[Federal Register Volume 90, Number 189 (Thursday, October 2, 2025)]
[Proposed Rules]
[Pages 47632-47662]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2025-19428]
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Proposed Rules
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.
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Federal Register / Vol. 90, No. 189 / Thursday, October 2, 2025 /
Proposed Rules
[[Page 47632]]
FEDERAL HOUSING FINANCE AGENCY
12 CFR Parts 1209, 1281, and 1282
RIN 2590-AB59
2026-2028 Enterprise Housing Goals
AGENCY: Federal Housing Finance Agency.
ACTION: Proposed rule.
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SUMMARY: The Federal Housing Finance Agency (FHFA) is issuing a
proposed rule and requesting comments on the housing goals for Fannie
Mae and Freddie Mac (the Enterprises) for 2026 through 2028 as required
by the Federal Housing Enterprises Financial Safety and Soundness Act
of 1992. The proposed rule establishes benchmark levels for the housing
goals for 2026 through 2028. The proposed rule replaces the two area-
based subgoals with one low-income areas subgoal, simplifies the goal
determination process, clarifies inflation adjustments to maximum civil
money penalties related to housing goals, and makes other technical
changes.
DATES: FHFA will accept written comments on the proposed rule on or
before November 3, 2025.
ADDRESSES: You may submit your comments on the proposed rule,
identified by regulatory information number (RIN) 2590-AB59, by any one
of the following methods:
Agency Website: https://www.fhfa.gov/regulation/federal-register.
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-AB59.
Hand Delivered/Courier: The hand delivery address is:
Clinton Jones, General Counsel, Attention: Comments/RIN 2590-AB59,
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. EST.
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-AB59, Federal Housing
Finance Agency, 400 Seventh Street SW, Washington, DC 20219. Please
note that all mail sent to FHFA via U.S. Mail is routed through a
national irradiation facility, a process that may delay delivery by
approximately two weeks.
FOR FURTHER INFORMATION CONTACT: For general questions, please contact
[email protected]. For technical questions, please contact Leda
Bloomfield, Senior Associate Director, Office of Affordable Housing and
Community Investment, Division of Housing Mission and Goals, 202-649-
3415, [email protected]; Siobhan Kelly, Senior Associate
Director, Office of Multifamily Analytics and Policy, Division of
Housing Mission and Goals, 202-649-3142, [email protected]; or
Elena Hoffman, Honors Counsel, Office of General Counsel, 202-649-3511,
[email protected]. These are not toll-free numbers. The mailing
address is: Federal Housing Finance Agency, 400 Seventh Street SW,
Washington, DC 20219. For TTY/TRS users with hearing and speech
disabilities, dial 711 and ask to be connected to any of the contact
numbers above.
SUPPLEMENTARY INFORMATION:
I. Comments
FHFA invites comments on all aspects of the proposed rule and will
take all comments into consideration before issuing a final rule.
Comments will be posted to the electronic rulemaking docket on the FHFA
public website at https://www.fhfa.gov/regulation/rulemaking, except as
described below. Commenters should submit only information that the
commenter wishes to make available publicly. FHFA may post only a
single representative example of identical or substantially identical
comments, and in such cases will generally identify the number of
identical or substantially identical comments represented by the posted
example. FHFA may, in its discretion, redact or refrain from posting
all or any portion of any comment that contains content that is
obscene, vulgar, profane, or threatens harm. All comments, including
those that are redacted or not posted, will be retained in their
original form in FHFA's internal rulemaking file and considered as
required by all applicable laws. Commenters that would like FHFA to
consider any portion of their comment exempt from disclosure on the
basis that it contains trade secrets, or financial, confidential or
proprietary data or information, should follow the procedures in
section IV.D. of FHFA's Policy on Communications with Outside Parties
in Connection with FHFA Rulemakings, see https://www.fhfa.gov/sites/default/files/documents/Ex-Parte-Communications-Public-Policy_3-5-19.pdf. FHFA cannot guarantee that such data or information, or the
identity of the commenter, will remain confidential if disclosure is
sought pursuant to an applicable statute or regulation. See 12 CFR
1202.8, 12 CFR 1214.2, and the FHFA FOIA Reference Guide at https://www.fhfa.gov/about/foia-reference-guide for additional information.
II. Background
A. Statutory and Regulatory Background for Enterprise Housing Goals
The Federal Housing Enterprises Financial Safety and Soundness Act
of 1992 (Safety and Soundness Act) requires FHFA to establish several
annual housing goals for both single-family and multifamily mortgages
purchased by the Enterprises.\1\ The annual housing goals are one
measure of the extent to which the Enterprises are meeting their public
purposes as defined by statute, which include ``an affirmative
obligation to facilitate the financing of affordable housing for low-
and moderate-income families in a manner consistent with their overall
public purposes, while maintaining a strong financial condition and a
reasonable economic return.'' \2\
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\1\ 12 U.S.C. 4561(a).
\2\ 12 U.S.C. 4501(7).
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FHFA establishes annual housing goals for Enterprise purchases of
single-family and multifamily mortgages consistent with the
requirements of the
[[Page 47633]]
Safety and Soundness Act. The structure of the housing goals and the
parameters for determining how mortgage purchases are counted or not
counted towards the goals are defined in FHFA's Enterprise housing
goals regulation.\3\ This proposed rule would establish benchmark
levels for the single-family and multifamily housing goals for 2026-
2028.
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\3\ 12 CFR part 1282.
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Single-family housing goals. The single-family housing goals
defined under the Safety and Soundness Act include separate categories
for home purchase mortgages for low-income families, very low-income
families, and families that reside in low-income areas.\4\ For purposes
of the single-family housing goals, families that reside in low-income
areas \5\ include: (1) families in low-income census tracts, defined as
census tracts with median income less than or equal to 80 percent of
area median income (AMI); \6\ (2) families with incomes less than or
equal to 100 percent of AMI who reside in minority census tracts
(defined as census tracts with a minority population of at least 30
percent and a tract median income of less than 100 percent of AMI); \7\
and (3) families with incomes less than or equal to 100 percent of AMI
who reside in designated disaster areas.\8\ The current Enterprise
housing goals regulation also includes subgoals \9\ within the low-
income areas home purchase goal.\10\ Performance on the single-family
home purchase goals and subgoals is measured as the percentage of the
total home purchase mortgages purchased by an Enterprise each year that
qualify for each goal or subgoal. There is also a separate goal for
single-family refinance mortgages for low-income families, and
performance on the refinance goal is determined in a similar way.
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\4\ 12 U.S.C. 4562(a)(1). To distinguish the goals and subgoals
related to home purchase mortgages from the goal related to
refinance mortgages, this preamble refers to the ``low-income home
purchase goal'' and the ``very low-income home purchase goal'' to
refer to the low-income families housing goal and the very low-
income families housing goal, respectively, described in 12 CFR
1282.12(c) and (d).
\5\ See 12 U.S.C. 4502(28); 12 CFR 1282.1 (definition of
``families in low-income areas'').
\6\ 12 CFR 1282.1 (par. (i) of definition of ``families in low-
income areas'').
\7\ 12 U.S.C. 4502(29); 12 CFR 1282.1 (par. (ii) of definition
of ``families in low-income areas'' and definition of ``minority
census tract'').
\8\ 12 U.S.C. 4502(28); 12 CFR 1282.1 (definition of
``designated disaster area'' and par. (iii) of definition of
``families in low-income areas'').
\9\ For brevity, sometimes this preamble uses the term ``goals''
to refer to goals and subgoals.
\10\ 12 CFR 1282.12(f).
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Under the Safety and Soundness Act, the single-family housing goals
are limited to mortgages on owner-occupied housing with one to four
units. The single-family goals cover first lien, conventional,
conforming mortgages, meaning mortgages that are not subordinate to
other mortgage liens, that are not insured or guaranteed by the Federal
Housing Administration or another government agency, and that have
principal balances that do not exceed the conforming loan limits for
Enterprise mortgages.
Two-part evaluation approach for single-family housing goals. The
Enterprises' performance on the single-family housing goals is
evaluated using a two-part approach that compares the goal-qualifying
share of each Enterprise's mortgage purchases to two separate measures:
a benchmark level and a market level. To meet a single-family housing
goal, the percentage of mortgage purchases by an Enterprise that
qualifies for credit under each goal must equal or exceed either the
benchmark level or the market level for that year. The benchmark level
is set prospectively by rulemaking based on various factors set forth
in the Safety and Soundness Act, which are further discussed below.\11\
The market level is determined retrospectively for each year, based on
the actual goal-qualifying share of the overall market as measured by
the Home Mortgage Disclosure Act \12\ (HMDA) data for that year.\13\
The overall market that FHFA uses for setting both the prospective
benchmark level and the retrospective market level consists of all
single-family, owner-occupied, conventional, conforming mortgages that
would be eligible for purchase by either Enterprise. It includes loans
purchased by the Enterprises as well as comparable loans held in a
lender's portfolio or that are part of a private label security (PLS).
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\11\ See 12 U.S.C. 4562(e).
\12\ 12 U.S.C. 2801 et seq.
\13\ FHFA bases these calculations on its analysis of public
HMDA data made available by the Consumer Financial Protection Bureau
(CFPB) based on data that mortgage originators submit to the Federal
Financial Institutions Examination Council (FFIEC). Additional
information about loans held in lender portfolios is available
through HMDA and the National Mortgage Database (National Mortgage
Database (NMDB[supreg]), a joint dataset published by FHFA and
CFPB).
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Since 2018, several new HMDA data fields have become available.
FHFA continues to monitor reporting of these new fields to consider
potential adjustments to the way FHFA measures the overall market.
Because FHFA's econometric market models use past years' data in their
construction, a potential transition to incorporate any new data
variables will require time to obtain an adequate input data series.
While the retrospective market levels measure mortgage originations
in a particular year, the performance of the Enterprises on the housing
goals includes all Enterprise purchases in that year, regardless of the
year in which the loan was originated. This includes any loans that are
originated in one year and purchased by an Enterprise in a later year.
Multifamily housing goals. The multifamily housing goals defined
under the Safety and Soundness Act include separate categories for
mortgages on multifamily properties (properties with five or more
units) with rental units affordable to low-income and very low-income
families. The Safety and Soundness Act also requires reporting on
smaller properties.\14\ The multifamily housing goals generally include
all Enterprise multifamily mortgage purchases, regardless of the
purpose of the loan. The multifamily housing goals evaluate the
performance of the Enterprises based on the share of affordable units
in properties that serve as collateral for mortgages purchased by an
Enterprise (loans that are excluded as ineligible under 12 CFR
1282.16(b) are not counted for purposes of measuring Enterprise
performance). The Enterprise housing goals regulation does not include
a retrospective market level measure for the multifamily housing goals,
due in part to a lack of comprehensive data about the multifamily
market. As a result, FHFA measures Enterprise multifamily housing goals
performance against the benchmark levels only and the proposed rule
retains this approach.
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\14\ 12 U.S.C. 4563(a)(3).
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The Safety and Soundness Act requires that affordability for rental
units under the multifamily housing goals be determined based on rents
that ``[do] not exceed 30 percent of the maximum income level of such
income category, with appropriate adjustments for unit size as measured
by the number of bedrooms.'' \15\ The Enterprise housing goals
regulation considers the net rent paid by the renter, i.e., the rent is
decreased by any subsidy payments that the renter may receive,
including housing assistance payments.\16\
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\15\ See 12 U.S.C. 4563(c).
\16\ See 12 CFR 1282.1 (par. (i)(B) of definition of ``rent'').
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B. Adjusting the Housing Goals
If, after publication of this proposed rule, new information
indicates that any of the single-family or multifamily housing goals
should be adjusted in light of market conditions or the safety and
soundness of the Enterprises, or for
[[Page 47634]]
any other reason, FHFA may take any steps that are necessary and
appropriate to respond, consistent with the Safety and Soundness Act
and the Enterprise housing goals regulation.
For example, under the Safety and Soundness Act and the Enterprise
housing goals regulation, FHFA is permitted to reduce a benchmark level
in response to an Enterprise petition for reduction for any of the
single-family or multifamily housing goals in a particular year. Any
adjustment in response to such a petition must be based on a
determination by FHFA that: (1) market and economic conditions or the
financial condition of the Enterprise require a reduction; or (2)
efforts to meet the goal or subgoal would result in the constraint of
liquidity, over-investment in certain market segments, or other
consequences contrary to the intent of the Safety and Soundness Act or
the purposes of the Enterprises' charter acts.\17\
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\17\ See 12 U.S.C. 4564(b); 12 CFR 1282.14(d).
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The Safety and Soundness Act and the Enterprise housing goals
regulation also provide for the possibility that achievement of a
particular housing goal or subgoal may not have been feasible for an
Enterprise. If FHFA determines that a housing goal or subgoal was not
feasible for an Enterprise to achieve, then the statute and regulation
do not require any further action related to that housing goal or
subgoal for that year.\18\
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\18\ See 12 U.S.C. 4566(b); 12 CFR 1282.22(a).
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If FHFA determines that an Enterprise did not meet a housing goal
or subgoal and that achievement of the housing goal or subgoal was
feasible, the statute and regulation provide FHFA with discretion in
determining whether to require the Enterprise to submit a housing plan
describing the specific actions the Enterprise will take to improve its
housing goals performance.\19\
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\19\ See 12 U.S.C. 4566(c); 12 CFR 1282.22(a).
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III. Summary of Proposed Rule
A. Benchmark Levels for the Single-Family Housing Goals and Subgoal
This proposed rule would establish the benchmark levels for the
single-family housing goals for 2026-2028 as follows:
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Proposed
Current benchmark
Goal or subgoal Criteria benchmark level for
level 2026-2028
(percent) (percent)
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Low-Income Home Purchase Goal............ Home purchase mortgages on single-family, 25.0 21.0
owner-occupied properties, to borrowers
with incomes no greater than 80 percent of
area median income (AMI).
Very Low-Income Home Purchase Goal....... Home purchase mortgages on single-family, 6.0 3.5
owner-occupied properties, to borrowers
with incomes no greater than 50 percent of
AMI.
Low-Income Refinance Goal................ Refinance mortgages on single-family, owner- 26.0 26.0
occupied properties, to borrowers with
incomes no greater than 80 percent of AMI.
Low-Income Areas Home Purchase Subgoal... Home purchase mortgages on single-family, N/A 16.0
owner-occupied properties with:
Borrowers in census tracts with
tract median income of no greater than 80
percent of area median income; or.
Borrowers with income no greater
than 100 percent of area median income in
census tracts where (i) tract income is
less than 100 percent of area median
income, and (ii) minorities comprise at
least 30 percent of the tract population..
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The proposed rule would combine the current low-income census
tracts home purchase subgoal and the minority census tracts home
purchase subgoal into a single low-income areas home purchase subgoal.
Similar to the existing regulation, the benchmark level for the low-
income areas home purchase goal would be the sum of the benchmark
levels for the low-income areas home purchase subgoal, plus an
additional amount that will be determined separately by FHFA that takes
into account families in disaster areas with incomes no greater than
100 percent of AMI.\20\ The low-income areas home purchase goal is
published annually on FHFA's website.\21\
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\20\ See 12 CFR 1282.12(e). The low-income areas home purchase
goal benchmark level for 2025 is 21 percent.
\21\ See Housing Goal Annual Housing Activity Reports and
Determinations for each Enterprise at https://www.fhfa.gov/programs/affordable-housing/enterprise-housing-goals.
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To simplify the structure of the Enterprise housing goals
regulation, FHFA is proposing to remove temporary measurement buffers
for the housing goals that the Agency previously established for 2025-
2027. The measurement buffers were established to encourage the
Enterprises to focus on achieving certain single-family housing goals
by meeting the market level, if the benchmark level turns out to be
higher than the market level. These measurement buffers partly
addressed the uncertainty in forecasting the market several years in
advance as well as the time lag in determining the actual market level
retrospectively. Since the 2026-2028 proposed benchmarks are set below
the forecasted marketed level, FHFA expects that the Enterprises will
be able to calibrate their mortgage purchase strategies to anticipate
small fluctuations in market uncertainty, making it unnecessary to
maintain an additional regulatory buffer. This would accomplish the
original intent of the measurement buffers, rendering the buffers
duplicative and unnecessary.
B. Proposed Benchmark Levels for the Multifamily Housing Goals and
Subgoal
The proposed rule would establish the benchmark levels for the
multifamily housing goals and subgoal for 2026-2028 as follows:
[[Page 47635]]
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Proposed
Current benchmark
Goals and subgoal Criteria benchmark level for
level 2026-2028
(percent) (percent)
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Low-Income Goal................ Percentage share of all goal-eligible units in 61.0 61.0
multifamily properties financed by mortgages
purchased by the Enterprises in the year that are
affordable to low-income families, defined as
families with incomes less than or equal to 80
percent of AMI.
