie Mae and Freddie Mac, respectively; Black applicants had
approval rates of about 70 and 69 percent; Latino applicants had
approval rates of about 78 percent and 73 percent; Asian applicants had
approval rates of about 84 and 85 percent; American Indian and Alaska
Native applicants had approval rates of about 78 and 75 percent; and
Native Hawaiian and Pacific Islander applicants had approval rates of
about 78 and 74 percent.\46\
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\46\ See https://www.fhfa.gov/DataTools/Downloads/Pages/Fair-Lending-Data.aspx.
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Home Mortgage Disclosure Act (HMDA) data also shows higher denial
rates by lenders for many underserved communities. For example, an
analysis of the 2020 HMDA data found a denial rate of 27.1 percent for
Black applicants compared to 13.6 percent for White applicants.\47\ The
trend in higher denial rates has persisted in HMDA data for many
years.\48\ A 2019 study of mortgage pricing found that Black and Latino
borrowers pay 7.9 and 3.6 basis points more in interest for mortgages,
even when controlling for several factors.\49\ FHFA conducts an annual
screening, preliminary findings, and referral process for lenders
pursuant to the Safety and Soundness Act and describes the results in
its Annual Report to Congress. Based on the results of FHFA's 2019 and
2020 analysis, more than 36 percent of FHFA's preliminary findings were
based on an annual percentage rate disparity of 10 basis points or
more, with the most common preliminary findings and referrals for
Latino and Black borrowers.\50\
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\47\ See Jung H. Choi et al., ``What Different Denial Rates Can
Tell Us About Racial Disparities in the Mortgage Market,'' (Jan. 13,
2022), available at https://www.urban.org/urban-wire/what-different-denial-rates-can-tell-us-about-racial-disparities-mortgage-market.
\48\ See Laurie Goodman et al., ``Traditional Mortgage Denial
Metrics May Misrepresent Racial and Ethnic Discrimination,'' (Aug.
23, 2018), p. 5, available at https://www.urban.org/urban-wire/traditional-mortgage-denial-metrics-may-misrepresent-racial-and-ethnic-discrimination.
\49\ See Robert Bartlett et al., Haas School of Business UC
Berkely, ``Consumer-Lending Discrimination in the FinTech Era,''
(Nov. 2019), available at https://faculty.haas.berkeley.edu/morse/research/papers/discrim.pdf.
\50\ See Federal Housing Finance Agency, 2021 Report to
Congress, p. 67, available at https://www.fhfa.gov/AboutUs/Reports/ReportDocuments/FHFA-2021-Annual-Report-to-Congress.pdf.
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The Federal Home Loan Bank of San Francisco entered into a research
and product development initiative with a research institution to
address issues related to the racial homeownership gap.\51\ A study
resulting from this partnership noted that the heavy reliance on
certain credit attributes in the current mortgage underwriting process
to the exclusion of other attributes limits opportunities for people of
color.\52\
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\51\ See https://fhlbsf.com/about/newsroom/urban-institute-and-fhlbank-san-francisco-announce-new-efforts-close-racial?f%5B0%5D=authored_on%3A2021.
\52\ See Jung H. Choi et al., Urban Institute and Federal Home
Loan Bank of San Francisco, ``Reducing the Black-White Homeownership
Gap through Underwriting Innovations: The Potential Impact of
Alternative Data in Mortgage Underwriting,'' available at https://www.urban.org/sites/default/files/2022-10/Reducing%20the%20Black-White%20Homeownership%20Gap%20through%20Underwriting%20Innovations.pdf.
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Additional mortgage market disparities and challenges remain with
respect to rural areas, manufactured housing, and other market
segments. FHFA's Duty to Serve program works to address many of these
disparities.\53\
---------------------------------------------------------------------------
\53\ See https://www.fhfa.gov/PolicyProgramsResearch/Programs/Pages/Duty-to-Serve.aspx.
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5. Appraisal and Valuation Disparities
FHFA's Uniform Appraisal Dataset (UAD) Aggregate Statistics
highlight that properties located in minority tracts have a higher
proportion of appraised values less than the contract price. According
to the 2021 appraisal statistics, 23.3 percent of homes in high
minority tracts (80.1-100 percent) experienced an appraised value less
than the contract price.\54\ This is compared to 13.4 percent of homes
in White tracts (0-50 percent) and 19.2 percent in minority tracts
(50.1-80 percent).\55\ Additionally, FHFA identified examples with
direct references to the racial and ethnic composition of the
neighborhood in appraisal reports.\56\ Freddie Mac's
[[Page 25298]]
research showed that properties in minority tracts are more likely than
properties in White tracts to receive an appraisal lower than the
contract price.\57\ A Fannie Mae publication concluded that White
borrowers' homes were overvalued at higher rates across all
neighborhoods, but stronger effects were present for White borrowers in
Black neighborhoods.\58\ Additional research has also highlighted and
analyzed disparities in property valuation.\59\ Consumer groups have
begun to conduct fair housing paired testing of appraisers, resulting
in the filing of complaints.\60\ Rural markets also experience
challenges related to appraiser availability and appraisal cost.\61\
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\54\ See Jonathan Liles, ``Exploring Appraisal Bias Using UAD
Aggregate Statistics,'' FHFA Insights Blog (Nov. 11, 2022),
available at https://www.fhfa.gov/Media/Blog/Pages/Exploring-Appraisal-Bias-Using-UAD-Aggregate-Statistics.aspx.
\55\ For 2022, 17.15 percent of home purchase appraisals were
below contract price in high minority tracts, compared to 14.3
percent in minority tracts and 11.2% in White tracts. Uniform
Appraisal Dataset Aggregate Statistics, available at https://www.fhfa.gov/DataTools/Pages/UAD-Dashboards.aspx.
\56\ See Chandra Broadnax, ``Reducing Valuation Bias by
Addressing Appraiser and Property Valuation Commentary,'' FHFA
Insights Blog (Dec. 14, 2021), available at https://www.fhfa.gov/Media/Blog/Pages/Reducing-Valuation-Bias-by-Addressing-Appraiser-and-Property-Valuation-Commentary.aspx.
\57\ See Melissa Narragon et al., ``Racial & Ethnic Valuation
Gaps in Home Purchase Appraisals--A Modeling Approach,'' (May 2022),
available at https://www.freddiemac.com/research/insight/20220510-racial-ethnic-valuation-gaps-home-purchase-appraisals-modeling-approach; Freddie Mac, ``Racial and Ethnic Valuation Gaps in Home
Purchase Appraisals,'' (Sept. 20, 2021), available at https://www.freddiemac.com/research/insight/20210920-home-appraisals.
\58\ See Jake Williamson et al., ``Appraising the Appraisal,''
(Feb. 2022) available at https://www.fanniemae.com/media/42541/display.
\59\ See, e.g., Andre Perry et al., The Brookings Institution,
``The Devaluation of Assets in Black Neighborhoods: The Case of
Residential Property (Nov. 27, 2018), available at https://www.brookings.edu/research/devaluation-of-assets-in-black-neighborhoods/; Junia Howell et al., ``Appraised: The Persistent
Evaluation of White Neighborhoods as More Valuable Than Communities
of Color,'' (Nov. 2022), available at https://www.eruka.org/appraised; Edward Pinto et al., American Enterprise Institute, ``How
Common is Appraiser Racial Bias--An Update,'' (May 2022), available
at https://www.aei.org/wp-content/uploads/2022/06/How-Common-is-Appraiser-Racial-Bias-An-Update-May-2022-FINAL-corrected-1.pdf?x91208.
\60\ Jake Lilien, National Community Reinvestment Coalition,
``Faulty Foundations: Mystery-Shopper Testing in Home Appraisals
Exposes Racial Bias Undermining Black Wealth,'' (Oct. 2022),
available at https://ncrc.org/faulty-foundations-mystery-shopper-testing-in-home-appraisals-exposes-racial-bias-undermining-black-wealth/.
\61\ See FHFA, Request for Information on Appraisal-Related
Policies, Practices, and Processes (Dec. 28, 2020), p. 4, available
at https://www.fhfa.gov/Media/PublicAffairs/PublicAffairsDocuments/RFI-Appraisal-Related-Policies.pdf.
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III. The Proposed Rule
A. FHFA Fair Lending Oversight of the Regulated Entities
The proposed rule would codify in regulation FHFA's existing fair
lending oversight functions with respect to the regulated entities,
including conducting supervisory examinations, issuing examination
findings, requiring regular and special reporting and data, and
enforcement. The proposed oversight would be substantially the same as
FHFA's current fair lending oversight functions, but would establish
FHFA's oversight of potential unfair or deceptive acts or practices by
the regulated entities and would require the regulated entities to file
certifications of compliance with fair lending and fair housing laws
with regular and special reports. It would additionally establish more
precise standards related to fair housing and fair lending and
principles of equitable housing for regulated entity boards of
directors.
B. Enterprise Equitable Housing Finance Plans
The proposed rule would codify FHFA's current requirements for the
Enterprises' Equitable Housing Finance Plans. The proposed plan
requirements would be substantially the same as FHFA's current
requirements for the Enterprises' plans, but would establish additional
public disclosure and reporting requirements and expanded program
requirements. Codifying the Enterprises' plan requirements with
additions in a regulation would make the Enterprises' obligations more
explicit and transparent to the public and would also establish greater
accountability mechanisms through FHFA's statutory enforcement and
compliance authorities.
The proposed rule has some similar elements to the HUD's
affirmatively furthering fair housing rules and requirements.\62\ HUD's
framework provides helpful guidance and information on an equity
planning process that affirmatively furthers fair housing. HUD's
framework has informed FHFA in its development of the proposed rule,
but FHFA has also taken into account the unique features of the
Enterprises, its experience in overseeing the program to date, and the
views of stakeholders as part of FHFA's requests for input and
listening sessions to develop the proposed rule.