Very Low-Income Goal........... Percentage share of all goal-eligible units in 14.0 14.0
multifamily properties financed by mortgages
purchased by the Enterprises in the year that are
affordable to very low-income families, defined as
families with incomes less than or equal to 50
percent of AMI.
Small Multifamily Low-Income Percentage share of all goal-eligible units in all 2.0 2.0
Subgoal. multifamily properties financed by mortgages
purchased by the Enterprises in the year that are
units in small multifamily properties affordable to
low-income families, defined as families with
incomes less than or equal to 80 percent of AMI.
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C. Required Adjustments to Maximum Civil Money Penalty Amounts
The Federal Civil Penalties Inflation Adjustment Act Improvements
Act of 2015 \22\ (Adjustment Improvements Act) requires FHFA to adjust
the level of civil monetary penalties for inflation (including an
initial catch-up adjustment and annual adjustments thereafter). This
proposed rule would make explicit that the required inflation
adjustments apply to civil money penalties described in section 1345 of
the Safety and Soundness Act (12 U.S.C. 4585), including penalties
applicable to the Enterprise and Federal Home Loan Bank housing goals.
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\22\ Federal Civil Penalties Inflation Adjustment Act
Improvements Act of 2015, Public Law 114-74, title VII, sec. 701,
129 Stat. 599 (28 U.S.C. 2461 note) (2015), available at https://www.govinfo.gov/content/pkg/PLAW-114publ74/pdf/PLAW-114publ74.pdf.
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D. Notice of Preliminary Determination of Compliance With Housing Goals
To streamline the housing goal compliance determination processes,
this proposed rule would provide that the Director need only provide
written notice to an Enterprise of a preliminary determination if an
Enterprise has failed to meet a housing goal or subgoal.
E. Technical Changes
The proposed rule would make technical changes to the names of the
single-family housing goals to distinguish between goals related to
home purchase mortgages and the goal related to refinance mortgages.
IV. Single-Family Housing Goals and Subgoal
A. Factors Considered in Setting the Single-Family Housing Goal
Benchmark Levels
The Safety and Soundness Act requires FHFA to consider the
following seven factors in setting the single-family housing goals:
1. National housing needs;
2. Economic, housing, and demographic conditions, including
expected market developments;
3. The performance and effort of the Enterprises toward achieving
the housing goals in previous years;
4. The ability of the Enterprises to lead the industry in making
mortgage credit available;
5. Such other reliable mortgage data as may be available;
6. The size of the purchase money conventional mortgage market, or
refinance conventional mortgage market, as applicable, serving each of
the types of families described, relative to the size of the overall
purchase money mortgage market or the overall refinance mortgage
market, respectively; and
7. The need to maintain the sound financial condition of the
Enterprises.\23\
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\23\ See 12 U.S.C. 4562(e)(2)(B).
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FHFA has considered each of these seven statutory factors in
setting the proposed benchmark levels for each of the single-family
housing goals in the proposed rule.
In setting the benchmark levels for the single-family housing
goals, FHFA typically relies on statistical market models developed by
FHFA to evaluate four of the seven factors (national housing needs;
economic, housing, and demographic conditions; other reliable mortgage
data; and the size of the conventional purchase money or refinance
mortgage segment). These market models generate a point forecast for
each goal as well as a confidence interval for the point forecast. FHFA
monitors information on market developments and Enterprise financial
condition that are not reflected in the models. FHFA also considers the
other statutory factors that are not explicitly modeled in the
statistical forecast models (i.e., performance and effort of the
Enterprises to lead the industry in making mortgage credit available;
the ability of the Enterprises to do so; and the need to maintain sound
financial condition of the Enterprises) to make post-model adjustments
to the point forecast for each goal.
Market forecast models. The purpose of FHFA's market forecast
models is to forecast the market share of the goal-qualifying mortgage
originations for the relevant goal period. The models are intended to
generate reliable forecasts rather than to test various economic
hypotheses about the housing market or to explain the relationship
between variables. Therefore, following standard practice among
forecasters and economists at other federal agencies, FHFA estimates a
reduced-form equation for each of the housing goals and fits an
Autoregressive Integrated Moving Average (or ARIMA) model to each goal
share. The models look at the statistical relationship between (a) the
historical market share for each single-family housing goal or subgoal,
as calculated from monthly HMDA data, and (b) the historical values for
various factors that may influence the market shares, such as interest
rates, inflation, home prices, home sales, the unemployment rate, and
other factors. The models then project the future value of the
affordable market share using forecast values of the model inputs.
Separate models are developed for each of the single-family housing
goals.
FHFA has employed similar models in past cycles of rulemaking for
Enterprise housing goals to generate market forecasts. The models are
developed using monthly series generated from HMDA and other data
sources, and the resulting monthly forecasts are then averaged into an
annual forecast for each of the three years in the goal period. The
most recently developed models, published in December 2024, relied on
20 years of HMDA data, from 2004 to 2023, the
[[Page 47636]]
latest year for which public HMDA data was available at the time of
model construction. Additional discussion of the most recent market
forecast models can be found in a technical report on FHFA's
website.\24\
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\24\ Details on FHFA's single-family market models are available
in the technical report ``The Size of the Affordable Mortgage
Market: 2025-2027 Enterprise Single-Family Housing Goals,''
(December 2024), available at https://www.fhfa.gov/research/papers/2025-2027-enterprise-single-family-housing-goals-12-2024.
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This proposed rule continues to use the most recent market forecast
models, because the 2024 HMDA data, which is critical for accurately
forecasting the outcome variables (i.e., market share estimates), was
not available at the time FHFA prepared this proposed rule. In
addition, as shown below, the current forecasts for several key
independent variables are substantially similar to those used in the
most recent market forecast models. As such, FHFA finds it appropriate
to use the most recent market forecasts for this proposed rule.
Current market outlook. There are many factors that impact the
affordable housing market, and changes to any of them could
significantly impact the ability of the Enterprises to meet the goals.
In developing the most recent market forecast models, FHFA used Moody's
August 2024 baseline forecasts as the source for macroeconomic
variables.\25\ FHFA reviewed Moody's April 2025 baseline forecast and
determined that it is not materially different from the August 2024
baseline forecast for key driver variables in the models, including
mortgage interest rates, FHFA's Purchase-Only House Price Index (HPI),
and the Housing Affordability Index (HAI) provided by the National
Association of Realtors (NAR). In their December 2024 meeting, the
Federal Open Market Committee (FOMC) of the Federal Reserve affirmed
its policy priorities to seek maximum employment and a 2 percent long-
term inflation rate, by lowering its target for the federal funds rate
to a range of 4.25 percent to 4.5 percent.\26\ In its May 2025 meeting,
FOMC reiterated that commitment by maintaining its target range for the
federal funds rate at that level.\27\ Consistent with Moody's 2024
baseline forecast, Moody's April 2025 baseline forecast projects that
the federal funds rate will decrease to 3 percent by the fourth quarter
of 2026.\28\
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\25\ Ibid.
\26\ Press Release, ``Federal Reserve issues FOMC statement,''
(December 2024), available at https://www.federalreserve.gov/newsevents/pressreleases/monetary20241218a.htm.
\27\ Press Release, ``Federal Reserve issues FOMC statement,''
(May 2025) available at https://www.federalreserve.gov/newsevents/pressreleases/monetary20250507a.htm.
\28\ Moody's Analytics, ``Economic Data and Forecasts,'' August
2024 and April 2025.
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Moody's April 2025 baseline forecast for the 30-year fixed mortgage
rate indicates a slightly more elevated trajectory compared to the
August 2024 baseline forecast, with a projected decline of 0.2
percentage points from 6.5 percent in 2025 to 6.3 percent in 2027
versus the earlier projection of 6.4 percent in 2025 to 6.0 percent in
2027. However, this difference is not considered material for the
purposes of this rulemaking. Notably, the projected 30-year mortgage
rate for 2025 in both forecasts is nearly identical (6.5 percent versus
6.4 percent). Given the inherent uncertainties in long-term economic
projections and the relatively modest divergence in out-year forecasts,
particularly when the initial year remains largely consistent, the
Agency finds these projections to be substantially similar and,
therefore, appropriate to use to inform our current policy
considerations.\29\
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\29\ Ibid.
[GRAPHIC] [TIFF OMITTED] TP02OC25.018
Home prices increased rapidly in 2021 and 2022, as indicated by the
HPI, due to a strong demand for housing and limited supply of homes for
sale.\30\ The rapid rise in mortgage rates through 2022 and their
stabilization at new
[[Page 47637]]
elevated levels in 2023 slowed down the pace of house price growth.
Although slower, house price growth was still significant, rising 3.9
percent from February 2024 to February 2025.\31\ Moody's predicts that
home price appreciation will continue to slow in 2026. Moody's April
2025 forecast of the same HPI expects the annual rates of house price
growth to decline to 0.8 percent in 2026 before rising to 1.6 percent
and 2.7 percent in 2027 and 2028, respectively. While Moody's August
2024 baseline forecast predicted a lower 2024 percentage growth than
seen in the April 2025 forecast (3.3 percent vs 4.5 percent), the
average annual price growth for both forecasts for 2024-2027 is the
same at 2 percent.\32\
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\30\ FHFA, ``House Price Index Datasets,'' see https://www.fhfa.gov/data/hpi/datasets?tab=hpi-datasets.
\31\ FHFA, ``FHFA House Price Index Report--Monthly Report,''
(April 2025), see https://www.fhfa.gov/document/fhfa-hpir-monthly-april-2025.
\32\ Moody's Analytics, ``Economic Data and Forecasts,'' August
2024 and April 2025.
[GRAPHIC] [TIFF OMITTED] TP02OC25.019
Housing affordability in 2025 remains historically low compared to
the past two decades. Based on Moody's April 2025 baseline forecast of
the HAI, as reported by NAR, affordability is expected to improve.\33\
That forecast projects a continued, albeit moderate, upward trajectory
in affordability from an index value of 99.8 in 2024 to 110.1 in 2027
and remain flat at 110.2 in 2028.\34\ Moody's August 2024 baseline
forecast saw a similar rise in the index from 99.5 in 2024 to 111.6 in
2027.\35\
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\33\ NAR's HAI is a national index. It measures, nationally,
whether an average family could qualify for a mortgage on a typical
home. A typical home is defined as the national median-priced,
existing single-family home as reported by NAR. An average family is
defined as one earning the median family income. The calculation
assumes a down payment of 20 percent of the home price and a monthly
payment that does not exceed 25 percent of the median family income.
An index value of 100 means that a family earning the median family
income has exactly enough income to qualify for a mortgage on a
median-priced home. An index value above 100 signifies that a family
earning the median family income has more than enough income to
qualify for a mortgage on a median-priced home. A decrease in the
index value over time indicates that housing is becoming less
affordable.
\34\ Moody's Analytics, ``Economic Data and Forecasts,'' August
2024 and April 2025.
\35\ Ibid.
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[[Page 47638]]
[GRAPHIC] [TIFF OMITTED] TP02OC25.020
Following the historic low in housing supply observed in March
2022, inventory levels have shown consistent growth. As of April 2025,
active listings have increased by 30.1 percent compared to April 2024
and 70.4 percent relative to April 2023.\36\ Current listing levels now
exceed pre-pandemic benchmarks, surpassing January 2020 figures by
7,552 units. Single-family housing starts--which measure new
construction of one-to-four-unit residential properties--registered a
modest 7.3 percent increase from 2023 to 2024 but remain slightly below
the decade-high levels recorded in 2021.\37\
---------------------------------------------------------------------------
\36\ ``Housing Inventory: Active Listing Count in the United
States,'' accessed on May 20, 2025, at https://fred.stlouisfed.org/series/ACTLISCOUUS.
\37\ ``New Privately-Owned Housing Units Started: Single-Family
Units,'' accessed on May 20, 2025, at https://fred.stlouisfed.org/series/ACTLISCOUUS.
---------------------------------------------------------------------------
FHFA continues to monitor how these changes in the housing market,
as well as other market conditions, may impact various segments of the
market, including those targeted by the housing goals.
Post-model adjustments. While FHFA's models can address and
forecast many of the factors referenced in the statute, including
increasing mortgage interest rates and rising property values, some
factors are not captured in the models. FHFA, therefore, considers
additional factors when selecting the benchmark level for each of the
single-family housing goals. These factors may adjust the model point
forecast to arrive at the proposed benchmark levels.
Demographic trends. Although the models consider some demographic
factors, FHFA also considers specific demographic changes not captured
in the models as post-model adjustments when setting the housing goals
benchmark levels. Notably, according to NAR, Millennials represented
the largest share of homebuyers for almost a decade until 2022.\38\
After a brief dip in 2022, Millennials once again constituted the
largest share of homebuyers in 2023, surging from 28 percent to 38
percent.39 40 As a substantial portion of this generation
continues to enter their peak homebuying years, this demographic wave
is poised to create additional, substantial demand across the housing
market.
---------------------------------------------------------------------------
\38\ NAR, ``2023 Home Buyers and Sellers Generational Trends
Report,'' (2023), p. 8, available at https://www.nar.realtor/sites/default/files/documents/2023-home-buyers-and-sellers-generational-trends-report-03-28-2023.pdf.
\39\ Ibid.
\40\ NAR, ``2024 Home Buyers and Sellers Generational Trends
Report,'' (2024), p. 8, available at https://www.nar.realtor/sites/default/files/documents/2024-home-buyers-and-sellers-generational-trends-04-03-2024.pdf.
---------------------------------------------------------------------------
However, the nature of this demand, when considered in conjunction
with prevailing market conditions, presents notable affordability
challenges, particularly for first-time homebuyers and lower-income
households. The NAR 2025 ``Housing Affordability & Supply'' report
indicates a significant disparity between available inventory and
affordability for this segment.\41\ While overall housing inventory has
experienced an increase, the preponderance of newly available housing
is not affordable to first-time homeowners. Specifically, the NAR
report identifies that buyers earning less than $50,000 per year now
face a reduction in affordable options compared to the preceding year.
This observation underscores a widening affordability gap,
demonstrating that lower-income households are increasingly excluded
from homeownership opportunities within the current market environment.
---------------------------------------------------------------------------
\41\ NAR, ``Housing Affordability & Supply: Rising Inventory,
But for Whom? A Look at Inventory Gaps by Price Range and Income
Levels in 2025,'' (May 2025), available at https://www.nar.realtor/sites/default/files/2025-05/2025-housing-affordability-and-supply-05-15-2025.pdf.
---------------------------------------------------------------------------
This evidence suggests that, despite robust demand originating from
the Millennial cohort, the commensurate supply of available and
affordable housing is insufficient to meet the needs of low- and
moderate-income segments. Elevated housing goals, if unaligned with the
realistic capacity of the market to deliver affordable units, possess
the potential to exacerbate existing affordability pressures.
Consequently, in consideration of these demographic trends and the
persistent affordability constraints documented by NAR--particularly
for low- and moderate-income homebuyers--the Agency deems it prudent to
establish more modest benchmarks for the housing goals. This
[[Page 47639]]
adjustment acknowledges the current limitations in affordable
inventory, facilitating a lending pace that more accurately reflects
accessible supply and mitigating the potential for further price
escalation that could disproportionately affect the intended
beneficiaries of these goals.
Past performance and effort of the Enterprises to achieve the
housing goals.
The Enterprises' primary method to meet the housing goal targets is
through guarantee fee pricing subsidies. Guarantee fee subsidies
designed to facilitate lending to housing goal-qualifying households
include the elimination of upfront fees, cash window incentives, and
variable ongoing fees. Notably, none of the three methods of providing
incentives are generally required to be passed on to the borrower;
rather, they incent sellers to deliver loans that qualify for the
goals. The Enterprises charge guarantee fees to sellers to cover
expected credit losses, administrative costs, and the cost of capital
associated with their guarantees. There are two types of guarantee
fees: ongoing and upfront. Ongoing fees are factored into each loan's
interest rate and collected monthly over the life of a loan. Upfront
fees are one-time payments made by sellers upon delivery of a loan to
an Enterprise, and are similarly factored into the interest rate paid
by the borrower. Upfront guarantee fees are determined by the risk
attributes of a borrower, such as the loan-to-value ratio, borrower's
credit score, property type, and occupancy type. Loans with riskier
attributes have higher upfront fees.\42\ This is the primary manner by
which the Enterprises implement risk-based pricing.
---------------------------------------------------------------------------
\42\ FHFA, ``Fannie Mae and Freddie Mac Single-Family Guarantee
Fees in 2022,'' (May 2024), available at https://www.fhfa.gov/sites/default/files/2024-05/GFee-Report-2022.pdf.
---------------------------------------------------------------------------
In October 2022, FHFA announced the elimination of upfront fees for
certain homebuyers and affordable products. Upfront fees were
eliminated for first-time homebuyers at or below 100 percent of AMI or
at or below 120 percent of AMI in high-cost areas; HomeReady and Home
Possible loans; \43\ HFA Advantage and HFA Preferred loans; and single-
family loans supporting the Duty to Serve program. Loans that qualify
for upfront fee waivers align with, but are not exact matches to, loans
that qualify for goals credit. The fee subsidies encourage lenders to
deliver these loans to the Enterprises.\44\
---------------------------------------------------------------------------
\43\ HomeReady is Fannie Mae's low-down payment mortgage product
designed for creditworthy low-income borrowers, available at https://singlefamily.fanniemae.com/media/8316/display. Home Possible is
Freddie Mac's equivalent see: https://sf.freddiemac.com/working-with-us/origination-underwriting/mortgage-products/home-possible.
\44\ New Release, ``FHFA Announces Updates to the Enterprises'
Single-Family Pricing Framework,'' (January 2023), available at
https://www.fhfa.gov/news/news-release/fhfa-announces-updates-to-the-enterprises-single-family-pricing-framework.
---------------------------------------------------------------------------
The Enterprises also provide incentives for loans that qualify for
goals that are delivered through the cash window.\45\ The cash window
allows sellers to deliver loans directly to an Enterprise in return for
a cash payment. The Enterprises bundle these loans into mortgage-backed
securities (MBS) and sell the MBS into the secondary market. The
Enterprises can provide subsidies, in the form of pay-ups or other
pricing benefits, to goal-qualifying loans. While pay-ups are used
primarily to account for these loans' lower prepayment risk, an
important secondary effect is to encourage the delivery of more goal-
qualifying loans due to the overlapping populations.
---------------------------------------------------------------------------
\45\ Also known as the whole loan conduit channel and distinct
from the MBS swap acquisition channel, whereby a seller exchanges a
group of loans for an Enterprise-guaranteed mortgage-backed
security, which the seller may then sell into the secondary market.
See https://www.cbo.gov/publication/60978.
---------------------------------------------------------------------------
The Enterprises may also vary the ongoing guarantee fees they
charge to lenders. Ongoing fees are based primarily on the product
type, such as whether the loan is a 30-year fixed-rate or a 15-year
fixed-rate loan, but also reflect other factors, which may include the
share of mortgages delivered that are goals-qualifying. As described by
the Congressional Budget Office in its report on the housing goals:
``For example, when lenders consistently deliver a higher percentage of
mortgages that meet the requirements of one or more housing goals, the
GSEs may charge those lenders a lower ongoing fee for future deliveries
than the fee paid by lenders who deliver a lower share of such
mortgages.'' \46\
---------------------------------------------------------------------------
\46\ See Congressional Budget Office, ``Fannie Mae and Freddie
Mac's Housing Goals,'' (November 2024), available at https://www.cbo.gov/publication/60978.
---------------------------------------------------------------------------
Through ongoing discussions and stakeholder engagement with market
participants,\47\ the Agency is also aware of other methods for meeting
housing goals that do not rely on pricing incentives. One large lender
stated that to meet the housing goals, the Enterprises reduced
purchases of higher-balance loans through their cash window, provided
less competitive pricing for non-goal qualifying loans, and implemented
market share and/or volume restrictions. Another large lender shared
that to maintain its relationship with the Enterprises, they have to
pay-up for goal-qualifying loans from third-party loan aggregators that
they would have not ordinarily purchased in order to deliver those
loans to the Enterprises, noting that the lower pricing is not passed
to the borrower in the form of down payment assistance, closing cost
assistance, or a lower rate. One large trade association reiterated
these concerns, noting that the Enterprises' actions resulted in
distorted pricing and an inefficient subsidy mechanism that benefits
lenders, rather than ``creating a bigger [affordable housing] pie''
that benefits future homeowners, and that sellers' ability to
participate in pilots and receive preferential pricing was directly
tied to goals.\48\ The trade association also noted that lenders felt
compelled to turn away non-goals business in order to keep their goal
percentages high, or place low-income borrowers in conventional loans
when another product might be a better fit.
---------------------------------------------------------------------------
\47\ FHFA is not aware of a data source that would quantify the
trends illustrated by these examples.
\48\ Ibid.
---------------------------------------------------------------------------
Anecdotal feedback from the Enterprises and industry notes that the
housing goals often result in Fannie Mae and Freddie Mac competing with
each other for the same low- and moderate-income borrowers. In
Congressional testimony, Edward DeMarco of the Housing Policy Council,
similarly stated that ``the current target level of affordable loans
materially exceeds what the market is capable of producing, given
today's market conditions . . . As a result, there is a bidding war for
these loans but there is no mechanism to ensure the homebuyer benefits.
Moreover, competition between the two GSEs over goals loans does
nothing to expand the number of borrowers reached.'' \49\ These
insights highlight that the Enterprises compete over a limited pool of
borrowers rather than ensuring all credit eligible applicants have
access to a liquid market. If the housing goals benchmark target
results in shifting volume from one Enterprise to another, it may
indicate that the goals are set too high.
---------------------------------------------------------------------------
\49\ See Housing Policy Council, ``Edward DeMarco Testimony,''
(May 17, 2023), available at https://www.housingpolicycouncil.org/_files/ugd/d315af_c923c372d1074faebc5c80f2b2bbc6ec.pdf.
---------------------------------------------------------------------------
These anecdotal discussions reinforce the need to carefully set the
housing goals to avoid unintended consequences that harm borrowers,
lenders, and the market. Of particular concern is feedback from lenders
that they have turned away middle-class borrowers or increased prices
on middle-class
[[Page 47640]]
borrowers in pursuit of meeting housing goals.\50\ These concerns were
also expressed in public comments to the 2025-2027 proposed rule.\51\
While this feedback is not presented as formal statistical data, it
offers illustrative examples of the real-world impact of the current
regulatory structure. These concerns also suggest that the benchmarks
for the housing goals have been set too high.
---------------------------------------------------------------------------
\50\ AEI, ``Reforming GSE Lending: A Sustainable Path for Fannie
Mae and Freddie Mac White Paper,'' (April 2025), available at
https://aei.org/wp-content/uploads/2025/04/FHFA-White-Paper-Reforming-GSE-Lending-A-Sustainable-Path-for-Fannie-Mae-and-Freddie-Mac-FINAL-2.pdf.
\51\ See, e.g., John Meussner, MMCD, ``Public Comment on FHFA
2025-2027 Proposed Housing Goals,'' (August 26, 2024), available at
https://www.fhfa.gov/regulation/federal-register/proposed-rulemaking/2025-2027-enterprise-housing-goals.
---------------------------------------------------------------------------
Further, on January 20, 2025, the President issued a Memorandum
entitled ``Delivering Emergency Price Relief for American Families and
Defeating the Cost-of-Living Crisis,'' instructing federal agencies to,
among other actions, lower the cost of housing and expand housing
supply.\52\ FHFA, in carrying out this policy priority, is assessing
the impact of the housing goals on the cost of housing, particularly to
middle-class borrowers, who may be turned away or receive higher prices
than they would in the absence of overly aggressive housing goals.
---------------------------------------------------------------------------
\52\ Presidential Memorandum ``Delivering Emergency Price Relief
for American Families and Defeating the Cost-of-Living Crisis,''
(January 20, 2025), 90 FR 8245 (Jan. 28, 2025), available at https://www.federalregister.gov/documents/2025/01/28/2025-01904/delivering-emergency-price-relief-for-american-families-and-defeating-the-cost-of-living-crisis.
---------------------------------------------------------------------------
The Agency recognizes that it is difficult to fully isolate and
quantify the extent to which setting inappropriately aggressive housing
goals penalizes middle-class borrowers. However, insights from
discussions with market participants suggest a material impact on
access to liquidity and inefficient deployment of funds. While the
scope and systemic impact of these unintended consequences are not yet
fully understood, the Agency recognizes the importance of ensuring the
Enterprises meet their charter act mission to provide liquidity to all
markets at all times for all income segments. Further, the Agency has a
policy interest in ensuring effective allocation of resources, as well
as lowering costs for American families.
To address the concern that middle-class borrowers are penalized by
benchmarks that are too high, and to facilitate a more thorough
examination of the relationship between housing goal benchmarks and
Enterprise practices to meet the benchmarks, the Agency believes that a
recalibration of the Enterprise housing goals is warranted. By setting
the goals at a level that allows for greater flexibility in Enterprise
operations, FHFA anticipates that it and the Enterprises will be better
positioned to collect and analyze comprehensive data on lending
patterns, pricing structures, and borrower outcomes. This approach will
enable the Agency to gain a more robust, data-driven understanding of
whether and to what extent certain pricing mechanisms are indeed
creating unintended barriers for middle-class families. Allowing FHFA
to better observe and study these potential impacts will be invaluable
in informing the establishment of more appropriately benchmarked
housing goals in future rulemakings that enable the Enterprises to
serve all income levels fairly.
In previous iterations of the Enterprise Housing Goals rules, the
Agency has, by design, afforded less significant weight to the
Enterprises' past performance and effort to achieve the housing goals
in setting future benchmarks. This approach was largely predicated on a
recognition that past performance data, while valuable, may not always
capture the nuances of the Enterprises' efforts, particularly regarding
the specific actions taken to achieve goals, and a larger weighting on
the Enterprises' ability to lead the mortgage market. However, recent
insights into the Enterprises' operational behaviors, coupled with an
updated understanding of how various pricing mechanisms can affect
overall housing affordability, necessitate a recalibration of the
Agency's approach.
Table 1 provides the annual performance of both Enterprises on the
single-family housing goals between 2010 and 2024.
BILLING CODE 8070-01-P
[[Page 47641]]
[GRAPHIC] [TIFF OMITTED] TP02OC25.021
BILLING CODE 8070-01-C
To better align the housing goals with the Agency's objectives, and
to gain a more granular understanding of how Enterprise actions
contribute to or detract from this aim, FHFA believes that adjustments
to the weighting of past performance is appropriate for some of the
benchmarks. As described above, FHFA's review of past Enterprise
tactics used to achieve housing goals target indicates that some
actions taken may have increased housing costs for some homebuyers. A
key policy priority for the Agency is to reduce costs to
[[Page 47642]]
homeownership for all borrowers across all income brackets. FHFA is
assessing both the Enterprises performance in meeting the goals and the
effectiveness of strategies used to complete the goals in order to
inform the establishment of more precise and appropriately calibrated
benchmark housing goals in future rulemakings that reduce homeownership
costs for all borrowers.
Ability of the Enterprises to lead the mortgage market. The
Enterprises' overall share of the mortgage market at origination is
subject to fluctuation. In the years preceding the 2008 financial
crisis, the Enterprises' share of the market dropped to about 44
percent. As shown in Graph 4, that share rose to about 65 percent in
2012, but declined to about 55 percent in 2015. The Enterprises' share
remained relatively stable until 2019, then jumped to 67 percent in
2020 as the Enterprises continued to acquire mortgages even as others
in the market stepped back during the COVID-19 pandemic. Since then,
the Enterprises' share has declined as the shares of government-
guaranteed and government-insured loans, as well as the shares of other
market participants, have grown. Government-guaranteed and government-
insured loans are not eligible for housing goals credit.
BILLING CODE 8070-01-P
[GRAPHIC] [TIFF OMITTED] TP02OC25.022
BILLING CODE 8070-01-C
Graph 4 also shows that the Enterprises' share of the conforming
mortgage market returned to pre-pandemic levels in 2022 but declined
significantly the following year, by seven percentage points in 2023.
In 2024, the Enterprises' share continued to decline, dropping one
percentage point from the previous year. Compared to pre-pandemic
levels of 2019, the Enterprise share in 2024 was 8 percentage points
lower. Over the same period, the total direct government share of the
mortgage market (not including the Enterprises) and the Other share
(such as retained bank portfolios) expanded. Government share of the
mortgage market increased seven percentage points from 2022 to 2023 and
remained the same level in 2024.
It is neither efficient nor necessary for the Enterprises to serve
the entire of the low- and moderate-income market. The market serving
low- and moderate-income households is a distinct segment of the
housing market, offering tailored mortgage products and programs to
serve the credit needs of these borrowers. The federal government--
through the Federal Housing Administration (FHA),\53\ Rural Housing
Service (RHS), and Veterans Administration (VA)--also provide mortgage
products geared toward low- and moderate-income households.\54\ For
example, HUD reports that in FY 2024 about 32 percent of FHA-insured
mortgages were issued to borrowers earning less than 80 percent of the
Area Median Income, compared with 26 percent in the rest of the broader
market.\55\ In FY 2024, FHA served 766,942 forward mortgage borrowers,
including 603,040 purchase mortgages.\56\ Assuming, of the 603,040
purchase mortgages, a similar
[[Page 47643]]
percentage were to low-income borrowers, FHA insured home purchase
mortgages to roughly 193,150 borrowers earning less than 80 percent of
the AMI--roughly on par with the 189,247 low-income home purchases
mortgages supported by Fannie Mae and the 200,757 low-income home
purchase mortgages supported by Freddie Mac. According to the Veterans'
Administration report, similarly, in FY 2024, 22 percent (65,949
purchase loans) of Veterans Administration insured loans were to
borrowers with incomes of less than $74,999.\57\ That same year, 4,164
low-and very low-income borrowers received funding through the Section
502 Single Family Housing Direct Loan program under USDA's Rural
Housing Programs.\58\ For the USDA rural housing program, data provided
by USDA shows an average loan size of $102,154 for the most recent year
with available data (2016), compared to an average conventional loan
amount of $256,000 for that same year.\59\
---------------------------------------------------------------------------
\53\ See HUD, ``Let FHA Loans Help You,'' available at https://www.hud.gov/helping-americans/loans.
\54\ See VA, ``Rural Housing Programs,'' available at https://www.va.gov/HOMELESS/docs/Rural-Housing-Programs-Fact-Sheet.pdf.
\55\ See FHA Annual Report to Congress FY2024, available at
https://www.hud.gov/sites/dfiles/Housing/documents/2024FHAAnnualReportMMIFund.pdf.
\56\ Ibid.
\57\ See VA Annual Benefits Report FY2024, available at https://www.benefits.va.gov/REPORTS/abr/docs/2024-abr.pdf#.
\58\ See Congressional Research Service, ``USDA Rural Housing
Programs: An Overview,'' (March 2022), available at https://www.congress.gov/crs-product/R47044; USDA's current low- and very
low-income limits, ``Rural Development Single Family Housing
Guaranteed Loan Program,'' available at https://www.rd.usda.gov/files/rd-grhlimitmap.pdf; and Housing Assistance Council, ``USDA
Rural Development Housing Activity Report Fiscal Year 2024,''
available at https://ruralhome.org/wp-content/uploads/2025/03/2024-usda-rural-development-housing-activity-report.pdf.
\59\ See USDA Rural Development Single Family Section 502 Direct
Active Loans by County, available at http://www.sc.egov.usda.gov/data/files/SFH_Data/USDA%20Single%20Family%20Section%20502%20Direct_Loans%20by%20County%20as%20of%207.8.2016.csv; and FHFA NMDB data base for new mortgages
available at https://www.fhfa.gov/data/dashboard/nmdb-new-residential-mortgage-statistics.
---------------------------------------------------------------------------
State Housing Finance Agencies (HFAs) are state-chartered
organizations that provide financing and services for affordable
housing, generally targeted towards low- and moderate-income borrowers.
HFAs can offer first-lien mortgage products and programs that include
low down payment products, down payment assistance, flexible
underwriting guidelines, and competitive or lower-than-market interest
rates.\60\ Certain HFA loans may be delivered to the Enterprises, while
others may not meet the Enterprises' charter act requirements or
underwriting guidelines.\61\
---------------------------------------------------------------------------
\60\ See FDIC, ``Affordable Mortgage Lending Guide,'' available
at https://www.fdic.gov/resources/bankers/affordable-mortgage-lending-center/guide/part-2-docs/affordable-mortgage-lending-guide-part-2.pdf.
\61\ See HFA Preferred, available at https://singlefamily.fanniemae.com/media/8661/display; and HFA Advantage,
available at https://sf.freddiemac.com/working-with-us/origination-underwriting/mortgage-products/hfa-advantage.
---------------------------------------------------------------------------
Finally, many financial institutions elect to keep mortgage loans
in their portfolios to meet their obligations under the Community
Reinvestment Act (CRA). A core component of CRA evaluations is an
assessment of a bank's record of providing credit to low- and moderate-
income households, and first-lien mortgages directly contribute to this
test.\62\ By originating and retaining these loans in their portfolio,
financial institutions demonstrate their commitment to serving these
communities.
---------------------------------------------------------------------------
\62\ See, generally, 12 CFR part 25.
---------------------------------------------------------------------------
As described above, the Enterprises are not the sole source of
support for mortgage originations to low- and moderate-income
households. Mortgage lenders offer a broad range of products and assess
each individual borrower's circumstances to identify the best product.