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\62\ See, e.g., 24 CFR 5.150 et seq.
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C. Enterprise Data Collection and Reporting to FHFA
The proposed rule would require the Enterprises to collect,
maintain, and report data on language preference, homeownership
education, and housing counseling for applicants and borrowers. The
Enterprises collect this data through their automated underwriting
systems and loan delivery. The Enterprises also provide a standard form
for collection of the data--the Supplemental Consumer Information Form.
The proposed rule would codify the FHFA policy announced in May 2022
for mandatory use of the Supplemental Consumer Information Form.\63\
Consistent with current policy, the proposed rule would not require
applicants and borrowers to respond to a language preference question,
and applicants and borrowers may be provided with the option to not
respond to a question about language preference as part of the
information collection to satisfy the proposed rule.
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\63\ See https://www.fhfa.gov/Media/PublicAffairs/Pages/FHFA-Announces-Mandatory-Use-of-the-Supplemental-Consumer-Information-Form.aspx.
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D. Application of FHFA's Prudential Standard Framework
Section 4513b of the Safety and Soundness Act (12 U.S.C. 4513b(b))
requires FHFA to establish prudential management and operations
standards for its regulated entities, authorizes FHFA to establish such
standards by regulation or guideline, and establishes a corrective
action framework if a regulated entity fails to meet a prudential
standard.\64\ To implement section 4513b, FHFA has adopted a Prudential
Management and Operations Standards (PMOS) regulation, at 12 CFR part
1236, and an Appendix to that regulation. The PMOS regulation is
primarily procedural; for example, it addresses FHFA determinations
that a regulated entity has failed to meet a standard; provides that
FHFA may base that determination on an examination, inspection, or any
other information; and addresses the contents and filing deadlines for
corrective plans.\65\ The PMOS regulation also codifies FHFA's
authority to require a regulated entity to submit a PMOS corrective
plan in conjunction with other required submissions.\66\ If a regulated
entity fails to submit a corrective plan or fails to implement an
approved corrective plan, the PMOS regulation addresses FHFA's
statutory authority to order the regulated entity to correct the
deficiency or to undertake additional corrective or remedial measures
as FHFA may require.
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\64\ 12 U.S.C. 4513b(b)(2)(B).
\65\ 12 CFR 1236.4(a).
\66\ 12 CFR 1236.4(c)(2)(ii).
---------------------------------------------------------------------------
The Appendix sets forth substantive prudential management and
operational standards (Standards) that FHFA has established as
guidelines, including a statement on General Responsibilities of the
Board and Management and ten numbered Standards. These Standards
contain many elements that are relevant to components of the proposed
rule, such as responsibilities for boards and senior management with
respect to appropriate business strategies and policies; standards for
internal controls and information systems; maintenance of records;
alignment of the overall risk
[[Page 25299]]
profile with mission objectives; internal audit; compliance with laws,
regulations, and supervisory guidance; and others. Therefore,
compliance with the proposed rule, if finalized, would be subject to
applicable Standards and could be addressed through the PMOS corrective
framework.
Separately, the proposed rule would establish Subpart C, Enterprise
Equitable Housing Finance Planning, except for Sec. 1293.26, as a
prudential standard within the meaning of section 4513b. FHFA has
determined that it is legally appropriate and would be sound policy to
identify that subpart as a prudential standard. The Enterprise
equitable housing finance planning framework, as discussed above, is
consistent with the Enterprises' authorizing statute obligations and
FHFA's statutory charges related to ensuring regulated entities operate
consistent with the public interest and that FHFA furthers fair housing
in its oversight of the regulated entities. In addition to the more
general application of the PMOS framework through the Standards
discussed above, this designation of the equitable housing finance
planning framework as a Standard by regulation would provide FHFA
access to section 4513b corrective measures, if necessary, to address
deficiencies in equitable housing finance planning or implementation by
an Enterprise. Section 1293.26 is proposed to be excluded from the
designation because that section articulates a broader concept related
to ensuring Enterprise boards appropriately consider the equitable
housing finance plan alongside other longstanding mission
responsibilities in their oversight of an Enterprise and not the
required elements and process for an Equitable Housing Finance Plan.
Section 4513b makes clear that corrective actions pursuant to the
PMOS framework are in addition to any enforcement action FHFA would be
authorized to take, if FHFA determined that an Enterprise has violated
any regulation.\67\ Thus the PMOS framework does not limit FHFA's
authorities and FHFA will determine the appropriate supervisory
response based on the facts and circumstances of any failure or
violation.
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\67\ 12 U.S.C. 4513b(c).
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E. Policy Purposes for and Benefits of the Proposed Rule
All communities in the United States deserve access to sustainable
housing opportunities and well-functioning housing markets. As
acknowledged through the Duty to Serve requirements, housing goals
framework, and the Agency and the regulated entities' public purposes,
enumerated protected classes under fair housing and fair lending laws
are not the only underserved communities in the United States. The
proposed rule's incorporation of broad protections for consumers under
prohibitions against unfair or deceptive acts or practices, and
defining underserved communities broadly for the purposes of Equitable
Housing Finance Plans, will help ensure the Agency and the regulated
entities focus on underserved communities throughout the United States,
consistent with the Enterprises' Charter Acts, the Agency's public
interest duty, and the purposes of the Fair Housing Act. The proposed
rule will add to the Agency's existing set of programs and tools to
accomplish these goals.
By codifying many of FHFA's existing requirements and policies
regarding fair lending oversight, Enterprise Equitable Housing Finance
Plans, and language preference and homeownership education and housing
counseling data collection, as well as expanding certain requirements,
the proposed rule serves a number of policy purposes and would provide
a number of policy benefits.
Consistent oversight of fair housing and fair lending, along with
public participation and accountability, have been key issues that
impact the fair housing and fair lending compliance by financial
institutions and housing market actors. Codifying the requirements and
policies through rulemaking will provide greater public transparency
and input regarding the existing programs, as well as greater assurance
of the Agency's commitment. Codifying existing fair housing and fair
lending requirements and enhancing them will provide greater oversight
and accountability regarding the regulated entities' fair housing and
fair lending compliance and therefore benefit the public who are
ultimately protected by fair housing and fair lending laws.
Strategic planning for improvements in fair housing has been a key
component of fulfilling commitments to affirmatively further fair
housing and is an important way in which progress toward providing for
fair housing throughout the United States can be made. Codifying
Equitable Housing Finance Plans in regulation and providing additional
standards through rulemaking will ensure that fair housing issues can
be addressed proactively in addition to reactively through supervision
and examinations.
Establishing enhanced standards and transparency for fair housing
and fair lending generally, and for the Equitable Housing Finance
Plans, may also have the benefit of providing greater market assurance
with respect to the regulated entities' compliance with applicable
laws, thereby supporting liquidity in the secondary mortgage market and
support for underserved communities.
IV. Section-by-Section Analysis
A. Section 1293.1 General
Subpart A of the proposed rule would provide general information,
rules, definitions, and compliance and enforcement provisions that
apply to all of proposed part 1293. Proposed Sec. 1293.1(a) would
provide general information and rules, including fair lending oversight
of the regulated entities, equitable housing finance planning by the
Enterprises, and data collection and reporting by the regulated
entities (currently only including requirements for the Enterprises).
Proposed Sec. 1293.1(b) would provide that nothing in proposed part
1293 permits or requires a regulated entity to engage in any activity
that would otherwise be inconsistent with the Safety and Soundness Act,
the authorizing statutes, or other applicable law. FHFA believes it is
important to reiterate in the proposed rule that activities must be in
keeping with safety and soundness. Without safety and soundness
underlying the regulated entities' activities, they cannot truly
promote fair housing, fair lending, and principles of housing equity.
As discussed later, FHFA is also adding the prohibition on unfair or
deceptive acts or practices to the laws it oversees with respect to the
regulated entities. FHFA believes that underscoring the importance of
safety and soundness and avoiding unfair or deceptive acts or practices
complements and enhances the pursuit of solutions that further fair
housing, fair lending, and principles of housing equity and makes clear
that predatory products or activities would not be in furtherance of
the proposed rule. Proposed Sec. 1293.1(c) would provide that nothing
in proposed part 1293 creates a private right of action.
B. Section 1293.2 Definitions
Proposed Sec. 1293.2 would provide definitions that apply to
proposed part 1293.
The proposed definition of ``Equitable Housing Finance Plan''
(plan) is a key component of subpart C of the proposed rule. It is a
three-year public plan developed with public engagement and adopted by
each Enterprise describing how each Enterprise will overcome barriers
to sustainable housing opportunities faced by one or more
[[Page 25300]]
underserved communities through objectives, meaningful actions, and
measurable goals. The plan is a key element of the proposed rule, and
its requirements are more fully described in proposed Sec. Sec.
1293.22 and 1293.25. The proposed definition of ``annual plan update''
(update) is a public update to a plan for the second or third year of a
planning cycle. The proposed definition of ``performance report''
(report) is an annual public report by an Enterprise on its performance
under a plan and other information on equitable housing and fair
lending that meets the requirements of proposed Sec. 1293.23 and any
other FHFA requirements.
The proposed definition of ``barrier'' is an important element of a
plan. As part of a plan, an Enterprise would be required to identify
barriers faced by an underserved community. The proposed definition
includes Enterprise actions, products, or policies as well as aspects
of the housing market that can reasonably be influenced by an
Enterprise's actions, products, or policies that contribute to an
underserved community's limited share of sustainable housing
opportunities, difficulties in accessing those sustainable housing
opportunities, or the continuing adverse effects of discrimination
affecting their participation in the housing market. The proposed
definition focuses on an Enterprise's own actions, products, or
policies because these are what an Enterprise can most easily change.
Including aspects of the housing market that can reasonably be
influenced by an Enterprise's actions, in addition to an Enterprise's
own actions, products, or policies, encourages actions that serve the
public interest, promote access to mortgage credit throughout the
nation, and further fair housing.
The proposed definition of ``fair housing and fair lending laws''
provides an enumeration of Federal fair housing and fair lending laws
to which the regulated entities are subject and FHFA oversees pursuant
to the fair lending oversight described in the proposed rule. The
``fair housing and fair lending laws'' are the Fair Housing Act, the
Equal Credit Opportunity Act, and implementing regulations.
Additionally, with respect to an Enterprise, the ``fair housing and
fair lending laws'' include 12 U.S.C. 4545 and implementing
regulations.
The proposed definition of ``sustainable housing opportunity''
relates to the scope and type of the benefits that the plans should
seek to achieve for underserved communities through meaningful actions.
The proposed definition includes both rental and homeownership
opportunities that include one or more characteristics important to the
needs of a tenant or homeowner within its scope and includes several
illustrative characteristics of the concept, including affordability,
habitability, resilience to climate impacts, quality, locational
benefits, accessibility, long-term sustainability, and accommodations
for short-term hardships. These are important features of housing
opportunities that should help focus the Enterprises' plans. Further
standards related to the proposed definition are provided in proposed
Sec. 1293.25.
The proposed definition of ``underserved community'' is an
important element of a plan. An Enterprise chooses one or more
underserved communities on which to focus for a planning cycle.
``Underserved community'' would be defined as a group of people with
shared characteristics or an area that is subject to current
discrimination or has been subjected to past discrimination that has or
has had continuing adverse effects on the group or area's participation
in the housing market, historically has received or currently receives
a lower share of the benefits of Enterprise programs and activities
providing sustainable housing opportunities, or that otherwise has had
difficulty accessing these benefits compared with groups of people
without the shared characteristic or other areas. The proposed
definition includes characteristics protected by fair lending laws
applicable to the Enterprises, but the definition is not limited to
such characteristics. The definition provides illustrative examples, if
supported by adequate information under the requirements of proposed
Sec. 1293.25. The proposed definition makes clear that a variety of
groups or areas could be chosen by an Enterprise. The inclusion or
exclusion of any particular group from the illustrative examples is not
an indication of FHFA's views about whether or not that group
constitutes an underserved community or whether it should be the focus
of a plan.
C. Section 1293.3 Compliance and Enforcement
Proposed Sec. 1293.3 reiterates general FHFA authority related to
compliance and enforcement for proposed part 1293, inclusive of all
aspects of the proposed rule. FHFA has broad authority for compliance
and enforcement. This section notes FHFA's ability to conduct
examinations related to proposed part 1293, including fair lending
compliance, equitable housing finance, and other matters. It also notes
FHFA's ability to issue adverse examination findings and take various
forms of enforcement actions and issue civil money penalties under 12
U.S.C. 4511(b), 4513b, 4631, and 4636. This section is similar to other
sections of FHFA regulations related to oversight of specific
programmatic areas \68\ and the FHFA fair lending policy statement.\69\
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\68\ See, e.g., 12 CFR 1223.24.
\69\ See FHFA, ``Policy Statement on Fair Lending,'' (Jul. 9,
2021), available at https://www.govinfo.gov/content/pkg/FR-2021-07-09/pdf/2021-14438.pdf.
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Some examples of how FHFA's compliance and enforcement authority
could be used with respect to fair lending oversight, equitable housing
finance, or data collection or reporting include, but are not limited
to:
If FHFA found that a regulated entity had insufficient
compliance management around fair lending laws or the proposed rule,
FHFA could issue adverse examination findings and factor the
insufficient compliance management into supervisory ratings;
If FHFA found that a regulated entity had violated the
Fair Housing Act, FHFA could issue adverse examination findings, factor
the non-compliance into supervisory ratings, and enter into a consent
order with the regulated entity requiring corrective action, additional
remedies, and civil money penalties;
If an Equitable Housing Finance Plan, annual update,
performance report, or an Enterprise's actions taken under the program
did not meet the requirements of this proposed rule, FHFA could issue
an adverse examination finding, factor non-compliance into supervisory
ratings, and issue a prudential management operating standard notice
requiring the entity to submit a corrective plan; and
If FHFA found that a regulated entity had not complied
with required data collection or reporting, FHFA could issue an adverse
examination finding, factor non-compliance into supervisory ratings,
and enter into a written agreement with the regulated entity.
Neither this section of the proposed rule or the examples given
above are intended to limit FHFA's authority in any way. This section
merely restates some of the most applicable FHFA authority.
D. Section 1293.4 Preservation of Authority
Proposed Sec. 1293.4 would provide that nothing in the proposed
rule would in any way limit the authority of the agency under other
provisions of applicable law and regulations.
[[Page 25301]]
E. Section 1293.11 Regulated Entity Compliance
Subpart B of the proposed rule applies to all regulated entities
and provides standards related to compliance, responsibilities of
boards of directors, reports, data, and certification. Proposed Sec.
1293.11 addresses regulated entity compliance with fair housing and
fair lending laws. Proposed Sec. 1293.11(a) states that regulated
entities must comply with the Fair Housing Act, the Equal Credit
Opportunity Act, and 12 U.S.C. 4545 for the Enterprises. Proposed Sec.
1293.11(b) would provide that the regulated entities must comply with
15 U.S.C. 45 (Section 5 of the Federal Trade Commission Act), which
prohibits unfair or deceptive acts or practices. The prohibition
against unfair or deceptive acts or practices is an important
protection under Federal law for consumers and other market actors
against predatory and deceptive actions,\70\ and FHFA has determined it
would be appropriate to oversee the regulated entities for compliance
with this statute. Violations of these laws by the regulated entities
would, in addition, violate Sec. 1293.11(a) and (b) as proposed.\71\
The Safety and Soundness Act empowers FHFA to oversee its regulated
entities' compliance with ``other applicable law,'' 12 U.S.C.
4511(b)(2), and to engage in enforcement for noncompliance with
law.\72\ Other Federal financial regulators examine and oversee their
regulated entities on these or similar bases as part of consumer
protection under similar authority.\73\ While FHFA is including unfair
or deceptive acts or practices in the proposed rule because they are
similar to fair lending laws in the intent to ensure fair treatment,
FHFA understands unfair or deceptive acts or practices to encompass a
broad scope of activities harmful to individuals that go beyond illegal
discrimination.
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\70\ Kathleen C. Engel et al., A Tale of Three Markets: The Law
and Economics of Predatory Lending, 80 Tex. L. Rev. 1255, 1260
(2002) (noting that lending fraud or deceptive practices ``come[ ]
in endless varieties''). Ngai Pindell, The Fair Housing Act at
Forty: Predatory Lending and the City As Plaintiff, J. Affordable
Housing & Community Dev. L., Winter 2009, at 173-75 (describing
contemporary unfair and predatory lending practices).
\71\ See, e.g., 12 U.S.C. 4636.
\72\ 12 U.S.C. 4631. FHFA's cease-and-desist authority is
similar to Section 8 of the Federal Deposit Insurance Act under
which the FDIC (for example) enforces unfair and deceptive acts or
practices.
\73\ See, e.g., Federal Deposit Insurance Corporation (FDIC)
Guidance on Unfair or Deceptive Acts or Practices, FIL-57-2002 (May
30, 2002), available at https://www.fdic.gov/news/inactive-financial-institution-letters/2002/fil0257.html. See also HUD's
Mortgagee Letter 2014-10 (ML 2014-10), available at https://www.hud.gov/sites/documents/14-10ML.PDF (HUD letter ``remind[ing]
mortgagees of the Federal Housing Administration's (FHA)
requirements prohibiting misleading or deceptive advertising'').
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Proposed Sec. 1293.11(c) would establish more precise standards
related to fair housing and fair lending and the prohibition on unfair
or deceptive acts or practices for regulated entity boards of directors
in carrying out their existing responsibility under FHFA's Corporate
Governance regulation (12 CFR part 1239) to direct the operations of
the regulated entities in conformity with FHFA regulations. FHFA's
Corporate Governance regulation provides that the ultimate
responsibility for a regulated entity's oversight rests with the board
of directors, and that directors have a duty to direct the operations
of a regulated entity in conformance with the authorizing statutes, the
Safety and Soundness Act, and FHFA regulations.\74\ Board and
management oversight of fair housing and fair lending compliance has
long been recognized as a critical component of a well-functioning
compliance management system. Federal financial regulators regularly
examine their regulated entities for sufficient fair lending compliance
management, and rate regulated entities based in part on Board and
Management Oversight.\75\ Consent orders for fair housing and fair
lending violations frequently include specific requirements for
enhanced Board and Management Oversight.\76\ The standard articulated
in the proposed rule is intended to provide more clarity and guidance
to directors in how to incorporate the proposed rule into the pre-
existing duty under the Corporate Governance regulation to direct
operations in conformity with FHFA regulations. The proposed rule's
language on ``appropriately considering'' compliance with fair housing
and fair lending laws and the prohibition on unfair or deceptive acts
or practices are intended to be flexible and tailored to the particular
consideration at hand, while reinforcing the broad application of fair
housing and fair lending laws and the prohibition on unfair or
deceptive acts or practices on a regulated entity's operations and the
board's ultimate responsibility for the regulated entity's oversight.
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\74\ 12 CFR 1239.4.
\75\ See, e.g., Federal Financial Institutions Examination
Council, Uniform Interagency Consumer Compliance Rating System, 81
FR 79473 (Nov. 14, 2016) (outlining expectations for Board and
Management Oversight in consumer compliance management, including
fair lending); Federal Financial Institutions Examination Council,
Interagency Fair Lending Examination Procedures, available at
https://www.fdic.gov/regulations/examinations/fairlend.pdf
(detailing examiners' engagement with management and review of
management oversight).