For affordable lending, lender considerations include strategies that
ensure long-term affordability and borrower success. For an individual
household, a conventional mortgage that is eligible to be purchased by
the Enterprise may not always offer the best execution or product for
their needs.\63\ Loans held in portfolio for CRA purposes, and other
non-Enterprise eligible loans may be a better fit based on a borrower's
credit profile, down payment, and other factors. For example, a bank
may offer a CRA product that provides a below-market interest rate,
ensuring a more sustainable loan compared to the rates offered in the
conventional market, or a household eligible for a Veterans
Administration loan may wish to use a product with no down payment
requirement.\64\ Financial institutions serving low- to moderate-income
borrowers may also seek liquidity through Federal Home Loan Bank
advances to best meet affordability needs.
---------------------------------------------------------------------------
\63\ See FDIC, ``Affordable Mortgage Lending Guide,'' (October
2021), available at https://www.fdic.gov/affordable-mortgage-lending-center/affordable-mortgage-lending-guide.
\64\ See Veterans United, ``VA Loan Downpayment Requirements,''
(January 2025), available at https://www.veteransunited.com/realestate/why-va-loans-dont-require-a-down-payment/?msockid=17e9c459dfd169f939ecd1a3de5a6807.
---------------------------------------------------------------------------
The Presidential Memorandum on Federal Housing Finance Reform
issued by President Trump on March 27, 2019,\65\ includes the following
policy objectives: (1) ``increasing competition and participation of
the private sector in the mortgage market;'' and (2) ``defining the
GSEs' role in promoting affordable housing without duplicating support
provided by the FHA or other Federal programs.'' Consistent with the
policy objectives and the U.S. Treasury's Housing Reform Plan,\66\ the
Enterprises should provide support for low- and moderate-income
households without crowding out or displacing other important sources
of liquidity that may better serve these segments.
---------------------------------------------------------------------------
\65\ See White House, Presidential Memorandum ``Memorandum on
Housing Finance Reform,'' (March 2019), available at https://www.govinfo.gov/content/pkg/DCPD-201900181/pdf/DCPD-201900181.pdf.
\66\ Treasury, ``U.S. Department of Treasury Housing Reform
Plan,'' (September 2019), available at https://home.treasury.gov/system/files/136/Treasury-Housing-Finance-Reform-Plan.pdf.
---------------------------------------------------------------------------
It is appropriate, therefore, that FHFA consider the potentially
distortive impacts of the Enterprises on the market when determining
their appropriate role in the low- and moderate-income segment.
Benchmark levels that are set inappropriately high will likely result
in the Enterprises increasing their relative market share of low-income
borrowers, but, as discussed in the Past performance and effort of the
Enterprises to achieve the housing goals section of this preamble, may
reduce liquidity for middle-class borrowers and increase costs for all
borrowers.
Further, unduly elevated housing goals may continue to inhibit the
PLS market. The PLS market, which includes mortgage-backed securities
not guaranteed by the Enterprises or the federal government, is a
critical component of a diversified and resilient housing finance
system.\67\ As shown in Graph 4, the PLS market has not robustly
returned following the 2008 financial crisis.\68\ A diminished PLS
market can stifle innovation in private sector underwriting, product
development, and risk management. A small PLS market also limits the
financing options for low-income borrowers who do not have the
necessary credit for government-backed loans.\69\
---------------------------------------------------------------------------
\67\ See Congressional Research Service, ``An Overview of the
Housing Finance System in the United States,'' (January 2017),
available at https://www.congress.gov/crs-product/R42995.
\68\ FHFA, Office of Inspector General Report, ``FHFA's
Initiative to Reduce the Enterprises' Dominant Position in the
Housing Finance System by Raising Gradually their Guarantee Fees,''
(July 2013), available at https://www.fhfaoig.gov/Content/Files/EVL-2013-005.pdf.
\69\ Urban Institute, ``The Rebirth of Securitization: Where is
the Private Label Mortgage Market?'' available at https://mitsloan.mit.edu/sites/default/files/inline-files/GCFP-3rdConference-Goodman.pdf.
---------------------------------------------------------------------------
Further, if the most straightforward and least risky segments of
the market
[[Page 47644]]
are disproportionately absorbed by the Enterprises, private capital may
be deterred from developing solutions for the remaining, potentially
higher-risk, market niches, and FHA will be left with the riskiest
loans. A comprehensive review of the mortgage risk of Enterprise, VA,
PLS, and FHA loans from 1990 to 2019 found a history of the least risky
loans being absorbed by the Enterprises,\70\ and results from 2024 show
that PLS, VA, and FHA loans continue to have higher rates of default
compared to Enterprise loans.\71\ If elevated housing goals crowd out
the PLS market, pushing risky loans to non-Enterprises, the result
could leave private capital with a reduced incentive to innovate.
Lowering the benchmarks may help support a vibrant PLS market which
encourages diverse product offerings and risk solutions that may not be
available through the GSEs or government programs.
---------------------------------------------------------------------------
\70\ FHFA, ``A Quarter Century of Mortgage Risk,'' Figure 4,
(February 2022 revised; January 2019 original), available at:
https://www.fhfa.gov/document/wp1902.pdf.
\71\ MBA, ``Mortgage Delinquencies Increase in the Fourth
Quarter of 2024,'' (February 2025), available at https://www.mba.org/news-and-research/newsroom/news/2025/02/06/mortgage-delinquencies-increase-in-the-fourth-quarter-of-2024.
---------------------------------------------------------------------------
Importantly, housing goals that are set too high may simply steer
borrowers from other loan products, such as FHA loans, to conventional
loans, rather than providing liquidity for new households. As defined
in statute, the Enterprises have the objective of supporting financing
for low- to moderate-income households, including ensuring the
Enterprises promote access to mortgage capital throughout the
Nation.\72\ However, this does not require the Enterprises to diminish
the vital role of other market participants in a diversified secondary
market ecosystem or engage in a ``race to the bottom'' competition
between the two Enterprises. These outcomes ultimately diminish the
benefit to underserved and middle-class borrowers. In such scenarios,
the Enterprises may gain a disproportionate share of the existing
market for certain loan types, rather than expand the universe of
eligible borrowers or foster new, innovative lending solutions across
the entire market. This can lead to a phenomenon where the benefits of
housing goals accrue more to the Enterprises' market presence than to a
broader societal gain in housing accessibility.
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\72\ 12 U.S.C. 4501.
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Commenters on the proposed rule for the 2025-2027 housing goals
expressed this concern about how high housing goals can shift borrowers
away from other loan products to conventional loans, thereby creating
competition between the Enterprises, rather than increasing affordable
housing supply. For example, the Mortgage Bankers Association (MBA)
wrote, ``While well intended . . . there is extreme competition for LIP
and VLIP loans,'' noting how there is a ``tug of war effect,'' over
these loans that can ``cause market disruption, mispricing of
underlying risks, and potentially higher costs for nongoals loans--
i.e., cross-subsidization beyond the levels intended in the
Enterprises' pricing framework.'' \73\
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\73\ MBA, Public Comment Letter on ``FHFA 2025-2027 Proposed
Housing Goals,'' (October 28, 2024), available at https://www.fhfa.gov/sites/default/files/2024-10/FHFA_2025-2027_Housing_Goals_Final.pdf; LIP refers to low-income purchase
mortgages and VLIP refers to very low-income purchase mortgages.
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Conversely, if housing goals are set too low, there is a risk of a
decrease in liquidity and outreach to low- and moderate-income
borrowers if market participants are not sufficiently incented to
provide mortgage liquidity to these borrowers. However, there are
several countervailing reasons why this is unlikely. First, both
Enterprises have a statutory mandate to provide ongoing assistance for
residential mortgages, including ``housing for low- and moderate-income
families.'' This broad mission is enshrined in their charter acts and
extends beyond the specifics of housing goals.\74\ Second, lenders and
the Enterprises are incented to deliver loans to low- and moderate-
income borrowers due to the pay-ups (premiums) they command through
spec pool trading.\75\ Loans to low- and moderate-income borrowers
exhibit more stable prepayment behavior and other desirable attributes
for investors. Third, and finally, low- and moderate-income households
represent a significant (and still profitable) proportion of the
overall potential homebuying market.\76\ It is not in the Enterprises'
interest to cease purchases from this market because it would result in
a substantial loss of business and market reach.
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\74\ See https://www.govinfo.gov/content/pkg/USCODE-2023-title12/pdf/USCODE-2023-title12-chap11A.pdf and https://www.govinfo.gov/content/pkg/USCODE-2023-title12/pdf/USCODE-2023-title12-chap13-subchapIII.pdf.
\75\ A spec pool is an MBS where all loans in the pool meet a
specified criteria at issuance, and these characteristics are known
at the time of the trade. Investors generally invest in spec pools
because of the prepayment characteristics of these pools. For a
discussion of this issue in the context of low-loan balance spec
pools, see Fannie Mae, ``Low Balance Lending Economics: The Role of
the Spec Pay-up,'' (December 2023), available at https://www.fanniemae.com/media/49786/display.
\76\ National Community Reinvestment Coalition, ``Home Lending
to LMI Borrowers and Communities by Banks Compared to Non-Banks,''
(April 2019), available at https://ncrc.org/home-lending-to-lmi-borrowers-and-communities-by-banks-compared-to-non-banks/.
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FHFA also looks to past performance to assess the likelihood that
an Enterprise would cease or reduce liquidity to low- and moderate-
income borrowers if the benchmarks were lowered. A review of
performance in the 2018 and 2021 housing goals cycle finds that the
Enterprises consistently delivered above the benchmark number.\77\ When
the benchmark was set higher, as in the 2022-2024 cycle, one or both
Enterprises did not meet the benchmarks for low-income and very low-
income purchase goals.\78\ For 2025, FHFA lowered the benchmark and to
date, both Enterprises are performing above the benchmark.
Additionally, when FHFA lowered the single-family benchmarks for the
2012-2014 housing goals, Enterprise performance maintained a similar
variance from the actual market to the period when the benchmarks were
higher.79 80 This pattern leads FHFA to conclude that the
Enterprises would not pull back from providing liquidity if the goals
were lowered.
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\77\ FHFA, ``[Affordable] Housing Goals Performance,'' available
at https://www.fhfa.gov/programs/affordable-housing/housing-goals-performance.
\78\ FHFA, ``Annual Housing Report 2024,'' p. 33, (October
2024), available at https://www.fhfa.gov/document/annual-housing-report-2024.
\79\ FHFA, ``[Affordable] Housing Goals Performance,'' available
at https://www.fhfa.gov/programs/affordable-housing/housing-goals-performance.
\80\ Since the Housing Goals market performance level includes
loans purchased by Fannie Mae and Freddie Mac, in periods where the
Enterprises had a high market share, their purchase activities could
influence the overall market level.
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For the reasons discussed above, FHFA believes that in some
instances it is appropriate to set benchmarks that are lower than the
market forecasts to encourage other secondary market outlets to
participate in the market, and to avoid unnecessary and costly
duplication of support. While the housing goals provide a quantitative
framework for avoiding significant liquidity gaps in the market, the
underlying business rationale, market dynamics, and the Enterprises'
foundational mission ensure a continued, strong incentive to provide
liquidity to low- and moderate-income borrowers. Moreover, the presence
of the goals, even at a lower level, ensures that the low- and
moderate-income mortgage market continues to be served and recognizes
the crucial role the Enterprises play in maintaining this stability.
[[Page 47645]]
In previous Enterprise Housing Goals rules, the Agency's assessment
of the Enterprises' ability to lead the mortgage market has primarily
focused on their direct contributions to providing liquidity to low-
and moderate-income borrowers. This approach historically placed less
explicit emphasis on the broader market's composition, including the
vital roles and activities of other federal housing programs, such as
FHA, and of the PLS market, as well as lender decisions regarding their
portfolio. While acknowledging the interconnectedness of the overall
housing finance system, prior regulations were structured to primarily
address the Enterprises' activities. Prior FHFA housing goal
regulations often lacked a detailed consideration of potential overlaps
or synergistic effects with other market participants.
However, recent policy priorities and market conditions necessitate
a more holistic view. The Agency is now placing a significant policy
focus on ensuring that Enterprise subsidies are deployed efficiently,
minimizing unnecessary and costly duplication of efforts within the
government share of the mortgage market. Additionally, the Agency will
undertake a critical examination of how the Enterprises' activities
intersect with, impact, and compete with FHA's mission, the health of
the PLS market, and financial institutions' obligations under the
Community Reinvestment Act. Furthermore, the Agency is aligning its
approach with Treasury's recommendations regarding the appropriate
roles and potential overlap between the Enterprises and FHA, with the
goal of creating a more streamlined and effective housing finance
system. Therefore, the Agency's analysis and weighting of the
Enterprises' ability to lead the market will consider the Enterprises'
role within the entire mortgage market, seeking to optimize resource
allocation and ensure that each segment of the market efficiently
serves its intended purpose without undue competition or inefficiency.
Need to maintain the sound financial condition of the Enterprises.
A key factor guiding FHFA in setting the benchmark levels for the
housing goals is FHFA's statutory mandate and critical policy objective
to maintain the sound financial condition of the Enterprises. FHFA is
reevaluating the housing goals to prioritize Enterprise safety and
soundness, ensure adequate capital accumulation, and promote efficient
deployment of Enterprise resources. This rulemaking occurs during a
period of heightened housing affordability challenges and increased
market uncertainty. FHFA carefully considered benchmark levels that
represent a balanced approach to supporting access for low- and
moderate-income families, and those living in low-income areas, while
supporting the Enterprises' financial stability and overall market
integrity.
The Housing and Economic Recovery Act (HERA) of 2008 mandates that
Fannie Mae and Freddie Mac operate in a ``safe and sound manner,
including maintenance of adequate capital and internal controls.'' \81\
FHFA's unwavering policy priority is to ensure that the Enterprises
accumulate statutorily required capital, mitigate risk exposures, and
adjust financial strategies to ensure their long-term stability.
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\81\ HERA, Public Law 110-289, title I, subtitle A, sec.
1102(a), 122 Stat 2664 (12 U.S.C. 4513(a)(1)(B)(i)), (2008),
available at https://www.congress.gov/110/plaws/publ289/PLAW-110publ289.pdf.
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Despite this statutory requirement, the Enterprises continue to
face significant capital shortfalls. As noted in FHFA's 2024 Annual
Report to Congress, while their capital positions have improved since
the 2008 financial crisis, they have not yet accumulated the
statutorily required capital.\82\ At the end of 2024, both Fannie Mae
and Freddie Mac failed to meet the minimum regulatory capital
requirements established under the Enterprise Regulatory Capital
Framework (ERCF).\83\ Their continued reliance on government support
through the Senior Preferred Stock Purchase Agreements (PSPAs) with
Treasury, evidenced by accumulated deficits and negative retained
earnings, underscores their ongoing capital needs.\84\ Specifically, as
of December 2024, Fannie Mae's statutory capital shortfall was $157
billion, with a total regulatory shortfall of $164 billion ($243
billion when including regulatory capital buffers).\85\ For Freddie
Mac, the statutory capital shortfall stood at $108 billion, with a
total regulatory capital shortfall of $107 billion ($164 billion when
including regulatory capital buffers).\86\
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\82\ 2024 Annual Report to Congress, (June 2025), p. 15,
available at https://www.fhfa.gov/document/fhfa-2024-annual-report-to-congress.pdf.
\83\ Fannie Mae, available at https://www.fanniemae.com/media/document/pdf/fnma-capital-disclosures-2024q4-022625.pdf; and Freddie
Mac, available at https://www.freddiemac.com/investors/docs/4Q24_ERCF_Public_Disclosure.pdf.
\84\ 2024 Annual Report to Congress, (June 2025), p. 15,
available at https://www.fhfa.gov/document/fhfa-2024-annual-report-to-congress.pdf.
\85\ U.S. Securities and Exchange Commission Form 10-k, 2024,
Fannie Mae, p. 125, available at https://www.fanniemae.com/media/document/pdf/q42024.pdf.
\86\ U.S. Securities and Exchange Commission Form 10-k, 2024,
Freddie Mac, p. 93, available at https://www.freddiemac.com/investors/financials/pdf/10k_021325.pdf.
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These shortfalls underscore why the Enterprises must make safety
and soundness their primary focus, considering their size and role in
the housing market. The Enterprises' profitability, crucial for organic
capital generation, depends heavily on the credit risk associated with
guarantee fees. However, the Enterprises often expect lower returns on
mortgage loans for low- and moderate-income families.\87\ A study
conducted by Fannie Mae in 2017 on ``The Credit Risk of Low-Income
Mortgages'' describes how several risk factors, such as debt-to-income
ratios, loan-to-value ratios, and credit scores can vary significantly
across income groups, with loans to lower-income borrowers exhibiting
higher risk profiles. The data illustrates that default rates for
mortgages are higher when borrower income declines, reinforcing the
need to carefully balance support for low- and moderate-income families
with safety and soundness concerns.\88\
---------------------------------------------------------------------------
\87\ FHFA, ``Fannie Mae and Freddie Mac Single-Family Guarantee
Fees in 2023,'' (January 2025), p. 8, available at https://www.fhfa.gov/document/gfee-report-2023.pdf.