\76\ See, e.g., United States v. Cadence Bank Consent Order,
available at https://www.justice.gov/crt/case-document/file/1429051/
download#:~:text=%C2%A7%C2%A7%201691%2D1691f.&text=1.,%2C%20color%2C%
20and%20national%20origin.
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F. Section 1293.12 Reports and Data
Proposed Sec. 1293.12 would provide that FHFA may require the
regulated entities to provide to FHFA regular and special reports,
including the provision of data, concerning fair lending and fair
housing. FHFA has issued fair lending reporting orders to Fannie Mae
and Freddie Mac requiring regular reports.\77\ FHFA has not issued fair
lending reporting orders to the Banks, and FHFA is not proposing to
require specific reports of the Banks through this proposed rule. FHFA
would plan to issue such reporting orders at an appropriate time, if
deemed necessary.
---------------------------------------------------------------------------
\77\ See FHFA's Fair Lending Orders, available at https://
www.fhfa.gov/PolicyProgramsResearch/Programs/Pages/Fair-Lending-
Oversight-
Program.aspx#:~:text=Fair%20Lending%20Reporting%20Orders&text=The%20o
rders%20require%20the%20Enterprises,lending%20supervision%20and%20mon
itoring%20capabilities.
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Proposed Sec. 1293.12 also provides that each regular report
related to fair housing and fair lending shall include a certification
of the regulated entity's compliance with fair housing and fair lending
laws and the prohibition on unfair or deceptive acts or practices in
addition to any other required certification or declaration (such as a
declaration under 12 U.S.C. 4514(a)(4)). Under FHFA's regular and
special report authority under 12 U.S.C. 4514(a)(4), each report must
contain a declaration from an officer that the report is true and
correct to the best of such officer's knowledge and belief. This
section would add an additional requirement for a certification that
the regulated entity complies with fair housing and fair lending laws
and the prohibition on unfair or deceptive acts or practices for
reports related to fair housing and fair lending. This certification
requirement would provide additional incentive to the boards and
management of the regulated entities to ensure compliance with fair
housing and fair lending laws in their operations. Both Enterprises
require their seller/servicers to attest to compliance with fair
housing and fair lending laws.\78\ Certifications related to
[[Page 25302]]
compliance are commonly used by other Federal agencies, including with
respect to Federal housing grants, such as Community Development Block
Grants, and consent decrees and settlement agreements by the Department
of Justice and HUD in housing and lending discrimination cases.
---------------------------------------------------------------------------
\78\ See Fannie Mae Selling Guide, Compliance with Laws
available at https://selling-guide.fanniemae.com/Selling-Guide/Doing-Business-with-Fannie-Mae/Subpart-A3-Getting-Started-with-Fannie-Mae/Chapter-A3-2-Compliance-with-Requirements-and-Laws/1645975681/A3-2-01-Compliance-With-Laws-07-06-2022.htm and Freddie
Mac Seller/Service Guide, Compliance with Applicable Law available
at https://guide.freddiemac.com/app/guide/section/1301.2/03-01-2023.
---------------------------------------------------------------------------
FHFA is not proposing to include the specific certification
language in the rule, instead merely the general requirement. FHFA
believes this would allow flexibility for FHFA to make changes to the
specific certification language when necessary. However, FHFA seeks
comment on the following certification language: ``[Regulated entity]
complies and has complied in all material respects with, and maintains
policies, procedures, and internal controls to assure compliance with
fair housing and fair lending laws and the prohibition on unfair or
deceptive acts or practices.'' If a regulated entity did not believe it
could certify to that or similar language for a particular period, such
as because FHFA had identified fair lending non-compliance in a
supervisory examination that the regulated entity was still
remediating, and the regulated entity would not be able to complete
remediation by the time of certification, it could notify FHFA in
advance to discuss additional stipulations to the language.
G. Section 1293.21 General
Proposed Sec. 1293.21 provides general information that Subpart C
of the proposed rule, entitled Enterprise Equitable Housing Finance
Planning, sets forth the Enterprises' duty to engage in equitable
housing finance planning and establishes standards and procedures
related to public engagement and FHFA's oversight of the Enterprises'
planning and actions. It provides for general timing requirements when
a date falls on a non-business day. It also provides that submission
requirements and publication dates provided in the proposed rule may be
altered or waived by the Director by publication of a public order. As
discussed above, it also designates Subpart C, except for Sec.
1293.26, as a prudential standard.
H. Section 1293.22 Plans and Updates
Proposed Sec. 1293.22 provides rules related to plans and updates.
Proposed Sec. 1293.22(a) would establish the general requirement
for each Enterprise to adopt a plan covering a three-year period, with
optional updates in the second and third year of the plan period.
Proposed Sec. 1293.22(b) establishes general content requirements
for the plan, including an identification of barriers to sustainable
housing opportunities faced by one or more underserved communities,
objectives that define the outcomes the plan seeks to accomplish that
address the identified barriers, meaningful actions that describe the
high-impact activities that the Enterprise will undertake to accomplish
or further the identified objectives, which may span one or more years
(including extending beyond the period covered by the plan); specific,
measurable, and time-bound goals for those actions; and summaries of
the Enterprise's public engagement in developing the plan.
Proposed Sec. 1293.22(c) would establish a requirement for an
Enterprise to submit a plan to FHFA for review on or before September
30 of the year prior to the first year covered by the plan.
Proposed Sec. 1293.22(d) would establish general content
requirements for an update, including all changes the Enterprise is
making to its plan and a summary of any additional public engagement.
Proposed Sec. 1293.22(e) would establish a requirement for an
Enterprise to submit an update to FHFA for review on or before February
15 of the year covered by the update.
Proposed Sec. 1293.22(f) would establish standards for FHFA's
review of plans and updates. It would provide that FHFA may review each
plan and update prior to publication and may require removal of any
confidential or proprietary information; require removal of any content
that is not consistent with part 1293, the Safety and Soundness Act,
the authorizing statutes, or other applicable law; provide any feedback
for consideration; and exercise any other authority of FHFA. Inclusion
of confidential or proprietary information in plans and updates would
be inappropriate and reveal sensitive information that is not required
under the proposed rule. Further, FHFA's review may identify proposals
and plan content that are contrary to the Enterprise's authorizing
statutes, the Safety and Soundness Act, or other applicable law. FHFA
also retains all other existing authority that may be needed in
particular circumstances to address issues that arise during the review
of a plan or update. Given that a plan may only contain limited
information about a proposed action, FHFA may identify issues with the
activity through other processes, such as prior approval of new
products, or its supervision and oversight of the Enterprises. FHFA's
review of the plan would not preclude using these processes and FHFA's
full authorities if it were to later identify issues with the action,
and the public engagement opportunities throughout the plan cycle would
give FHFA additional information from the public for this purpose.
Proposed Sec. 1293.22(g) would provide that FHFA's review does not
constitute a prior approval of a plan or update or any action described
therein and that all actions included in a plan are subject to all
applicable FHFA and other requirements and authorities. For example, a
meaningful action that met the criteria for a new activity or new
product would be subject to the process described in FHFA's prior
approval for Enterprise products regulation.\79\ FHFA believes that the
process established by the proposed rule would help support the prior
approval for Enterprise products regulation by providing both FHFA and
the public information about activities being considered by the
Enterprises that may later trigger the requirements of the regulation.
---------------------------------------------------------------------------
\79\ 12 CFR part 1253.
---------------------------------------------------------------------------
Proposed Sec. 1293.22(h) would provide that plans and updates must
include disclaimer language indicating the implementation of actions
may be subject to change based on certain factors. The disclaimer
language in the current plans is: ``DISCLAIMER: Implementation of the
activities and objectives in [Enterprise]'s Equitable Housing Finance
Plan may be subject to change based on factors including, without
limitation, FHFA review for compliance with [Enterprise]'s statutory
charter, specific FHFA approval requirements and safety and soundness
standards, FHFA guidance and directives, regulatory requirements,
Senior Preferred Stock Purchase Agreement obligations, and adverse
market or economic conditions, as applicable.'' FHFA seeks comment on
this disclaimer language and any changes that should be made.
Proposed Sec. 1293.22(i) would provide that each Enterprise shall
publish its plan on January 15 of the first year covered by the plan,
and each annual update on April 15 of the second and third year covered
by the plan. It would also provide that the Enterprise maintain the
plan on its website thereafter and that it ensures that the
[[Page 25303]]
plans or updates are accessible to persons with disabilities.
Proposed Sec. 1293.22(j) would provide that from time to time,
FHFA may issue public guidance on plans and updates.
I. Section 1293.23 Performance Reports
Proposed Sec. 1293.23 would provide rules related to annual
performance reports (reports). Proposed Sec. 1293.23(a) would
establish the general requirement for each Enterprise to publicly
report on its plan progress and provide other information related to
equitable housing and fair lending annually for the prior year in a
report.
Proposed Sec. 1293.23(b) would establish requirements for the
contents of the report, including: a narrative assessment about the
program; performance details for each objective, measurable goal, and
meaningful action; general outcomes categorized by group; summary of
resources dedicated to the plan; and an assessment of the Enterprise's
underwriting that includes several elements. The report section on
underwriting is similar in nature to the authorizing statutes'
requirements for assessing underwriting standards that may yield
disparate results based on the race of the borrower, including
revisions thereto that may promote fair lending, and reporting on this
assessment under the Annual Housing Activities Report.\80\ FHFA
believes that the proposed rule provides an opportunity to incorporate
this concept into a fair lending-focused report and provide details
based on it into reporting under the Equitable Housing Finance Plans.
---------------------------------------------------------------------------
\80\ See, e.g., 12 U.S.C. 1723a(n)(2)(G) (``assess underwriting
standards, business practices, repurchase requirements, pricing,
fees, and procedures, that affect the purchase of mortgages for low-
and moderate-income families, or that may yield disparate results
based on the race of the borrower, including revisions thereto to
promote affordable housing or fair lending;'').
---------------------------------------------------------------------------
Proposed Sec. 1293.23(c) would establish a requirement for an
Enterprise to submit a report to FHFA for review on or before February
15 annually.
Proposed Sec. 1293.23(d) would establish standards for FHFA's
review of reports. The standards would align with the review standards
for plans and updates.
Proposed Sec. 1293.23(e) would establish a requirement for an
Enterprise to publish its report on April 15 annually. It would also
require that the report be maintained on the Enterprise's website and
that the Enterprise ensures that reports are accessible to persons with
disabilities.
Proposed Sec. 1293.23(f) would establish that FHFA may issue
public guidance on reports and also notes that FHFA may require
additional information in reports through other authorities, such as
its authority to require regular reports under 12 U.S.C. 4514. FHFA
believes that this authority may be helpful in establishing reporting
requirements in an expedited fashion for specific plans given the
differing nature of underserved communities and activities that may be
included in plans and the ongoing public engagement that is a part of
the process established by the proposed rule.
J. Section 1293.24 Public Engagement
Proposed Sec. 1293.24 establishes requirements related to public
engagement. Proposed Sec. 1293.24(a) provides that on or before June
15 annually, FHFA will conduct public engagement to gather public input
for the Enterprises and for FHFA to consider. FHFA's 2021 request for
input and listening session on the initial Equitable Housing Finance
Plan program provided valuable input and the proposed rule would
therefore codify these or similar types of public engagement as a
requirement for future plans.\81\
---------------------------------------------------------------------------
\81\ See FHFA, Enterprise Equitable Housing Finance Plans
Request for Input, (Sept. 2021), available at https://www.fhfa.gov/Media/PublicAffairs/PublicAffairsDocuments/Equitable-Housing-Finance-Plans-RFI.pdf; FHFA Public Listening Session: Enterprise
Equitable Housing Finance Plans RFI, (Sept. 28, 2021), available at
https://www.fhfa.gov/Videos/Pages/Enterprise-Equitable-Housing-Finance-Plans-RFI.aspx.
---------------------------------------------------------------------------
Proposed Sec. 1293.24(b) of the proposed rule would provide that
the Enterprises are required to consult with stakeholders, including
members of underserved communities and housing market participants, in
development of a plan and update and describe such consultation in the
plan.
K. Section 1293.25 Program Standards
Proposed Sec. 1293.25 would establish program standards for
various elements of the Equitable Housing Finance Plan process. These
requirements are intended to provide a foundational logic model and
theory of change for a particular plan.\82\
---------------------------------------------------------------------------
\82\ See, e.g., Leiha Edmonds, Urban Institute, ``Center Racial
Equity in Measurement and Evaluation: Emerging Lessons and Guidance
from Human Service Nonprofits,'' (July 2021), available at https://www.urban.org/sites/default/files/publication/104487/centering-racial-equity-in-measurement-and-evaluation_0.pdf.
---------------------------------------------------------------------------
Proposed Sec. 1293.25(a) would establish requirements for
selecting one or more underserved communities to be the focus of a
plan. It would establish a requirement that an Enterprise's choice of
an underserved community be supported by information and documented in
the plan. It would also provide several factors that an Enterprise must
consider in selecting an underserved community, but would also allow
for the consideration of other factors.
Proposed Sec. 1293.25(b) would establish requirements for
objectives. It would require objectives to be logically tied to one or
more identified barriers and facilitate establishing meaningful actions
and measurable goals. Objectives establish the overall direction and
focus for the plan by defining the outcomes the plan seeks to
accomplish. Given that the definition of an underserved community can
include both a group of people with a shared characteristic or an area,
in some cases objectives could seek to provide place-based solutions to
address the needs of a specific area or may seek to provide people the
opportunity to obtain sustainable housing opportunities more broadly.
The U.S. Supreme Court has made clear that both strategies may be
appropriate and comply with the Fair Housing Act depending on the
circumstances.\83\ FHFA expects that an Enterprise would choose
appropriate strategies in developing its objectives after considering
the needs of an underserved community and feedback from public
engagement.
---------------------------------------------------------------------------
\83\ See Tex. Dep't of Hous. & Cmty. Affairs v. Inclusive Cmtys.
Project, Inc., 135 S. Ct. 2507, 2512 (2015).
---------------------------------------------------------------------------
Examples of objectives, if developed to meet the requirements of
the proposed rule, could include:
Developing and providing secondary market support for
special purpose credit programs that promote sustainable housing
opportunities for an underserved community;
Increasing sustainable housing opportunities for
individuals in the mortgage market, such as by expanding the number of
qualified borrowers of an underserved community, or making changes to
underwriting standards, business practices, repurchase requirements,
pricing, fees, and procedures to promote fair lending or provide
greater access to sustainable housing opportunities;
Increasing sustainable housing opportunities for renters
of an underserved community living in or seeking to live in multifamily
properties financed by the Enterprise's loan purchases, such as by
prohibiting source of income discrimination (including rental subsidies
and vouchers), providing other tenant protections, or requiring
reporting of on-time payments;
[[Page 25304]]
Reducing the homeownership gap for an underserved
community with a significant homeownership rate disparity;
Reducing disparities in acceptance rates for an
underserved community with a significant disparity in the Enterprise's
automated underwriting system;
Reducing disparities in the share of loans acquired by the
Enterprise that serve an underserved community with a significant
disparity in the share of loans acquired by the Enterprise compared to
the share of loans originated to members of that underserved community
in the overall mortgage market;
Reducing disparities in negative outcomes for an
underserved community in servicing, loan modifications, and loss
mitigation;
Reducing disparities in negative outcomes for an
underserved community in tenant screening, repayment options, and
evictions;
Increasing the supply of, and equitable access to, high-
quality affordable rental housing for an underserved community;
Reducing underinvestment and undervaluation in formerly
redlined areas or areas that are otherwise underserved or undervalued;
Increasing the supply of, and equitable access to, high-
quality affordable and accessible housing for persons with disabilities
and that is available in the most integrated setting appropriate to the
needs of an individual with a disability;
Increasing the supply of, and equitable access to, high-
quality affordable housing for families with children in areas with
access to high-quality educational, transportation, economic, and other
important opportunities;
Increasing sustainable housing opportunities for veterans;
Promoting or requiring improvements in: fair lending
standards and compliance, marketing and outreach to members of an
underserved community who are less likely to apply for certain housing
opportunities, the estimation of race and ethnicity for mortgage
applicants or housing market participants where race and ethnicity data
has not been self-reported, and fair lending self-testing by primary
lenders or other market participants that do business with the
Enterprises;
Conducting, and making available publicly, research on
advancing equity and sustainable housing opportunities for an
underserved community;
Conducting ethnographic or consumer research on how to
effectively serve an underserved community and disseminating it to
market participants to improve quality of communications and increase
community trust;
Releasing data publicly on how an Enterprise or the market
is performing in serving an underserved community, the effects of an
Enterprise's policies on an underserved community, and how an
Enterprise's actions may improve performance or address such effects;
and
Providing support to HUD program participants in
affirmatively furthering fair housing.
The inclusion or exclusion of any particular objective from the
illustrative list is not an indication of FHFA's views about whether or
not that objective should or should not be undertaken as part of a
plan. The list is intended to illustrate the flexibility of the
proposed rule.
Proposed Sec. 1293.25(c) would establish requirements for
meaningful actions. It would require that meaningful actions be
logically tied to one or more measurable goals and one or more
objectives for an identified underserved community and that they
support sustainable housing opportunities. It would also require that
meaningful actions reflect significant additional action above and
beyond actions that also serve other Enterprise objectives and goals
and reflect more than de minimis action. It would also require that
meaningful actions reflect a commitment commensurate with an
Enterprise's prominence in the housing market, its available resources,
its dedication of resources to other important efforts, the needs of
underserved communities, market conditions, and safety and soundness.
It would also require that meaningful actions comply with the Safety
and Soundness Act, the authorizing statutes, and other applicable law.
Finally, it would require that meaningful actions not be actions that
are required to remediate supervisory findings or required as a result
of enforcement actions.
Proposed Sec. 1293.25(d) would establish requirements for
measurable goals. It would require measurable goals to be logically
tied to one or more meaningful actions in a plan, be specific, be time-
bound, be focused on outcomes, and facilitate measuring Enterprise
progress, comparing Enterprise performance, and ensuring public
accountability.
L. Section 1293.26 Enterprise Board Equitable Housing and Mission
Responsibilities
Proposed Sec. 1293.26 would provide equitable housing and other
mission-related responsibilities for Enterprise boards. As discussed
above, board oversight is an important element of successful corporate
governance, and FHFA's Corporate Governance regulation establishes a
requirement for directors to direct the operations of regulated
entities in conformity with FHFA regulations. The proposal would
provide that Enterprise boards appropriately consider the objectives,
actions, and goals of the Enterprise's Equitable Housing Finance Plan,
while also appropriately considering its affordable housing goals and
Duty to Serve plans and targets, and its other mission-related
obligations, in the board's oversight of the Enterprise and the
Enterprise's business activities. The proposed rule's language on
``appropriately considering'' the equitable housing and other mission
responsibilities is intended to be flexible and tailored to the
particular consideration at hand, while reinforcing that the plan
should work in concert with the Enterprise's other mission activities
and operations as a whole. This proposed section helps clearly
articulate the ultimate responsibility of the board for oversight of
the Equitable Housing Finance Plan, the Enterprise's affordable housing
goals and Duty to Serve plans and targets, and its other mission-
related obligations, and that they should work in concert with the
Enterprise's operations as a whole.\84\
---------------------------------------------------------------------------
\84\ See, e.g., Leiha Edmonds et al., Urban Institute,
``Centering Racial Equity in Measurement and evaluation,'' (July
2021), available at https://www.urban.org/sites/default/files/publication/104487/centering-racial-equity-in-measurement-and-evaluation_0.pdf.