\88\ Hamilton Fout, Grace Li, Mark Palim, ``Credit Risk of Low
Income Mortgages, Economic and Strategic Research, Fannie Mae,''
(May 2017), p. 7, available at https://www.fanniemae.com/sites/g/files/koqyhd191/files/migrated-files/resources/file/research/datanotes/pdf/credit-risk-of-low-income-mortgages-white-paper.pdf.
---------------------------------------------------------------------------
Given the current economic climate characterized by elevated
mortgage rates, reduced transaction volume, and affordability concerns,
as well as the Enterprises' current capital shortfalls, the Agency must
reweight its policy priorities to emphasize the need to maintain the
sound financial condition of the Enterprises. In prior housing goal
rulemakings, FHFA has given less weight to safety and soundness
considerations than it has to other considerations. In today's climate,
reduced loan origination volumes, elevated interest rates, and economic
uncertainty may make it harder for the Enterprises to generate
sufficient retained earnings to meet ERCF requirements if benchmark
levels are not reduced since housing goals loans generally earn a lower
return relative to non-housing goals loans, harming their financial
resiliency and independence. A strategic shift to weighing safety and
soundness more heavily is necessary to continue to maintain sound
financial positioning. Prioritizing full recapitalization and then
maintaining sufficient capital reserves will be critical to fulfilling
their statutory obligations and preserving their ability to support
[[Page 47646]]
the entire housing market sustainably while adhering to HERA
requirements for financial stability.
During a period of affordability challenges and uncertainty around
market conditions,89 90 setting the single-family housing
goals benchmark levels too high could compromise safe and sound
acquisition standards. Failure to appropriately account for important
risk management considerations, such as the need to maintain sound
financial conditions and meet minimum regulatory capital requirements
could lead to unintended consequences, including persistent capital
shortfalls. The proposed benchmarks levels are designed to support
access to mortgage lending for low- and moderate-income families while
concurrently enabling the Enterprises to adequately support all other
segments of the market fairly and fortify their financial foundations.
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\89\ See evidence of uncertainty in mortgage conditions: Bank of
America, ``BofA Report: 60% of Homeowners and Prospective Buyers
Uncertain About the Housing Market--A Three-Year High,'' (May 2025),
available at https://newsroom.bankofamerica.com/content/newsroom/press-releases/2025/05/bofa-report--60--of-homeowners-and-prospective-buyers-uncertain-.html. Joint Center for Housing
Studies, ``New Report Highlights Unease in Housing Market Amid a
Worsening Affordability Crisis,'' (June 2025), available at https://www.jchs.harvard.edu/press-releases/new-report-highlights-unease-housing-market-amid-worsening-affordability-crisis. Goodness C. Aye,
Matthew W. Clance, Rangan Gupta, ``The Effect of Economic
Uncertainty on the Housing Market Cycle,'' (2019), available at
https://www.jstor.org/stable/26742376?seq=1.
\90\ See uncertainty in general market conditions: UNDP,
``Global Train Update (September 2025): Trade Policy Uncertainty
Looms Over Global Markets,'' available at https://unctad.org/publication/global-trade-update-september-2025-trade-policy-uncertainty-looms-over-global-markets. McKinsey & Co, ``Economic
Conditions Outlook, June 2025,'' (June 2025), available at https://www.mckinsey.com/capabilities/strategy-and-corporate-finance/our-insights/economic-conditions-outlook.
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B. Proposed Benchmark Levels for the Single-Family Housing Goals for
2026-2028
FHFA is proposing to establish the following benchmark levels for
the single-family housing goals for 2026-2028:
1. Low-Income Home Purchase Goal
The low-income home purchase goal is based on the percentage share
of all conventional, conforming, single-family, owner-occupied home
purchase mortgages purchased by an Enterprise that are made to low-
income families, defined as families with incomes less than or equal to
80 percent of AMI. FHFA proposes setting the low-income home purchase
benchmark at 21.0 percent. Lowering the benchmark is necessary to
ensure the Enterprises' participation remains effective, avoids
distorting the market and competing unnecessarily with other secondary
market participants, and supports a policy objective of reducing
overall housing costs for all borrowers.
[GRAPHIC] [TIFF OMITTED] TP02OC25.023
Recent performance and forecasts. As presented in Table 2, the low-
income home purchase market level, derived from HMDA data, declined
from 27.6 percent in 2020 to 26.3 percent in 2023. FHFA's most recent
forecast for this goal projects a continued market level decline,
averaging 25.9 5.6 percent. FHFA's current model forecasts
the market level to remain below 26.0 percent through 2027, with an
average forecast midpoint value of 25.9 percent.
Regarding Enterprise performance, Freddie Mac recorded a low-income
home purchase performance of 29.0 percent in 2022 and 28.5 percent in
2023, exceeding both the benchmark and market levels in those years.
Fannie Mae's performance in 2022 was 27.4 percent, which was below the
benchmark level but above the market level. In 2023, however, Fannie
Mae's performance decreased to 26.1 percent, falling below both the
benchmark and the market levels. For 2023, FHFA determined that while
Fannie Mae did not meet the goal, the established benchmark was not
feasible for the Enterprise.\91\ Preliminary performance for 2024
indicates Fannie Mae at 26.7 percent and Freddie Mac at 26.6 percent.
FHFA will issue its preliminary and final determinations on this goal
when HMDA data becomes available.
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\91\ FHFA's final determination of Fannie Mae's performance for
2023, available at https://www.fhfa.gov/sites/default/files/2024-11/2023-Final-Determination-Letter-Fannie-Mae.pdf.
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FHFA rationale for the proposed benchmark. FHFA's holistic review
of Enterprise pricing factors, coupled with a policy objective to
facilitate lower housing costs for all borrowers and to ensure
efficient deployment of Enterprise subsidy, supports a reduction in
this goal's benchmark. It is imperative for the Enterprises to remain
active participants within this market segment; however, FHFA must
ensure that the established benchmark does not create distortive
incentives or unintended consequences within the housing finance
system.
As discussed previously in this preamble, feedback from lenders and
[[Page 47647]]
other market participants has indicated that, under the previous
benchmark level, the Enterprises employed various pricing incentives
and other competitive tactics to increase goals-eligible loan delivery,
or decrease non-goals-eligible loan delivery, particularly for low-
income and very low-income loans. This competition extended not only
between the Enterprises themselves, but also with the government share
of the mortgage market and private market participants. This dynamic
raised concerns about unnecessary and costly duplication of support.
Resources that could have been more efficiently deployed to ensure
sustainability and access for low- and moderate-income borrowers
through down payment or closing cost assistance, or towards building
accretive capital for the Enterprises were instead used to pursue a
comparatively limited pool of loans, potentially at the expense of the
wider market.
FHFA finds that the current benchmark of 25.0 percent is
inconsistent with the current Administration's policy focus of ensuring
efficiency in operations and minimizing duplication of efforts across
the secondary mortgage market. FHFA believes that lowering the
benchmark to 21.0 percent will better align with these objectives. This
proposal to reduce the benchmark from 25.0 percent to 21.0 percent is
further supported by the lower threshold of the model output,
indicating that 21.0 percent remains within the model's projected range
for an achievable goal that is commensurate with the Enterprises' size
and role in the market. The revised benchmark is anticipated to enable
the Enterprises to meet their statutory obligations without distorting
market dynamics or creating unintended incentives.
Moreover, while the 21.0 percent benchmark remains a significant
component of the Enterprises' overall book of business, its reduction
would offer several strategic advantages. Other market participants,
including FHA, VA, RHS, and potentially PLS lenders, would be able to
provide alternative funding without contributing to artificially
bidding up prices within this segment since the Enterprises would not
be incented to engage in denominator management activities described
above. This can facilitate the flow of more loans, thereby bolstering
their portfolios and diversifying market support. By reducing the
Enterprises' tendency to ``crowd out'' this space, FHFA explicitly aims
to avoid unnecessary overlap with FHA's core mission and foster a more
efficient allocation of capital across the housing finance system.
Finally, a reduction in the benchmark may enable the Enterprises to
build additional capital at an accelerated rate, consequently improving
their safety and soundness.
2. Very Low-Income Home Purchase Goal
The very low-income home purchase goal is based on the percentage
share of all conventional, conforming, single-family, owner-occupied
home purchase mortgages purchased by an Enterprise that are for very
low-income families, defined as families with incomes less than or
equal to 50 percent of AMI. FHFA proposes setting the very low-income
home purchase benchmark at 3.5 percent. Like the low-income home
purchase goal, lowering the benchmark will ensure the Enterprises
effectively support very low-income borrowers, while preventing market
distortions and redundant efforts, all while advancing FHFA's policy of
lower housing costs for all borrowers.
[GRAPHIC] [TIFF OMITTED] TP02OC25.024
Recent performance and forecasts. As detailed in Table 3, the very
low-income home purchase market level, derived from HMDA data,
decreased from 7.0 percent in 2020 to 6.5 percent in 2023. FHFA's most
recent forecast projects a continued market level decline, averaging
6.0 2.5 percent. FHFA's current model forecasts the market
to continue its downward trajectory reaching below 6 percent through
2027, with an average forecast midpoint value of 5.9 percent.
Regarding the Enterprises, Freddie Mac's performance was 7.1
percent in 2022, exceeding both the benchmark and the market. In 2023,
Freddie Mac's performance was 6.8 percent, which was above the market,
but below the benchmark. Fannie Mae's performance was 6.9 percent in
2022, exceeding the market, but below the benchmark. In 2023, Fannie
Mae's performance was 6.0 percent, which was below both the market and
the benchmark. Preliminary 2024 performance shows Fannie Mae at 5.9
percent and Freddie Mac at 6.1 percent, both of which are below the
benchmark. FHFA will issue final determinations later this year when
HMDA data is released.
The observed decline is largely attributable to a constrained
housing supply within the very low-income borrower purchase market.
Sustained house price appreciation has reduced the inventory of homes
affordable to
[[Page 47648]]
very low-income borrowers.\92\ Concurrently, new construction of
starter homes remains insufficient to meet consumer demand.\93\ This
deficit in the supply of new homes is compounded by current economic
incentives within the construction sector. Builders are drawn to
developing properties at the higher end of the market due to more
substantial profit margins. The increase in the cost of land
acquisition,\94\ construction materials,\95\ lack of skilled labor, and
regulatory barriers has compressed profit margins on starter homes
significantly, thereby hindering the addition of new, affordable supply
to the market.
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\92\ NY Times, ``Whatever Happened to the Starter Home?''
(September 2022), available at https://www.nytimes.com/2022/09/25/upshot/starter-home-prices.html.
\93\ National Association of Realtors, ``Housing Affordability &
Supply: Rising Inventory, But for Whom? A Look at Inventory Gaps by
Price Range and Income Levels in 2025,'' (May 2025), available at
https://www.nar.realtor/sites/default/files/2025-05/2025-housing-affordability-and-supply-05-15-2025.pdf.
\94\ Joint Center for Housing Studies, Housing Perspectives,
``Increasing Land Prices Make Housing Less Affordable,'' (July
2019), available at https://www.jchs.harvard.edu/blog/increasing-land-prices-make-housing-less-affordable.
\95\ National Association of Home Builders, ``How Soaring Prices
for Building Materials Impact Housing,'' (July 2024), available at
https://www.nahb.org/blog/2024/07/how-soaring-prices-building-materials-impact-housing.
---------------------------------------------------------------------------
FHFA rationale for proposed benchmark. FHFA is proposing a
benchmark level of 3.5 percent for the very low-income home purchase
goal for the 2026-2028 cycle based on a comprehensive review of the
Enterprises' actions and tactics to achieve goal benchmarks and FHFA's
policy objectives to facilitate lower housing costs for all borrowers,
particularly by avoiding distortive incentives and ensuring efficient
deployment of Enterprise subsidy. This proposed benchmark is
appropriate, reasonable, and consistent with the prudential risk
management of the Enterprises' respective portfolios.
Similar to the rationale for the low-income home purchase goal, a
reduction in the very low-income purchase goal compared to current
levels offers significant benefits for both the Enterprises and the
broader mortgage market. For the very low-income goal, in particular,
FHFA has received lender feedback since publication of the 2025-2027
final rule indicating that the benchmark is unattainable due to the
severe insufficiency of affordable housing supply. The cumulative
effect of sustained house price appreciation, elevated interest rates,
and persistent demand coupled with a lack of affordable housing supply
over recent years has significantly constrained this market segment.
Discussions with lenders indicate a strategic reallocation of resources
away from pursuing goal-eligible loans towards higher-margin products
in an effort to remain in business, further underscoring the market's
current capacity constraints in this segment.
FHFA believes that the current benchmark of 6 percent, established
in the 2025-2027 Enterprise Housing Goals final rule, does not fully
align with the current Administration's policy focus of ensuring
operational efficiency and minimizing duplication of efforts across the
secondary mortgage market. The proposed 3.5 percent benchmark remains
within the tolerance band of FHFA's model, indicating that it is an
achievable goal that is commensurate with the Enterprises' size and
role in the market. Further, it encourages the Enterprises to continue
their efforts to promote safe and sustainable lending to very low-
income families without creating undue market pressure. By setting the
benchmark at 3.5 percent, the Enterprises can ensure that liquidity for
middle-class borrowers is not constrained, while also improving their
own sound financial condition.
The Agency also recognizes that very low-income borrowers are often
better served by other market participants, such as FHA or HFAs, which
can offer more flexible products and underwriting. By setting a more
appropriate benchmark, the Enterprises will no longer create as great
an adverse competitive pressure in the market for these loans. Instead,
they will provide a complementary level of support without overwhelming
or distorting the broader market. In sum, FHFA believes that a
benchmark of 3.5 percent is appropriate, offering a stronger emphasis
on maintaining the Enterprises' sound financial condition, avoiding the
displacement of potentially innovative market participants, and more
effectively serving a wide range of borrowers, reflecting a prudent
balance between mission achievement, market dynamics, and safety and
soundness.
3. Low-Income Areas Home Purchase Subgoal
The proposed rule would establish a single low-income areas home
purchase subgoal, rather than two separate area-based subgoals, each
with their own benchmark level. The proposed subgoal would count all
single-family, owner-occupied home purchase mortgages purchased that
are either: (1) for families in low-income areas, defined to include
census tracts with median income less than or equal to 80 percent of
AMI; or (2) for families with incomes less than or equal to AMI who
reside in minority census tracts (defined as census tracts with a
minority population of at least 30 percent and a tract median income of
less than 100 percent of AMI). The proposed rule would set the annual
benchmark level for this subgoal for 2026-2028 at 16.0 percent.
[[Page 47649]]
[GRAPHIC] [TIFF OMITTED] TP02OC25.025
Recent performance and forecasts. Table 4 shows the market levels
and Enterprise performance on this subgoal in 2021, along with implied
market levels and Enterprise performance for the years 2022 through
2024, during which the low income areas subgoal was replaced by the
low-income census tracts and minority census tracts subgoals. As shown
above, both Enterprises exceeded the proposed benchmark level for this
subgoal in 2022, 2023, and, based on preliminary data, in 2024.
FHFA rationale for the proposed benchmark: In 2010, FHFA
established a low-income areas housing subgoal as a component of the
overall low-income areas housing goal.\96\ Both the low-income areas
housing goal and subgoal were established as part of FHFA's
implementation of the new housing goals structure created by Congress
in the Housing and Economic Recovery Act of 2008.\97\ HERA amended the
Safety and Soundness Act to include a new single-family housing goal
for ``low-income areas,'' which were defined to include census tracts
where the median tract income does not exceed 80 percent of the areas
median income, as well as moderate-income families in minority census
tracts and moderate-income families in designated disaster areas.
Because the areas of the country affected by disasters change each
year, it was necessary to structure the overall low-income areas
housing goal in a way that would allow the target level to be adjusted
by notice each year. FHFA established the low-income areas housing
subgoal as including the other two components of the goal, to
facilitate the setting of the overall low-income areas housing goal.
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\96\ ``2010-2011 Enterprise Housing Goals; Enterprise Book-entry
Procedures'' (Final Rule), 75 FR 55892 (Sept. 14, 2010), available
at https://www.federalregister.gov/documents/2010/09/14/2010-22361/2010-2011-enterprise-housing-goals-enterprise-book-entry-procedures.
\97\ HERA, Public Law 110-289, 122 Stat. 2654 (2008), available
at https://www.congress.gov/110/plaws/publ289/PLAW-110publ289.pdf.