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M. Section 1293.31 Required Enterprise Data Collection and Reporting
Proposed Sec. 1293.31 provides for certain required Enterprise
data collection and reporting related to fair housing and fair lending.
It would require the Enterprises to collect, maintain, and report data
on language preference, homeownership education, and housing counseling
for applicants and borrowers. The proposed rule would be substantially
the same as the policy announced by FHFA in May 2022.\85\ The
Enterprises currently collect this data through the automated
underwriting systems and loan delivery
[[Page 25305]]
and have established data standards for collection of the information.
The Enterprises have also issued a standard form for collection of the
data--the Supplemental Consumer Information Form.
---------------------------------------------------------------------------
\85\ See https://www.fhfa.gov/Media/PublicAffairs/Pages/FHFA-Announces-Mandatory-Use-of-the-Supplemental-Consumer-Information-Form.aspx.
---------------------------------------------------------------------------
FHFA issued a request for input in 2017 that addressed improving
language access in mortgage lending and mortgage servicing.\86\ As part
of that request for input as well as through ongoing engagement,
stakeholders have noted the value of collecting the information and
certain issues related to its collection. Certain applicants or
borrowers may not wish to disclose the information; consistent with
current practice by the Enterprises, the proposed rule would not
require a response from applicants and borrowers and they could be
provided with the option to not respond to a question about language
preference as part of the information collection to satisfy the
proposed rule. Providing the applicant or borrower the option to not
respond is consistent with the collection of data on race and ethnicity
in the mortgage market.\87\ Certain stakeholders have also raised
concerns about collecting the information in compliance with the Equal
Credit Opportunity Act and Regulation B. The Consumer Financial
Protection Bureau has specified that collection of language preference
information does not violate Regulation B.\88\
---------------------------------------------------------------------------
\86\ See FHFA, ``Improving Language Access in Mortgage Lending
and Servicing Request for Input,'' (May 25, 2017), available at
https://www.fhfa.gov/Media/PublicAffairs/PublicAffairsDocuments/Language_Access_RFI.pdf.
\87\ 12 CFR part 1003, appendix B.
\88\ ``On May 3, 2022, the Federal Housing Finance Agency
announced that lenders will be required to use the Supplemental
Consumer Information Form, which asks about consumers' language
preference, as part of the application process for loans that will
be sold to the Enterprises. Consistent with the Consumer Financial
Protection Bureau's Nov. 2017 approval, creditors do not violate the
ECOA or Regulation B when they collect the language preference of an
applicant or borrower.'' Consumer Financial Protection Bureau,
``Resources to help industry understand, implement, and comply with
the fair lending requirements of the Equal Credit Opportunity Act
(ECOA) and Regulation B,'' available at https://www.consumerfinance.gov/compliance/compliance-resources/other-applicable-requirements/equal-credit-opportunity-act/.
---------------------------------------------------------------------------
Information about homeownership education and housing counseling
provides valuable insight into these programs. In July 2022, the
Mortgage Industry Standards Maintenance Organization formed a new
working group related to housing counseling data.\89\ FHFA's National
Survey of Mortgage Originations (NSMO) includes questions related to
homeownership education and housing counseling.\90\ Researchers have
used the NSMO data to explore homeownership education and housing
counseling's effects on borrowers.\91\ Prior research has also explored
the effects of homeownership education and housing counseling on
borrowers.\92\ Consistent collection of homeownership education and
housing counseling data can facilitate research and market changes to
further make use of homeownership education and housing counseling to
assist borrowers.
---------------------------------------------------------------------------
\89\ See https://www.mismo.org/about-MISMO/news/2022/07/25/mismo-issues-call-for-participants-for-new-housing-counseling-workgroup.
\90\ See FHFA, National Survey of Mortgage Originations
Technical Documentation (Dec. 13, 2022), available at https://www.fhfa.gov/DataTools/Downloads/Documents/NSMO-Public-Use-Files/NSMO-Technical-Documentation-20221213.pdf.
\91\ See Robert Argento et al., ``First-Time Homebuyer
Counseling and the Mortgage Selection Experience in the United
States: Evidence from the National Survey of Mortgage
Originations,'' CityScape, Vol. 21, Number 2, (Nov. 2019), available
at https://www.huduser.gov/portal/periodicals/cityscpe/vol21num2/ch3.pdf.
\92\ See Wei Li et al., ``NeighborWorks America's Homeownership
Education and Counseling: Who Receives It and Is it Effective?''
Urban Institute (Sept. 29, 2016), available at https://www.urban.org/research/publication/neighborworks-americas-homeownership-education-and-counseling-who-receives-it-and-it-effective; Jennifer Turnham ``Pre-Purchase Counseling Outcome
Study,'' (May 2012), available at https://www.huduser.gov/publications/pdf/pre_purchase_counseling.pdf; J. Michael Collins et
al., ``Homeownership Education and Counseling: Do We Know What
Works?'' available at http://massinc.org/wp-content/uploads/2011/06/76378_10554_Research_RIHA_Collins_Report.pdf.
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FHFA believes that the information collected on language
preference, homeownership education, and housing counseling for
applicants and borrowers can support efforts to promote sustainable
housing opportunities for underserved communities and could underlie
elements of future Equitable Housing Finance Plans.
N. Proposed Rule Timing Elements
Considering the timing aspects of the proposed rule together, in
the year prior to new plans, FHFA would conduct public engagement on or
before June 15 (e.g., FHFA would conduct public engagement on or before
June 15, 2024, to inform planning and oversight related to the 2025-
2027 plans). An Enterprise would submit the plan to FHFA for review by
September 30 in the year prior to the three-year period covered by the
plan; the Enterprise would then publish the plan on its website on
January 15 of the first year covered by the plan (e.g., a Freddie Mac
plan covering 2025-2027 would be submitted to FHFA on September 30,
2024, and published by Freddie Mac on January 15, 2025). FHFA would
conduct public engagement on or before June 15 in the first year of the
plan cycle (e.g., FHFA would conduct public engagement on or before
June 16, 2025, because it is the first business day after June 15).
Updates and reports would be submitted to FHFA by February 15 of the
second year of the plan cycle and published by an Enterprise on April
15 (e.g., a 2026 Freddie Mac update to a 2025-2027 plan would be
submitted to FHFA on February 16, 2026, because it is the first
business day after February 15, and published by Freddie Mac on April
15, 2026). FHFA would conduct public engagement on or before June 15 of
the second year of the plan cycle (e.g., FHFA would conduct public
engagement on or before June 15, 2026). Updates and reports would be
submitted to FHFA by February 15 of the third year of the plan cycle
and published by an Enterprise on April 15 (e.g., a 2027 Freddie Mac
update to a 2025-2027 plan would be submitted to FHFA on February 16,
2027, because it is the first business day after February 15, and
published by Freddie Mac on April 15, 2027). FHFA would conduct public
engagement on or before June 15 in the third year of the plan (e.g.,
FHFA would conduct public engagement on or before June 15, 2027).
Establishing expected dates by rule for submission, public
engagement, and publication provides certainty and transparency to the
public and the Enterprises, while permitting the Director to change the
dates by public order if necessary in exigent circumstances.
V. Considerations of Differences Between the Banks and the Enterprises
Under the proposed rule, both the Enterprises and the Banks would
be subject to proposed subpart A (Sec. Sec. 1293.1 through 1293.3) and
subpart B (Sec. Sec. 1293.11 through 1293.12), including general
provisions related to fair housing and fair lending laws, compliance,
examinations, oversight, and enforcement. Additionally, both the Banks
and Enterprises would be covered by FHFA's ability to require regular
and special reports and the requirement to certify compliance in
regular reports. However, FHFA has not currently issued any reporting
orders requiring regular or special fair housing and fair lending
reports from the Banks. The Equitable Housing Finance Plan and broader
equitable housing finance planning requirements described specifically
in subpart C (Sec. Sec. 1293.21 through 1293.26) would apply only to
the Enterprises and would codify in regulation and expand on the
existing equitable housing framework for the Enterprises that FHFA
established. As
[[Page 25306]]
discussed above, as part of FHFA's comprehensive review of the Banks,
commenters have suggested incorporating equitable housing
considerations for the Banks and this idea is currently under
consideration. FHFA requests public comment on whether FHFA should
codify a similar framework to subpart C for the Banks in regulation and
what elements of the framework should be included, modified, or
excluded if FHFA were to apply such a framework to the Banks through
regulation. FHFA also requests comment on other ways to incorporate
principles of equitable housing for the Banks that would meet the same
objective. Proposed subpart D (Sec. 1293.31) could include data
collection and reporting requirements that would apply to both the
Enterprises and the Banks, but currently as proposed the requirements
would apply only to the Enterprises.
When promulgating regulations or taking other actions that relate
to the Banks, section 1313(f) of the Safety and Soundness Act, as
amended by section 1201 of HERA, requires the Director to consider the
differences between the Banks and the Enterprises with respect to the
Banks' cooperative ownership structure; mission of providing liquidity
to members; affordable housing and community development mission;
capital structure; and joint and several liability.\93\ In preparing
the proposed rule, the Director has considered the differences between
the Banks and the Enterprises as they relate to the above factors and
has determined that none of the statutory factors would be adversely
affected by the proposed rule. The Director is requesting comments from
the public about whether differences related to these factors should
result in a revision of the proposed rule as it relates to the Banks.