---------------------------------------------------------------------------
The 2022-2024 Enterprise Housing Goal rule replaced the low-income
areas housing subgoal that had been in place each year since 2010 with
a new structure for the low-income areas goal. The 2022-2024 Enterprise
Housiung Goals rule established two new area-based subgoals: the
minority census tracts subgoal and the low-income census tract
subgoals. The minority census tracts subgoal assesses the Enterprises'
performance in minority areas with respect to loans for families with
incomes no greater than 100 percent of AMI. The low-income census
tracts subgoal assesses the Enterprises' performance in low-income
census tracts, exclusive of loans that would qualify for the minority
census tracts subgoal. In other words, the low-income census tracts
subgoal is limited to: (1) loans in low-income census tracts that are
not minority census tracts, and (2) loans to borrowers above 100
percent of AMI in low-income census tracts that are also minority
census tracts.
FHFA adopted the two-part subgoal structure, with separate subgoals
for low-income census tracts and minority census tracts, to ``refocus
Enterprise efforts towards . . . families at or below 100 percent of
AMI.'' \98\ FHFA had observed that many goal-qualifying loans purchased
by the Enterprises were for higher income families (over 100 percent of
AMI) rather than for families at or below 100 percent of AMI. At the
time, FHFA was concerned that the single subgoal structure incentivized
the Enterprises to lend to higher-income households in low-income
census tracts. FHFA also cited concerns about gentrification and
displacement of lower-income borrowers as part of its rationale for
setting a relatively low benchmark level for the low-income census
tracts subgoal compared to historical performance and market levels.
---------------------------------------------------------------------------
\98\ ``2025-2027 Enterprise Housing Goals,'' (Proposed Rule), 89
FR 70127, 70138 (Aug. 29, 2024), available at https://www.federalregister.gov/documents/2024/08/29/2024-19261/2025-2027-enterprise-housing-goals.
---------------------------------------------------------------------------
FHFA is proposing to restore the single low-income areas subgoal to
simplify the regulatory framework, improve operational clarity for the
regulated Enterprises, and better align subgoals with existing
borrower-based metrics. After consideration of implementation
challenges related to the current subgoal structure, overlap of
[[Page 47650]]
the subgoals with existing low-income borrower goals, and broader
policy objectives to promote socioeconomic diversity and attract
private investment to distressed communities, FHFA concludes that
returning to the single low-income areas subgoal will further FHFA's
policy objectives while reducing complexity and unintended
consequences.
The proposed elimination of the two-part subgoal structure advances
Administration priorities for regulatory reform by reducing needless
complexity and focusing the Enterprises' affordable housing targets on
a single low-income areas subgoal. The current structure of the low-
income areas goal includes two separate subgoals, each with mutually
exclusive definitions for qualifying loans that require distinct
quantitative computation, tracking, and analysis for FHFA and the
regulated entities. Removing the current subgoal structure and
replacing with the low-income area's goal definition that applied from
2010 through 2021 is consistent with the Agency's objectives and with
Administration policy. Executive Order 14192 calls for agencies to be
``prudent and financially responsible in the expenditure of funds, from
both public and private sources, and to alleviate unnecessary
regulatory burdens.'' \99\ By switching to one simplified definition of
a low-income area that aligns with statutory objectives, the Agency
reduces compliance costs, increases efficiency, and reduces regulatory
burden.
---------------------------------------------------------------------------
\99\ Executive Order 14192 ``Unleashing Prosperity Through
Deregulation,'' section 2, (January 31, 2025), 90 FR 9065 (Feb. 6,
2025), available at https://www.federalregister.gov/documents/2025/02/06/2025-02345/unleashing-prosperity-through-deregulation.
---------------------------------------------------------------------------
The two-part subgoal structure also imposed modeling and compliance
challenges to the Enterprises that made it difficult to operationalize
the minority areas subgoal. Under the two-subgoal approach, the
Enterprises must develop and maintain models that accurately identify
qualifying census tracts, incorporate frequently updated geographic and
demographic inputs, and apply differing eligibility rules across
multiple subgoals--tasks that increase implementation complexity, raise
model risk, and divert resources from mission-oriented financing. Since
publication of the 2025-2027 final rule, FHFA has become aware of
operational challenges encountered by the Enterprises in accurately
forecasting lending within minority census tracts. For example, the
Enterprises have noted the difficulty in obtaining real-time metrics on
the size of the market due to the timing of the HMDA data release, the
availability of macroeconomic data at the census tracts level, and the
lack of technology infrastructure available to lenders to help target
and deliver the loans.100 101The Agency seeks to prevent the
Enterprises from engaging in practices that could lead to an artificial
increase in lending within this market segment solely to overcome
forecasting uncertainties to meet the elevated benchmark level. These
practices include distortive pricing and inefficient use of subsidy.
Eliminating these subgoals returns the Enterprises to a simpler, more
predictable framework that better supports underwriting, targeted
investment, efficient deployment of pricing incentives, and consistent
reporting.
---------------------------------------------------------------------------
\100\ Freddie Mac, ``Proposed Rulemaking on 2025-2027 Enterprise
Housing Goals--Comments/RIN 2590-AB34 (Enterprise Housing Goals),''
(October 28, 2024), available at: https://www.fhfa.gov/sites/default/files/2024-10/FreddieMacCommentsRIN2590-AB34_2025-2027EHG_2024.pdf.
\101\ Fannie Mae, ``Notice of Proposed Rule and Request for
Public Comment concerning the 2025-2027 Enterprise Housing Goals,
RIN 2590-AB34,'' (October 25, 2024), available at: https://www.fhfa.gov/sites/default/files/2024-10/FNMACommentLetteron20252027HousingGoalsNPROct252024.pdf.
---------------------------------------------------------------------------
Empirical analysis and program experience indicate substantial
overlap between beneficiaries captured by the minority area subgoal and
those already reached through the low-income borrower goals.
Approximately 70 percent of minority census tracts subgoal loans
otherwise qualify for the low-income purchase goal metrics. Maintaining
the two-part subgoal structure therefore produces limited incremental
benefit relative to the added complexity. The proposed low-income areas
subgoal maintains the statutory focus on families that reside in low-
income areas, including minority census tracts and designated disaster
areas. The Agency acknowledges that in 2022, there was a noticeable
increase in both the market level and the Enterprises' performance.
While this increase could be attributed to Enterprise efforts at
achieving the housing goal benchmark, several other factors may also
explain this material change. For example, 2022 marked the
implementation of new census boundaries derived from the 2020 Census,
which included a substantial increase in minority census tracts.\102\
Concurrently, 2022 also saw an unusually high average AMI increase,
which led to more borrowers qualifying for the subgoal.\103\ Another
factor that may have contributed to increased Enterprise performance in
this loan segment is a potential shift of loans from other entities
that previously served these borrowers before 2022, rather than serving
new borrowers or providing liquidity to areas that needed it. As noted
in the 2025-2027 Enterprise Housing Goals final rule, isolating the
precise driver of this increase--specifically, distinguishing between
the Enterprises' efforts to meet the subgoal and the impact of external
factors--was challenging. The new census tract boundaries and unusually
high AMI increases, for instance, may have independently led to more
borrowers qualifying for this subgoal \104\ Therefore, FHFA finds that
this high performance does not justify maintaining the 2025-2027
minority census tract and low-income census tract subgoal structure.
---------------------------------------------------------------------------
\102\ See 89 FR 106253 (Dec. 30, 2024).
\103\ Ibid.
\104\ Ibid.
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FHFA further acknowledges that gentrification and displacement are
real concerns when financing activity increases in low-income
neighborhoods. These potential harms merit consideration and
monitoring. Researchers note that gentrification since the 1970s
impacts a targeted set of central cities on the eastern and western
coasts.\105\ However, the National Community Reinvestment Coalition
reported in May 2025 that only about 15 percent of urban neighborhoods
showed signs of gentrification in the fifty-year time window of 1970-
2020.\106\ Increasingly, studies have found evidence that vulnerable,
low-income Americans leave gentrified neighborhoods at similar rates
then they leave non-gentrified neighborhoods.\107\
[[Page 47651]]
In fact, Ellen and O'Regan (2011) found that exit rates were lower in
gentrifying neighborhoods than in non-gentrifying neighborhoods, even
among renters or poor households.\108\ Further, scholars find mixed
effects of gentrification, noting while gentrification can have
negative impacts, it can also result in positive outcomes like lower
unemployment, and higher wages.\109\ Given this evidence of
gentrification's isolated and complex impacts, FHFA believes the two-
part subgoal structure is unnecessary.
---------------------------------------------------------------------------
\105\ Institute on Metropolitan Opportunity, ``Executive
Summary: American Neighborhood Change in the 21st Century,'' (April
2019), available at https://law.umn.edu/sites/law.umn.edu/files/metro-files/american_neighborhood_change_in_the_21st_century_-_executive_summary_-_4-2-2019.pdf; and National Community
Reinvestment Coalition, ``Displaced by Design: Fifty Years of
Gentrification and Black Cultural Displacement in US Cities,''
available at https://ncrc.org/displaced-by-design/#gen.
\106\ National Community Reinvestment Coalition, ``Displaced by
Design: Fifty Years of Gentrification and Black Cultural
Displacement in US Cities,'' (May 2025), available at https://ncrc.org/displaced-by-design/#gen.
\107\ HUD, ``Displacement of Lower-Income Families in Urban
Areas Report,'' (May 2018), available at https://www.huduser.gov/portal/sites/default/files/pdf/DisplacementReport.pdf; T. McKinnish,
R. Walsh, T.K. White, ``Who gentrifies low-income neighborhoods?''
J. Urban Econ., 67 (2) (2010), pp. 180-193, available at https://www.sciencedirect.com/science/article/pii/S0094119009000588?via%3Dihub; Jacob L. Vigdor, Douglas S. Massey,
Alice M. Rivlin, ``Does Gentrification Harm the Poor? [with
Comments],'' Brookings-Wharton Papers on Urban Affairs (2002), pp.
133-173 available at https://www.jstor.org/stable/25067387?seq=1;
``Gentrification and displacement: New York City in the 1990s,'' J.
Am. Plann. Assoc., 70 (1) (2004), pp. 39-52; and ``Displacement or
succession? Residential mobility in gentrifying neighborhoods,''
Urban Aff. Rev., 40 (4) (2005), pp. 463-491.
\108\ Ingrid Gould Ellen and Kathy O'Regan, ``How Low Income
Neighborhoods Change: Entry, Exit, and Enhancement,'' (June 2010),
available at https://furmancenter.org/files/publications/How_Low_Income_Neighborhoods_Change_1.pdf.
\109\ Jacob L. Vigdor, Douglas S. Massey, Alice M. Rivlin,
``Does Gentrification Harm the Poor? [with Comments],'' Brookings-
Wharton Papers on Urban Affairs, (2002), pp. 133-182, available at
https://www.jstor.org/stable/25067387?seq=1.
---------------------------------------------------------------------------
FHFA does not have evidence that the low-income areas subgoal, as
previously defined, was a major cause of gentrification across the
country. Limited housing supply and heightened affordability persist,
regardless of housing goal structure, and are some of the driving
causes of gentrification.\110\ While FHFA has a responsibility to
underserved communities and low-to moderate income borrowers, reverting
the low-income area's goal back to the structure that applied from 2010
through 2021 adequately fulfills this duty, while ensuring all credit
is acknowledged in low-income areas to best support housing supply
constraints and development needs.
---------------------------------------------------------------------------
\110\ National Community Reinvestment Coalition, ``Displaced by
Design: Fifty Years of Gentrification and Black Cultural
Displacement in US cities,'' (May 2025), available at https://ncrc.org/displaced-by-design/#gen.
---------------------------------------------------------------------------
FHFA's most recent forecast for the low-income areas subgoal
averaged 22.8 3.3 percent.\111\ FHFA is proposing to set
the benchmark level below the lower bound of the confidence interval to
balance the need for access to credit in the low-income census tracts
with the concern that a higher benchmark level could over-incentivize
the Enterprises to purchase loans for higher-income borrowers. The
2025-2027 final rule notes that around 70 percent of the loans that
qualified for the low-income census tracts segment of this subgoal were
made to borrowers at or above 100 percent of AMI.\112\
---------------------------------------------------------------------------
\111\ FHFA did not publish a forecast for this subgoal in the
2025-2027 final rule.
\112\ See 89 FR 106253 (Dec. 30, 2024).
---------------------------------------------------------------------------
Taking this into account, FHFA is proposing to set the benchmark
level for this subgoal at 16.0 percent, which is the sum of the 12.0
percent benchmark level for the minority census tracts subgoal and the
4.0 percent benchmark level for the low-income census tracts subgoal
set in the 2025-2027 final rule. This approach ensures that the
Enterprises continue to adequately serve borrowers in both segments of
the low-income areas subgoal while also addressing concerns about the
displacement of low-income families in these areas.
4. Low-Income Areas Home Purchase Goal
FHFA will continue to set a benchmark level for the overall low-
income areas home purchase goal by notice. The proposed rule will
define the low-income areas home purchase goal benchmark level as the
benchmark level for the low-income areas home purchase subgoal plus an
adjustment factor reflecting the additional incremental share of
mortgages for low- and moderate-income families in designated disaster
areas. This proposed definition is exactly equivalent to the current
low-income areas home purchase goal which is the sum of the benchmark
levels for the area-based subgoals plus an adjustment factor for the
low- and moderate-income families in designated disaster areas. FHFA
will continue to set a benchmark level for the overall low-income areas
home purchase goal that will reflect the adjustment factor for
mortgages to families with incomes less than or equal to 100 percent of
AMI who are in federally declared disaster areas.\113\ Accordingly, the
low-income areas home purchase goal benchmark level is not included in
the proposed rule. During the 2026-2028 housing goals period, FHFA will
continue its annual practice of notifying the Enterprises of the
benchmark level for the overall low-income areas home purchase goal for
each year and posting the benchmark on FHFA's website.
---------------------------------------------------------------------------
\113\ Disaster declarations are listed on the Federal Emergency
Management Agency (FEMA) website at https://www.fema.gov/disasters.
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5. Low-Income Refinance Goal
The low-income refinance goal is based on the percentage share of
all conventional, conforming, single-family, owner-occupied refinance
mortgages purchased by an Enterprise that are for low-income families,
defined as families with incomes less than or equal to 80 percent of
AMI. The proposed rule would keep the annual benchmark level for this
goal for 2026-2028 at 26.0 percent.
[GRAPHIC] [TIFF OMITTED] TP02OC25.026
[[Page 47652]]
Recent performance and forecasts. Annual performance in low-income
refinance mortgages, when measured in percentage terms, consistently
demonstrates an inverse relationship to the overall volume of refinance
loans within the market and the Enterprises' acquisitions. For
instance, during the low mortgage rate environment in 2020, a
significant refinance boom occurred, with overall low-income refinance
volume in the market exceeding 1.3 million loans.\114\ However, the
total market volume for all refinances reached over 6.3 million loans,
resulting in a low-income refinance market performance of only 21.0
percent.\115\
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\114\ FHFA's tabulation of HMDA data.
\115\ Ibid.
---------------------------------------------------------------------------
In contrast, in 2023, amidst higher mortgage rates, the overall
low-income refinance volume contracted sharply to approximately 160,000
loans, while total market refinance volume declined to about 397,000
loans.\116\ This contraction in volume corresponded to a substantially
higher low-income refinance market performance of 40.3 percent. The
Enterprises' performance on the low-income refinance goal mirrored this
pattern, with their low-income refinance percentages increasing
significantly during this later period, even as the absolute volume of
their low-income refinance mortgage purchases decreased. This trend
demonstrates the inverse relationship of low-income refinance
mortgages. It also highlights that percentage-based performance metrics
can reflect market contraction rather than increased absolute support
for low-income borrowers during periods of reduced refinance activity.
---------------------------------------------------------------------------
\116\ Ibid.
---------------------------------------------------------------------------
As shown in Table 5, both Enterprises have met this goal since
2021. The table also shows that when mortgage rates were low in 2021
and refinance volume high, both Enterprises met the benchmark but only
Fannie Mae performed higher than the actual market. However, when
mortgage rates rose in the following year and years since then,
refinance volume declined, and Enterprise performance rose and has
remained elevated.
FHFA rationale for proposed benchmark. As noted in the 2025-2027
Enterprise Housing Goals final rule, and shown in Table 5, the annual
performance in the overall market and by the Enterprises on low-income
refinance mortgages tends to be inversely proportional to the volume of
low-income refinance loans in the market.\117\ While FHFA's most recent
forecast for this goal averaged 36.3 6.9 percent, the
Agency noted in the 2025-2027 final rule that ``although mortgage rates
are expected to decline during the 2025-2027 housing goals period,
FHFA's model cannot forecast the low-income refinance market with a
high degree of confidence due to the unpredictability of future
interest rates and the strong sensitivity of refinance originations to
interest rates.'' \118\ Particularly, if interest rates were to decline
more significantly, and volume returned to the levels seen in 2021, a
benchmark level within the confidence interval could be difficult for
the Enterprises to achieve based on market conditions.