---------------------------------------------------------------------------
\93\ 12 U.S.C. 4513(f).
---------------------------------------------------------------------------
VI. Comments Specifically Requested
As stated above, FHFA invites comments on all aspects of the
proposed rule and will take all comments into consideration before
issuing a final rule. In addition to comments specifically requested
within the description of the proposed rule above, FHFA also requests
comment on the questions set forth below. The most helpful comments
reference the specific questions listed, explain the reason for any
changes, and include supporting data.
General
1. The rule currently does not define equity. FHFA seeks comments
on whether the rule should define equity. If the rule should define
equity, what would be an appropriate definition?
Compliance and Enforcement
2. How can FHFA improve fair lending compliance oversight of the
regulated entities?
3. Are there other applicable consumer compliance and/or consumer
protection statutes and regulations that FHFA should include in this
section?
4. Are there any benefits or other issues FHFA should be aware of
in considering adding unfair or deceptive acts or practices to its
compliance and enforcement for regulated entities?
5. How should FHFA approach assessing compliance with non-fair
lending consumer protection authorities such as unfair or deceptive
acts or practices? Would additional guidance be helpful to regulated
entities as they assess their overall compliance management?
6. Are there alternatives FHFA should consider to the language and
approach for fair lending compliance certifications?
Equitable Housing Finance Plans and Updates
7. Is the three-year timeline for the plans adopted by the
Enterprises appropriate?
8. Should FHFA issue an evaluation of the Enterprises? Should the
rule include required evaluation metrics for the progress reports?
9. Should the rule include required or optional priority goals? If
so, who should determine which priority goals are applicable?
10. From year to year, what should be the scope of updates to the
Equitable Housing Finance Plans?
11. Should the focus of an Equitable Housing Finance Plan be
limited to one underserved community at a time?
12. Does the rule provide for sufficient public engagement?
13. Developing or supporting special purpose credit programs is one
type of meaningful action that an Enterprise could take under an
Equitable Housing Finance Plan, but the rule would not establish any
special purpose credit programs under 12 CFR 1002.8(a)(1) in the
regulation itself. Should FHFA adopt any special purpose credit
programs under 12 CFR 1002.8(a)(1) and, if so, what type of program(s)
should be adopted?
14. Are the minimum requirements for performance reports sufficient
or should performance reports contain any additional information not
included in the rule?
Federal Home Loan Banks
15. Should the Banks be required to comply with a framework similar
to that of the Equitable Housing Finance Plans by regulation?
16. What elements of the framework should be included, modified, or
excluded if FHFA were to apply such a framework to the Banks by
regulation?
17. Are there other ways to incorporate principles of equitable
housing for the Banks that would meet the same objective?
VII. 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.
VIII. 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. FHFA has considered the impact of this proposed rule under
the Regulatory Flexibility Act. FHFA certifies that this 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 would
apply only to the regulated entities, which are not small entities for
purposes of the Regulatory Flexibility Act.
List of Subjects for 12 CFR Part 1293
Government-sponsored enterprises, Fair housing, Federal home loan
banks, Mortgages, Reporting and recordkeeping requirements.
Authority and Issuance
0
Accordingly, for the reasons stated in the preamble, under the
authority of 12 U.S.C. 4511, 4513, 4526, FHFA proposes to add part 1293
to chapter XII in title 12 of the Code of Federal Regulations, to read
as follows:
[[Page 25307]]
PART 1293--FAIR LENDING OVERSIGHT AND EQUITABLE HOUSING FINANCE
Subpart A--General
Sec. 1293.1 General.
Sec. 1293.2 Definitions.
Sec. 1293.3 Compliance and enforcement.
Sec. 1293.4 Preservation of authority.
Sec. Sec. 1293.5-1293.10 [Reserved]
Subpart B--Fair Housing and Fair Lending Compliance
Sec. 1293.11 Regulated entity compliance.
Sec. 1293.12 Reports, data, and certifications.
Sec. Sec. 1293.13-1293.20 [Reserved]
Subpart C--Enterprise Equitable Housing Finance Planning
Sec. 1293.21 General; Identification of subpart as prudential
standard.
Sec. 1293.22 Equitable housing finance plans and updates.
Sec. 1293.23 Performance reports.
Sec. 1293.24 Public engagement.
Sec. 1293.25 Program requirements.
Sec. 1293.26 Enterprise board equitable housing and mission
responsibilities.
Sec. 1293.27-1293.30 [Reserved]
Subpart D--Data Collection
Sec. 1293.31 Required Enterprise data collection and reporting.
Authority: 12 U.S.C. 1456(c)(1); 12 U.S.C. 1723a(m)(1); 12
U.S.C. 4511; 12 U.S.C. 4513; 12 U.S.C. 4513b; 12 U.S.C. 4514; 12
U.S.C. 4517; 12 U.S.C. 4526; 42 U.S.C. 3608(d).
Subpart A--General
Sec. 1293.1 General.
(a) This part sets forth requirements related to fair lending
oversight of regulated entities, equitable housing finance planning by
the Enterprises, and certain data collection and reporting by the
regulated entities.
(b) Nothing in this part permits or requires a regulated entity to
engage in any activity that would otherwise be inconsistent with the
Safety and Soundness Act, the authorizing statutes, or other applicable
law.
(c) Nothing in this part creates a private right of action.
Sec. 1293.2 Definitions.
For purposes of this part:
Annual plan update (update) means a public update to an Equitable
Housing Finance Plan for the second or third year of a planning cycle.
Barrier means an element of an Enterprise's actions, products, or
policies, or an aspect of the housing market that can reasonably be
influenced by the Enterprise's actions, products, or policies, that
contributes to an underserved community's limited share of sustainable
housing opportunities, difficulties in accessing those sustainable
housing opportunities, or the continuing adverse effects of
discrimination affecting their participation in the housing market.
Equitable Housing Finance Plan (plan) means a three-year public
plan developed with public engagement and adopted by each Enterprise
describing how each Enterprise will overcome barriers to sustainable
housing opportunities faced by one or more underserved communities
through objectives, meaningful actions, and measurable goals.
Fair housing and fair lending laws means the Fair Housing Act, the
Equal Credit Opportunity Act, and implementing regulations.
Additionally, with respect to an Enterprise, it means 12 U.S.C. 4545
and implementing regulations.
Performance report (report) means an annual public report by an
Enterprise on its performance under its Equitable Housing Finance Plan
and other information on equitable housing and fair lending that meets
the requirements of Sec. 1293.23 and any other FHFA requirements.
Sustainable housing opportunity means a rental or homeownership
opportunity that includes one or more characteristics important to the
needs of a tenant or homeowner. These include but are not limited to:
being affordable to obtain and sustain; relating to a dwelling that
meets basic habitability requirements and is reasonably able to
withstand natural disasters or other climate-related impact events;
relating to a dwelling that is improving the quality of housing stock
in an area; being located in an area with access to educational,
transportation, economic, and other important opportunities, including
community assets; being accessible for persons with disabilities and
available in the most integrated setting appropriate to the needs of an
individual with a disability; not placing the tenant or homeowner in a
position where they are unlikely to succeed in sustaining the housing
opportunity over the long term; and providing reasonable opportunities
to accommodate hardships by the renter or homeowner to allow
continuation of the housing opportunity.
Underserved community is a group of people with shared
characteristics or an area that is subject to current discrimination or
has been subjected to past discrimination that has or has had
continuing adverse effects on the group or area's participation in the
housing market, historically has received or currently receives a lower
share of the benefits of Enterprise programs and activities providing
sustainable housing opportunities, or that otherwise has had difficulty
accessing these benefits compared with groups of people without the
shared characteristic or other areas. Shared characteristics include
but are not limited to characteristics protected by fair lending laws
applicable to the Enterprises including race, color, religion, sex
(including actual or perceived sexual orientation or gender identity),
familial status, national origin, disability, marital status, age,
receipt of public assistance income, exercise of rights protected by
the Consumer Credit Protection Act, exercise of rights protected by the
Fair Housing Act, dwelling age, dwelling location, and neighborhood
age. Examples of underserved communities, if supported by adequate
information in a plan pursuant to Sec. 1239.25 of this chapter,
include: the Commonwealth of Puerto Rico, single parents, persons with
disabilities, women of color, seniors with fixed income, self-employed
individuals, individuals with limited mainstream credit and banking
history, counties which have historically received a lower share of the
benefits of Enterprise programs and activities, individuals with income
variance such as skilled tradespeople or those that receive income
through commission, persons with limited English proficiency, and
multigenerational households.
Sec. 1293.3 Compliance and enforcement.
FHFA may enforce compliance with this part in any manner and
through any means within its authority, including but not limited to
adverse examination findings or through supervision or enforcement
under 12 U.S.C. 4511(b), 4513b, 4631, or 4636. The agency may conduct
examinations of a regulated entity's activities related to this part
pursuant to 12 U.S.C. 4517.
Sec. 1293.4 Preservation of authority.
Nothing in this part in any way limits the authority of the Federal
Housing Finance Agency under other provisions of applicable law and
regulations.
Sec. Sec. 1293.5-1293.10 [Reserved]
Subpart B--Fair Housing and Fair Lending Compliance
Sec. 1293.11 Regulated entity compliance.
(a) Compliance with fair housing and fair lending laws. Regulated
entities must comply with fair housing and fair lending laws.
(b) Compliance with prohibition on unfair or deceptive acts or
practices. Regulated entities must comply with the
[[Page 25308]]
prohibition on unfair or deceptive acts or practices under 15 U.S.C.
45.
(c) Responsibilities of boards of directors. In accordance with
Sec. 1239.4(b)(4) of this chapter, directors of a regulated entity
shall direct the operations of the regulated entity in conformity with
fair housing and fair lending laws and the prohibition on unfair or
deceptive acts or practices under 15 U.S.C. 45, including by
appropriately considering compliance with fair housing and fair lending
laws and the prohibition on unfair or deceptive acts or practices under
15 U.S.C. 45 in the oversight of the regulated entity and its business
activities.
Sec. 1293.12 Reports, data, and certifications.
(a) Reports. FHFA may require the regulated entities to submit to
FHFA regular and special reports concerning fair housing and fair
lending, including the provision of data pursuant to FHFA instructions.
(b) Certifications. Each regular report concerning fair housing and
fair lending shall include a certification of the regulated entity's
compliance with fair housing and fair lending laws and with Sec.
1293.11(b) in addition to any other required certification or
declaration (such as a declaration under 12 U.S.C. 4514(a)(4)).
Sec. Sec. 1293.13-1293.20 [Reserved]
Subpart C--Enterprise Equitable Housing Finance Planning
Sec. 1293.21 General; Identification of subpart as a prudential
standard.
(a) This subpart sets forth the Enterprise duty to engage in
equitable housing finance planning and to take meaningful actions to
support underserved communities, and establishes standards and
procedures related to public engagement and FHFA's oversight of the
Enterprises' planning and actions.
(b) If a date provided in this subpart falls on a day that is not a
business day, the date required shall be the next business day.
(c) Submission and publication dates provided in this subpart may
be changed by the Director, as determined appropriate, by public order
for a particular required submission or publication.
(d) This subpart, except for Sec. 1293.26, is a prudential
standard pursuant to section 1313B of the Safety and Soundness Act, 12
U.S.C. 4513b, and is subject to 12 CFR part 1236.
Sec. 1293.22 Equitable housing finance plans and updates.
(a) General. Every three years each Enterprise shall adopt an
Equitable Housing Finance Plan covering a three-year period. Each
Enterprise may adopt a public annual plan update to that plan for the
second and third years of the plan.
(b) Contents of plan. The plan shall include:
(1) Identification of barriers to sustainable housing opportunities
faced by one or more underserved communities;
(2) Objectives that establish the overall direction and focus for
the plan by defining the outcomes the plan seeks to accomplish, and
that are logically tied to one or more identified barriers;
(3) Meaningful actions (actions) describing the high-impact
activities the Enterprise intends to undertake to further the
identified objectives that span one or more years (including extending
beyond the period covered by the plan);
(4) Specific, measurable, and time-bound goals (goals) for each
action; and
(5) Summaries of the Enterprise's public engagement in developing
the plan.
(c) Plan submission. Each Enterprise shall submit its Plan to FHFA
for review on or before September 30 of the year prior to the first
year covered by the Plan.
(d) Contents of annual plan update. If an Enterprise chooses to
submit an update, it shall include all changes the Enterprise is making
to its plan, including any changes in identified barriers, objectives,
meaningful actions, specific, measurable, and time-bound goals, and a
summary of any additional public engagement. The update shall clearly
describe the specific reason(s) for each significant change to the
plan.
(e) Annual update submission. If an Enterprise chooses to submit an
update, it shall submit its update for FHFA review on or before
February 15 of the year covered by the update.
(f) FHFA review. FHFA shall review each plan and update and, prior
to publication, may:
(1) Require removal of any confidential or proprietary information;
(2) Require removal of any content that is not consistent with this
part, the Safety and Soundness Act, the authorizing statutes, or other
applicable law; and
(3) Provide any feedback for consideration.
(g) No prior approval of activities. FHFA's review does not
constitute a prior approval of a plan or update or any action described
therein. All actions included in a plan are subject to all applicable
FHFA and other requirements and authorities.
(h) Disclaimer included in plan and annual update. The plan and the
annual update must include disclaimer language indicating the
implementation of actions may be subject to change based on certain
factors.
(i) Plan and update publication. Each Enterprise shall publish its
plan on its website on January 15 of the first year covered by the plan
and maintain it thereafter. Each Enterprise shall publish any update on
its website on April 15 of the second and third year covered by the
plan and maintain it thereafter. Each Enterprise shall ensure that
plans and updates are accessible to persons with disabilities.
(j) Additional guidance. From time to time, FHFA may issue public
guidance on plans and updates.
Sec. 1293.23 Performance reports.
(a) General. Annually, each Enterprise shall publicly report on its
plan progress and provide other information related to equitable
housing and fair housing and fair lending for the prior year in a
performance report.
(b) Contents of the report. The report shall contain, at a minimum:
(1) A narrative assessment consisting of a review of major
successes and key accomplishments as well as lessons learned and
challenges experienced;
(2) Plan performance details for each objective, measurable goal,
and meaningful action, including outcome-based metrics;
(3) A summary of outcomes for the year categorized by type of
activity and by race and ethnicity group and underserved community
group (if available);
(4) A summary of the value of resources dedicated by the Enterprise
in supporting the outcomes categorized by type of activity and a
summary of additional value of resources contributed from third parties
as a result of the Enterprise's support of the outcomes.
(5) An assessment of the Enterprise's underwriting that includes:
(i) For the applicable year and the preceding three years, the
accept rates for the Enterprise's automated underwriting system
categorized by home purchase, rate-term refinancing, and cash-out
refinancing and by race and ethnicity group and underserved community
group (if available);
(ii) For the applicable year and the preceding three years, the
Enterprise's loan acquisitions categorized by home purchase, rate-term
refinancing, and cash-out refinancing and by race and
[[Page 25309]]
ethnicity group and underserved community group (if available); and
(iii) A narrative assessment of any innovations in automated
underwriting or other policy taken during the applicable year and any
future planned work intended to address identified disparities.
(c) Report submission. Each Enterprise shall submit its report to
FHFA for review on or before February 15 annually.
(d) FHFA review. FHFA shall review each report and, prior to
publication, may:
(1) Require removal of any confidential or proprietary information;
(2) Require removal of any content that is not consistent with this
part, the Safety and Soundness Act, the authorizing statutes, or other
applicable law; and
(3) Provide any feedback for consideration.
(e) Report publication. Each Enterprise shall publish its report on
its website on April 15 annually and maintain it thereafter. Each
Enterprise shall ensure that reports are accessible to persons with
disabilities.
(f) Additional requirements and guidance. FHFA may require
additional information to be included in reports through other FHFA
authorities, such as 12 U.S.C. 4514. From time to time, FHFA may issue
public guidance on reports.
Sec. 1293.24 Public engagement.
(a) FHFA public engagement. On or before June 15 annually, FHFA
will conduct public engagement to allow the public to provide input for
the Enterprises to consider in developing and implementing their plans
and for FHFA to consider in its oversight.
(b) Enterprise consultation. The Enterprises shall consult with
stakeholders, including members of underserved communities and housing
market participants, in the development and implementation of their
plans and updates.
Sec. 1293.25 Program requirements.
(a) Requirements for underserved communities. An Enterprise shall
ensure that a plan relies on adequate information in identifying the
underserved community or communities addressed by that plan and shall
document that information as part of the plan. In selecting one or more
underserved communities to be the focus of a plan, an Enterprise shall
consider, among other factors:
(1) Input from public engagement;
(2) Whether the underserved community has previously been the focus
of a plan;
(3) The extent of the needs identified for the underserved
community, including such needs that may remain despite prior efforts
under a plan; and
(4) Whether the underserved community is covered by a different
initiative or program of the Enterprise.
(b) Requirements for objectives. Objectives identified in a plan
shall be logically tied to one or more identified barriers and
facilitate establishing meaningful actions and measurable goals.
(c) Requirements for meaningful actions--(1) Relation to objectives
and goals. Meaningful actions shall be logically tied to one or more
measurable goals and one or more objectives and support sustainable
housing opportunities for an identified underserved community.
(2) Other Enterprise goals and incremental action. Meaningful
actions may also serve other Enterprise objectives and goals; however,
a plan shall reflect significant additional action above and beyond
actions that are also serving other Enterprise objectives and goals and
shall reflect more than de minimis action.
(3) Significant dedication of resources. Meaningful actions shall
reflect a commitment commensurate with an Enterprise's prominence in
the housing market, its available resources, its dedication of
resources to other important efforts, the needs of underserved
communities, market conditions, and safety and soundness.
(4) Compliance with law. Actions that are not compliant with the
Safety and Soundness Act, the authorizing statutes, or other applicable
law do not qualify as meaningful actions.
(5) Required remedial actions. Actions that are required to
remediate supervisory findings or required as a result of enforcement
actions do not qualify as meaningful actions.
(d) Requirements for measurable goals. Measurable goals shall be:
(1) Logically tied to one or more meaningful actions identified in
a plan;
(2) Specific;
(3) Time-bound;
(4) Focused on outcomes; and
(5) Facilitative of measuring Enterprise progress, comparing
Enterprise performance, and ensuring public accountability.
Sec. 1293.26 Enterprise board equitable housing and mission
responsibilities.
An Enterprise's board of directors shall appropriately consider the
objectives, actions, and goals of the Enterprise's Equitable Housing
Finance Plan, while also appropriately considering its affordable
housing goals, Duty to Serve plans and targets, and other mission-
related obligations, in the board's oversight of the Enterprise and the
Enterprise's business activities.
Sec. Sec. 1293.27-1293.30 [Reserved]
Subpart D--Data Collection
Sec. 1293.31 Required Enterprise data collection and reporting.
Each Enterprise shall collect, maintain, and provide to FHFA the
following data relating to single-family mortgages:
(a) The language preference of applicants and borrowers; and
(b) Whether applicants and borrowers have completed homeownership
education or housing counseling and information about the homeownership
education or housing counseling.
Sandra L. Thompson,
Director, Federal Housing Finance Agency.
[FR Doc. 2023-08602 Filed 4-25-23; 8:45 am]
BILLING CODE 8070-01-P