---------------------------------------------------------------------------
\117\ See ``2025-2027 Enterprise Housing Goals,'' (Final Rule),
89 FR 106253 (Dec. 30, 2024), available at https://www.federalregister.gov/documents/2024/12/30/2024-30793/2025-2027-enterprise-housing-goals.
\118\ See ``2025-2027 Enterprise Housing Goals,'' (Final Rule),
89 FR 106253, 106270 (Dec. 30, 2024), available at https://www.federalregister.gov/documents/2024/12/30/2024-30793/2025-2027-enterprise-housing-goals.
---------------------------------------------------------------------------
FHFA is proposing to maintain the benchmark level of 26.0 percent
for this goal because it believes that this level will keep the
Enterprises focused on providing liquidity to this affordable segment
in 2026-2028 under current and projected market conditions, as well as
if interest rates decline more than projected and refinance volume
materially increases. This benchmark level maintains the Enterprises'
sound financial condition and avoids market participant displacement,
while supporting low-income borrowers.
V. Measurement Buffers
The 2025-2027 final housing goal rule established measurement
buffers, numerical factors to encourage each Enterprise to focus on
achieving the housing goal by meeting the market level if the benchmark
level is higher than the market level, thereby addressing uncertainties
regarding the final market level throughout the year.\119\
Specifically, an Enterprise that failed to meet the goal would not be
required to submit a housing plan if its performance met or exceeded:
(i) the market level minus 1.3 percentage points for the low-income
home purchase goal; (ii) the market level minus 0.5 percentage points
for the very low-income home purchase goal; or (iii) the market level
minus 1.3 percentage points for the low-income refinance goal. The
final rule articulated that these measurement buffers are a fair
mechanism to encourage Enterprise achievement of these three single-
family housing goals despite market level uncertainty during the
measurement period.
---------------------------------------------------------------------------
\119\ As previously noted, the proposed rule referred to the
measurement buffers as ``Enforcement Factors.''
---------------------------------------------------------------------------
FHFA is proposing to remove the measurement buffers for the 2026-
2028 proposed rule. The Agency now believes these measurement buffers
to be duplicative and unnecessary. The flexibility previously sought
through the buffers, particularly during uncertain market periods, is
now accounted for in proposing lower benchmark levels for the low-
income and very low-income home purchase goals, and by maintaining the
low-income refinance goal at an appropriate level. This revised
approach to benchmark setting provides the necessary operational
latitude without the complexity introduced by the buffers.
Furthermore, the Agency believes that these buffers have overly
complicated calculations and imposed increased administrative burden on
both FHFA staff and the Enterprises. One of the objectives of
instituting the buffers was to enhance transparency of Enterprise
performance. However, the buffers have not achieved this objective,
instead fueling uncertainty by requiring unnecessary additional
computational steps. Consequently, FHFA believes these measurement
buffers are not effective at enhancing performance transparency.
VI. Multifamily Housing Goals and Subgoal
A. Factors Considered in Setting the Multifamily Housing Goal Benchmark
Levels
The Safety and Soundness Act requires FHFA to consider the
following six factors in setting the multifamily housing goals:
1. National multifamily mortgage credit needs and the ability of
the Enterprises to provide additional liquidity and stability for the
multifamily mortgage market;
2. The performance and effort of the Enterprises in making mortgage
credit available for multifamily housing in previous years;
[[Page 47653]]
3. The size of the multifamily mortgage market for housing
affordable to low-income and very low-income families, including the
size of the multifamily markets for housing of a smaller or limited
size;
4. The ability of the Enterprises to lead the market in making
multifamily mortgage credit available, especially for multifamily
housing affordable to low-income and very low-income families;
5. The availability of public subsidies; and
6. The need to maintain the sound financial condition of the
Enterprises.\120\
---------------------------------------------------------------------------
\120\ 12 U.S.C. 4563(a)(4).
---------------------------------------------------------------------------
Unlike the single-family housing goals, performance on the
multifamily housing goals is measured solely against benchmark levels
set by FHFA in the regulation, without any retrospective market
measure. The absence of a retrospective market measure for the
multifamily housing goals results, in part, from the lack of
comprehensive data about the multifamily mortgage market. Unlike the
single-family mortgage market, where HMDA provides a reasonably
comprehensive dataset about single-family mortgage originations each
year,\121\ the multifamily mortgage market (and the affordable
multifamily mortgage market segment) has no comparable single, unified
data source with coverage extending across many years. As a result, it
is difficult to correlate different datasets that rely on different
reporting metrics.
---------------------------------------------------------------------------
\121\ Single family market performance is determined by FHFA
through analyzing public HMDA data made available by the CFPB based
on data that mortgage originators submit to the FFIEC.
---------------------------------------------------------------------------
The lack of comprehensive data for the multifamily mortgage market
is even more acute with respect to the segments of the market that are
targeted to low-income families, defined as families with incomes at or
below 80 percent of AMI, and very low-income families, defined as
families with incomes at or below 50 percent of AMI.
Unlike the single-family housing goals, which set separate
benchmark levels for home purchase and refinance mortgages, the
multifamily housing goals include all Enterprise multifamily mortgage
purchases, regardless of the purpose of the loan.
In consideration of public comments and to improve the
responsiveness of the multifamily housing goals to market conditions,
in 2023, FHFA revised the housing goals regulation to change the
multifamily housing goals benchmark levels from a numeric benchmark
level for units to a percentage of affordable units in multifamily
properties financed by mortgages purchased by the Enterprise each year.
This ensures that the multifamily housing goals remain meaningful in
different market conditions and enables the Enterprises to respond to
those conditions while continuing to serve affordable segments.\122\
---------------------------------------------------------------------------
\122\ 12 CFR 1282.13.
---------------------------------------------------------------------------
The proposed rule would establish benchmark levels for the
multifamily low-income housing goal, the multifamily very low-income
housing goal, and the small multifamily low-income subgoal for 2026-
2028 at the same levels that are currently in effect for 2025-2027.
FHFA believes that these relatively conservative benchmark levels are
appropriate for the multifamily housing goals given market uncertainty
and a desire to avoid unintended consequences that may result if the
multifamily goals are set at unrealistic levels. In proposing the
benchmark levels for the multifamily housing goals, FHFA has considered
each of the six statutory factors identified above. Five of the factors
relate to the multifamily mortgage market and the Enterprises' role in
that market. Those factors generally have similar impacts on each of
the multifamily housing goals and have not changed significantly in the
months since FHFA established the housing goals for 2025-2027. Each of
those factors is discussed below. The past performance of the
Enterprises is discussed separately for each of the multifamily housing
goals.
Multifamily mortgage market. FHFA's consideration of the
multifamily mortgage market credit needs addresses the size and
competitiveness of the overall multifamily mortgage market. In February
2025, MBA forecasted that multifamily mortgage originations would
increase from the $312 billion estimated in 2024 to $361 billion in
2025, and then to $419 billion in 2026.\123\ MBA noted that there is an
abundance of capital ready to be deployed, though that deployment will
depend on whether interest rates decline as they did at the end of
2024.\124\
---------------------------------------------------------------------------
\123\ MBA, ``CREF Forecast: Commercial/Multifamily Borrowing and
Lending Expected to Increase 16 Percent to $583 Billion in 2025,''
(February 10, 2025), available at https://www.mba.org/news-and-research/newsroom/news/2025/02/10/cref-forecast--commercial-multifamily-borrowing-and-lending-expected-to-increase-16-percent-to--583-billion-in-2025.
\124\ Ibid.
---------------------------------------------------------------------------
Affordability in the multifamily mortgage market. FHFA's
consideration of the affordability in the multifamily mortgage market
addresses the size of the multifamily mortgage market for housing
affordable to low-income and very low-income families, including the
size of the multifamily market for housing of a smaller or limited
size. In The State of the Nation's Housing 2025 report, Harvard
University's Joint Center for Housing Studies (JCHS) found that rent
growth for multifamily apartments remained modest through early 2025,
even as rental demand increased, and vacancies declined. Asking rents
rose 0.8 percent year-over-year in the first quarter of 2025, up
slightly from 0.2 percent in 2024.\125\ Such increases represent
moderate growth compared with the same quarter in 2022 when rents rose
by 15.3 percent year-over-year. Despite the continued slowdown in rent
growth, the extended period of rising rents corresponds to the
continued stress on renters, with the share of cost-burdened renters
continuing to remain elevated.
---------------------------------------------------------------------------
\125\ Joint Center for Housing Studies of Harvard University,
``The State of the Nation's Housing 2025,'' (2025), p. 14, available
at https://www.jchs.harvard.edu/sites/default/files/reports/files/Harvard_JCHS_The_State_of_the_Nations_Housing_2025.pdf.
---------------------------------------------------------------------------
For purposes of the Enterprise housing goals, the Safety and
Soundness Act requires FHFA to evaluate housing goals performance based
on whether rent levels are affordable. The Safety and Soundness Act
defines a rent level as affordable if a family's rent and utility
expenses do not exceed 30 percent of the maximum income level for each
income category, with appropriate adjustments for unit size as measured
by the number of bedrooms.\126\ In America's Rental Housing 2024
report, JCHS found that the share of cost-burdened renters,
particularly among low-income and very low-income households, continues
to grow.\127\ A household is considered cost-burdened if it spends more
than 30 percent of its income on housing, and severely cost-burdened if
it spends more than 50 percent of its income on housing. The JCHS
report shows that the share of cost-burdened renters across all income
segments rose by 3.2 percentage points to 50 percent from 2019 to
2022.\128\ The share of cost-burdened renters earning between $45,000
and $74,999 increased the most, rising by 5.4 percentage points.\129\
---------------------------------------------------------------------------
\126\ 12 U.S.C. 4563(c).
\127\ Joint Center for Housing Studies of Harvard University,
``America's Rental Housing 2024,'' (2024), p. 2, available at
https://www.jchs.harvard.edu/sites/default/files/reports/files/Harvard_JCHS_Americas_Rental_Housing_2024.pdf.
\128\ Ibid.
\129\ Ibid.
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[[Page 47654]]
In The State of the Nation's Housing 2025 report, JCHS noted the
significant rise in new rental supply as 608,000 units were added in
2024, the highest number of completions in more than 30 years.\130\
However, the growth in new rental supply is expected to slow down as
multifamily starts fell by 25 percent in 2024, and this decline has
accelerated.\131\ The JCHS report found that new rental units are
primarily targeted towards the upper end of the market, with a median
asking rent of $1,830 in the first quarter of 2025, up 32 percent since
2019.\132\
---------------------------------------------------------------------------
\130\ Joint Center for Housing Studies of Harvard University,
``The State of the Nation's Housing 2025,'' (2024), p. 35, available
at https://www.jchs.harvard.edu/sites/default/files/reports/files/Harvard_JCHS_The_State_of_the_Nations_Housing_2025.pdf.
\131\ Ibid.
\132\ Ibid., at 14.
---------------------------------------------------------------------------
Ability of the Enterprises to lead the market. In adopting the
multifamily housing goal benchmark levels for 2026-2028 in the proposed
rule, FHFA has considered the ability of the Enterprises to lead the
market in making multifamily mortgage credit available. The
Enterprises' share of the overall multifamily mortgage market increased
in the years immediately following the 2008 financial crisis but has
declined more recently in response to growing private sector
participation. The Enterprises' share of the multifamily market was
over 70 percent in 2008 and 2009, compared to 36 percent in
2015.133 134 The total share was 40 percent or higher from
2016 to 2020. However, in 2021 and 2022, when multifamily origination
volume was relatively robust, the combined Enterprise share was
estimated to be below 30 percent before increasing to 41 percent in
2023.\135\ In 2024, the combined Enterprise share is estimated to be 39
percent.\136\
---------------------------------------------------------------------------
\133\ Urban Institute, ``The GSE's Shrinking Role in the
Multifamily Market,'' (April 2015), p. 4, available at https://www.urban.org/sites/default/files/publication/48986/2000174-The-GSEs-Shrinking-Role-in-the-Multifamily-Market.pdf.
\134\ Fannie Mae, ``Multifamily Business Information
Presentation,'' (Updated August 2025), p. 3, available at https://multifamily.fanniemae.com/media/37196/display.
\135\ Ibid.
\136\ Ibid.
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FHFA recognizes that the multifamily housing goals are just one
measure of how the Enterprises contribute to and participate in the
multifamily market. Other Enterprise multifamily activities include
those under their Duty to Serve Plans for Underserved Markets and Low-
Income Housing Tax Credit (LIHTC) equity investments.\137\ Together
with the housing goals, these programmatic activities provide support
to renter households, including low-income families spending more than
30 percent of their income on housing. FHFA will continue to monitor
these initiatives and priorities to maintain appropriate focus by the
Enterprises, including compliance with the Enterprises' charter acts
and safety and soundness considerations.
---------------------------------------------------------------------------
\137\ Since FHFA placed the Enterprises into conservatorship on
September 6, 2008, it has issued a Conservatorship Scorecard
periodically to communicate its priorities and expectations for
Fannie Mae and Freddie Mac.
---------------------------------------------------------------------------
FHFA expects the Enterprises to continue to demonstrate leadership
in supporting affordable housing in the multifamily market by providing
liquidity for housing for tenants at different income levels in various
geographies and market segments. This support should continue
throughout the economic cycle, even as the overall size of the
multifamily mortgage market fluctuates.
Availability of public subsidies. Multifamily housing assistance is
primarily available in two forms: demand-side public subsidies that
either directly assist low-income tenants (e.g., Housing Choice
vouchers) or provide project-based rental assistance (e.g., Project-
Based Vouchers and Project-Based Rental Assistance contracts), and
supply-side public subsidies that support the creation and preservation
of affordable housing (e.g., the housing trust fund and LIHTCs). The
availability of public subsidies impacts the overall affordable
multifamily housing market, and significant changes to long-standing
public subsidy programs could impact the ability of the Enterprises to
meet the housing goals. The Enterprises also provide liquidity to
facilitate the preservation of public subsidies through their purchases
of mortgages that finance the preservation of existing affordable
housing units (especially for restructurings of older properties that
reach the end of their initial 15-year LIHTC compliance periods) and
for refinancing properties with expiring Project-Based Rental
Assistance contracts.
In 2026 and beyond, there will continue to be opportunities in the
multifamily mortgage market to provide permanent financing for
properties with LIHTCs and to preserve existing affordable units, as
described above.
Maintaining the sound financial condition of the Enterprises. In
establishing the 2026-2028 benchmark levels for multifamily housing
goals in the proposed rule, FHFA must balance the role of the
Enterprises in providing liquidity and supporting various multifamily
mortgage market segments with the need to maintain the Enterprises'
sound and solvent financial condition. The Enterprises have served as a
stabilizing force in the multifamily mortgage market across economic
cycles, and their loans on affordable multifamily properties have
experienced low levels of delinquency and default that are similar to
those of market rate properties.
FHFA continues to monitor the activities of the Enterprises in this
market to ensure their continued safety and soundness.
B. Proposed Multifamily Housing Goals and Subgoal Benchmark Levels
Based on FHFA's consideration of the statutory factors described
above and the past performance of the Enterprises under the multifamily
housing goals and subgoal, the proposed rule would establish benchmark
levels for the multifamily housing goals and subgoal as further
discussed below. Before finalizing the benchmark levels for the
multifamily housing goals and subgoal in the final rule, FHFA will
review any additional data that becomes available about the
Enterprises' performance related to these goals, developments in the
multifamily mortgage market, and comments on the proposed benchmark
levels.
1. Multifamily Low-Income Housing Goal
The multifamily low-income housing goal is the percentage share of
all goal-eligible units in multifamily properties financed by mortgages
purchased by the Enterprises that are affordable to low-income families
in any given year. Low-income families are defined as those with
incomes less than or equal to 80 percent of AMI.
[[Page 47655]]
[GRAPHIC] [TIFF OMITTED] TP02OC25.015
Table 6 shows the number and share of goal-qualifying low-income
multifamily units in properties backing mortgages acquired by each
Enterprise from 2021 through 2024.\138\ In addition, the historical
performance share average for the pre-pandemic years of 2017-2019 would
have been 65.1 percent for Fannie Mae and 67.3 percent for Freddie
Mac.\139\ Starting in 2023, the benchmark metric for this goal changed
from the number of low-income units to the share of low-income units.
---------------------------------------------------------------------------
\138\ 12 CFR 1282.16 (Special Counting Requirements).
\139\ See ``2023-2024 Multifamily Enterprise Housing Goals,''
(Proposed Rule), 87 FR 50794, 50800 (Aug. 18, 2022), available at
https://www.federalregister.gov/documents/2022/08/18/2022-17868/2023-2024-multifamily-enterprise-housing-goals.
---------------------------------------------------------------------------
Ongoing shortages in the supply of affordable rental housing
continue to contribute to the growing share of cost-burdened families
in the United States.\140\ There remains a liquidity need for
Enterprise support in the multifamily affordable housing market due to
evolving market conditions. These challenges are expected to persist in
2026-2028. In light of these factors, FHFA proposes to maintain the
current benchmark level for this goal at 61.0 percent for both
Enterprises in 2026-2028. The current benchmark for this goal enables
the Enterprises to adequately support multifamily housing affordable to
families with incomes at or below 80 percent of AMI. The proposed
benchmark takes into account market dynamics and safety and soundness
considerations, without diminishing the Enterprises' focus on
affordability.
---------------------------------------------------------------------------
\140\ See Joint Center for Housing Studies of Harvard
University, ``The State of the Nation's Housing 2024,'' (June 2024),
available at https://www.jchs.harvard.edu/state-nations-housing-2024.
---------------------------------------------------------------------------
2. Multifamily Very Low-Income Housing Goal
The multifamily very low-income housing goal is the percentage
share of all goal-eligible units in multifamily properties financed by
mortgages purchased by the Enterprises that are affordable to very low-
income families in any given year. Very low-income families are defined
as those with incomes less than or equal to 50 percent of AMI.
[GRAPHIC] [TIFF OMITTED] TP02OC25.016
Table 7 shows the number and share of goal-qualifying very low-
income multifamily units as a percentage of the total goal-eligible
units in properties backing mortgages acquired by each Enterprise from
2021 through 2024. In
[[Page 47656]]
addition, the historical performance share average for the pre-pandemic
years of 2017-2019 would have been 13.1 percent for Fannie Mae and 15.6
percent for Freddie Mac.\141\ Starting in 2023, the benchmark metric
for this goal changed from the number of very low-income units to the
share of very low-income units.
---------------------------------------------------------------------------
\141\ See ``2023-2024 Multifamily Enterprose Housing Goals,''
(Proposed Rule), 87 FR 50794, 50801 (Aug. 18, 2022), available at
http://www.govinfo.gov/content/pkg/FR-2022-08-18/pdf/2022-17868.pdf.
---------------------------------------------------------------------------
In 2025, the benchmark for this goal was raised from 12.0 percent
to 14.0 percent. FHFA set this benchmark at a higher level to ensure
that the Enterprises continue to adequately serve very low-income
families. Considering the multifamily mortgage conditions described
above and the continued need for affordable rental housing support,
FHFA proposes to maintain the current benchmark level for this goal at
14.0 percent for both Enterprises in 2026-2028. The current benchmark
for this goal enable the Enterprises to adequately support multifamily
housing affordable to families with incomes at or below 50 percent of
AMI. The proposed benchmark takes into account market dynamics and
safety and soundness consideration, without diminishing the
Enterprises' focus on affordability.
3. Small Multifamily Low-Income Housing Subgoal
The current Enterprise housing goals regulation defines a small
multifamily property as having 5 to 50 units. The small multifamily
low-income housing subgoal is based on the share of units in small
multifamily properties financed by mortgages purchased by the
Enterprise in a given year.
[GRAPHIC] [TIFF OMITTED] TP02OC25.017
Table 8 shows Enterprise performance on this subgoal, including the
previous numeric benchmark levels applicable through 2022 and the
percentage-based metric that began in 2023. FHFA recognizes that the
Enterprises have different business approaches to the small multifamily
market segment, and that each Enterprise sets its own credit risk
tolerance for these products. As a result, each Enterprise has
performed very differently on this subgoal. Since 2021, Freddie Mac has
exceeded Fannie Mae in terms of percentage share of total units and
volume of low-income units in small (5-50) multifamily properties.
In 2025, FHFA lowered the benchmark for this goal from 2.5 percent
to 2.0 percent due to increased availability of private sector
financing for small multifamily properties in recent years. While FHFA
continues to observe private sector participation in this market, the
Enterprises provide an important backstop for financing small
multifamily properties affordable to low-income families. Taking these
factors and the multifamily mortgage market conditions described above
into account, FHFA proposes to maintain the current benchmark level for
this subgoal at 2.0 percent for both Enterprises for 2026-2028. The
current benchmark for this subgoal enables the Enterprises to
adequately support this market when needed without crowding out other
sources of financing for small multifamily properties.
VII. Notice of Determination of Compliance With Housing Goals
The 2025-2027 housing goals final rule made non-substantive changes
to 12 CFR 1282.20 that describe the preliminary and final
determinations of housing goals compliance issued by FHFA each
year.\142\ FHFA has reviewed its current practices and is proposing a
regulatory change to streamline the housing goals compliance process.
---------------------------------------------------------------------------
\142\ See 12 CFR part 1282, adopted at ``2025-2027 Enterprise
Housing Goals,'' (Final Rule), 89 FR 106253, 106275 (Dec. 30, 2024)
available at https://www.federalregister.gov/documents/2024/12/30/2024-30793/2025-2027-enterprise-housing-goals.
---------------------------------------------------------------------------
This proposed rule seeks to simplify FHFA's process by eliminating
a requirement for preliminary determination letters when an Enterprise
has met its goals. As revised, the rule would require only a single
determination letter if FHFA determines that an Enterprise has met all
housing goals, and FHFA will provide the Enterprise with an opportunity
to comment on such determination during the 30-day period beginning
upon receipt by the Enterprise. FHFA finds it unnecessary for the
regulation to require two separate but substantially similar
determination letters that provide notice to the Enterprise that it has
met its housing goals obligations. Historically, the preliminary
determination letters have provided an opportunity for the Enterprises
to provide supplemental information for FHFA to consider when
[[Page 47657]]
determining compliance, feasibility, and whether a housing plan is
appropriate and necessary if an Enterprise fails to meet a housing goal
or subgoal.
If an Enterprise has met the housing goals, it is not necessary for
the Enterprise to provide additional information in order for FHFA to
reach a determination. Whether an Enterprise has met a goal depends on
whether its performance meets or exceeds the lower of the benchmark
level and the market level, not on the degree by which an Enterprise's
performance exceeds those levels. Preliminary determination letters
that confirm an Enterprise is meeting a goal are an inefficient use of
staff resources.
However, to comply with statutory requirements and ensure the
Enterprises have an opportunity to provide information to the Director
on their compliance and the feasibility of compliance, this proposed
rule continues to require preliminary determination letters if an
Enterprise has failed, or there is a substantial probability that an
Enterprise will fail, to meet any housing goal or subgoal. In sum, the
proposed rule would simplify existing procedures and ensure adequate
transparency.
VIII. Required Adjustments To Maximum Civil Money Penalty Amounts
The Adjustment Improvements Act amended the Federal Civil Penalties
Inflation Adjustment Act of 1990 by establishing a mechanism for
regular adjustment for inflation of civil money penalties. To maintain
their deterrent effect, this law requires FHFA to adjust the level of
civil monetary penalties for inflation (including an initial catch-up
adjustment and annual adjustments thereafter). The law also requires
FHFA to report inflation adjustments annually in its Agency Financial
Report as directed by OMB Circular A-136.
FHFA complies with the requirement by publishing a final rule each
year to adjust the amount of the civil money penalties in FHFA's Rules
of Practice and Procedure (12 CFR part 1209); FHFA's Flood Insurance
regulation (12 CFR part 1250); and FHFA's Implementation of the Program
Fraud Civil Remedies Act regulation (12 CFR part 1217). FHFA published
its most recent final rule to make the required adjustments on January
16, 2025.\143\
---------------------------------------------------------------------------
\143\ See ``Rules of Practice and Procedure; Civil Money Penalty
Inflation Adjustment,'' (Final Rule), 90 FR 4607 (Jan. 16, 2025),
available at https://www.federalregister.gov/documents/2025/01/16/2025-00775/rules-of-practice-and-procedure-civil-money-penalty-inflation-adjustment.
---------------------------------------------------------------------------
This proposed rule would make explicit that the required inflation
adjustments apply to civil money penalties described in section 1345 of
the Safety and Soundness Act (12 U.S.C. 4585), including penalties
applicable to the Enterprise and Federal Home Loan Bank housing goals.
A. Statutory Civil Money Penalties Related to Enterprise and Federal
Home Loan Bank Housing Goals
The Safety and Soundness Act authorizes FHFA to seek civil money
penalties to enforce several requirements related to the Enterprise and
Bank housing goals. Civil money penalties and other remedies related to
housing goals enforcement are subject to statutory procedural
requirements in sections 1341 through 1348 of the Safety and Soundness
Act (12 U.S.C. 4581-4588) (other remedies authorized by the Safety and
Soundness Act are not discussed in this preamble because they are not
relevant to inflation adjustment requirements). The civil money penalty
amount for violations related to housing goals is determined by the
Director after consideration of several statutory factors in section
1345(c)(2) (12 U.S.C. 4585(c)(2)). For most potential violations, the
amount may not exceed $50,000 for each day that the failure occurs.
Enterprise compliance with the housing goals is enforced under
section 1336 of the Safety and Soundness Act (12 U.S.C. 4566). Under
this provision, if an Enterprise fails to meet a housing goal, or has a
substantial probability of failing to meet a goal, and FHFA determines
that meeting the goal was or is feasible, the Director may, in his or
her discretion, require the Enterprise to submit a housing plan
describing the specific actions the Enterprise will take to achieve the
goal. Section 1336 further provides that if an Enterprise fails to
submit an acceptable housing plan or fails to comply with the plan, the
Director may impose civil money penalties against the Enterprise in
accordance with section 1345 (12 U.S.C. 4585) of the Safety and
Soundness Act. In addition, section 1345(a)(2) provides that the
Director may impose civil money penalties if an Enterprise fails to
report information on its housing activities to FHFA or Congress as
required by subsection (m) or (n) of section 309 of the Federal
National Mortgage Association Charter Act (12 U.S.C. 1723a(m) or (n))
or subsection (e) or (f) of section 307 of the Federal Home Loan
Mortgage Corporation Act (12 U.S.C. 1456(e) or (f)).
The Banks are subject to housing goals requirements pursuant to
section 10C(a) of the Federal Home Loan Bank Act (Bank Act), as amended
by section 1205 of HERA (12 U.S.C. 1430c(a)). This provision requires
the Director of FHFA to establish housing goals with respect to the
purchase of mortgages, if any, by the Banks. Section 10C(d) of the Bank
Act provides that the monitoring and enforcement requirements of
section 1336 of the Safety and Soundness Act shall apply to the Banks
in the same manner and to the same extent as they apply to the
Enterprises. Thus, in accordance with section 1336, FHFA's Bank housing
goals regulation includes housing plan provisions similar to those in
FHFA's Enterprise housing goals regulation. If a Bank fails to submit
or follow an acceptable housing plan, the Director may impose civil
money penalties against the Bank.
B. Other Civil Money Penalties in Section 1345
Section 1345(b)(1) of the Safety and Soundness Act (12 U.S.C.
4585(b)(1)) authorizes the Director to impose civil money penalties of
up to $100,000 for each day of occurrence ``for any failure described
in paragraph (1), (5), or (6)'' of section 1345(a). The cross
references to paragraphs (1), (5), and (6) are not clear. Section
1345(a) does not include a paragraph (5) or (6). Section 1345(a)(1)
describes a failure to ``submit a report under section 1327 [of the
Safety and Soundness Act] following a notice of such failure, an
opportunity for comment by the enterprise, and a final determination by
the Director.'' At the same time HERA added the current section 1345,
it removed general reporting requirements in section 1327 and amended
section 1314 of the Safety and Soundness Act to authorize the Director
to issue general and specific reporting orders and penalties for
violating those reporting orders.\144\ Congress subsequently added a
new section 1327 related to Enterprise guarantee fee requirements that
provides for reporting by each Enterprise as part of its annual report
submitted to Congress.\145\
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\144\ HERA, Public Law 110-289, title I, subtitle A, sec.
1104(b), 122 Stat. 2667; 12 U.S.C. 4514, available at https://www.congress.gov/110/plaws/publ289/PLAW-110publ289.pdf.
\145\ Temporary Payroll Tax Cut Continuation Act of 2011, Public
Law 112-78, title IV, sec. 401, 125 Stat. 1287 (12 U.S.C. 4547(d)),
(Dec. 23, 2011), available at https://www.govinfo.gov/content/pkg/PLAW-112publ78/pdf/PLAW-112publ78.pdf.
---------------------------------------------------------------------------
Regardless of whether Congress intended the civil money penalties
provision in section 1345(b)(1) to apply to violations of reporting
requirements under current section 1327, the statutory provision is
subject to the
[[Page 47658]]
Adjustment Improvements Act requirements. Therefore, FHFA proposes to
make explicit the mandatory inflation adjustments required by law.
C. Making Explicit Required Inflation Adjustments to Civil Money
Penalties Authorized by Section 1345
FHFA's Rules of Practice and Procedure regulation in part 1209 sets
forth procedures for any violation, practice, or breach addressed under
sections 1371, 1372, or 1376 of the Safety and Soundness Act (12 U.S.C.
4631, 4632, 4636).
In 2013, FHFA published a final rule, ``Rules of Practice and
Procedure: Enterprise and Federal Home Loan Bank Housing Goals Related
Enforcement Amendment.'' \146\ Section 1209.1(c)(4) of FHFA's Rules of
Practice and Procedure, as amended by this 2013 final rule, provides
that the rules of practice and procedure for hearings on the record in
subpart C of part 1209 apply to any civil money penalty proceedings
related to the housing goals, except where such rules are inconsistent
with section 1345 of the Safety and Soundness Act (12 U.S.C. 4585), in
which case the statutory provisions related to the housing goals
apply.\147\
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\146\ ``Rules of Practice and Procedure: Enterprise and Federal
Home Loan Bank Housing Goals Related Enforcement Amendment,'' (Final
Rule), 78 FR 37101 (June 20, 2013), available at https://www.federalregister.gov/documents/2013/06/20/2013-14676/rules-of-practice-and-procedure-enterprise-and-federal-home-loan-bank-housing-goals-related.
\147\ 12 CFR 1209.1(c)(4).
---------------------------------------------------------------------------
Section 1209.80 states explicitly the maximum penalty amounts that
apply for civil money penalty proceedings under section 1376 of the
Safety and Soundness Act (12 U.S.C. 4636). However, the section does
not state explicitly the corresponding maximum penalty amounts for
civil money penalty proceedings under section 1345 (12 U.S.C. 4585).
Similarly, FHFA's annual final rules for adjusting civil money
penalties for inflation in 12 CFR part 1209 do not explicitly reference
the civil money penalties described in section 1345 of the Safety and
Soundness Act. In a recent review of its regulations, FHFA determined
that 12 CFR part 1209 should be revised to explicitly state the maximum
civil money penalty amounts for violations related to housing goals
that reflect the catch-up adjustment and annual adjustments required by
the Adjustment Improvements Act. It is also prudent to amend the Bank
Housing Goals regulation in 12 CFR part 1281 and the Enterprise Housing
Goals regulation in 12 CFR part 1282 to cross reference the procedural
requirements for housing goals enforcement in 12 CFR part 1209.
The proposed rule describes increases in maximum penalty amounts
that would not dictate the amount of any penalty that FHFA may seek
under section 1345. FHFA would calculate penalty amounts on a case-by-
case basis based on its consideration of the statutory factors
described in section 1345(c)(2). FHFA's final rules implementing
Adjustment Improvements Act revisions of the maximum civil money
penalty amounts that FHFA may assess in accordance with section 1376
have applied those required adjustments prospectively from the date of
the final rule.\148\ FHFA similarly proposes to apply the inflation
adjusted maximum penalties prospectively to penalties sought after the
effective date of a final rule implementing this proposed change.
Prospective application is consistent with policy goals of fairness and
transparency, since this is the first time that 12 CFR part 1209 would
explicitly state the maximum civil money penalty amounts for section
1345.
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\148\ See, e.g., ``Rules of Practice and Procedure; Civil Money
Penalty Inflation Adjustment,'' (Final Rule), 90 FR 4607 (Jan. 16,
2025), available at https://www.federalregister.gov/documents/2025/01/16/2025-00775/rules-of-practice-and-procedure-civil-money-penalty-inflation-adjustment.
---------------------------------------------------------------------------
The Adjustment Improvements Act provides that the mandatory initial
catch-up adjustment must be implemented by an interim final rule. The
changes described in this proposed rule are consistent with the
statutory directive set forth in the Adjustment Improvements Act. As a
result, FHFA could implement these changes by interim final rule as
there are no issues of policy discretion about which to seek public
comment. However, FHFA is proposing the amendments in a notice and
comment rulemaking in this case because it is administratively
expedient to include the changes in this proposed rule on related
topics.
D. Calculation of Inflation Adjustments
To calculate inflation adjustments, FHFA follows the requirements
of the Adjustment Improvements Act \149\ and guidance provided by the
Office of Management and Budget (OMB). OMB issued guidance on the
catch-up adjustment in Memorandum M-16-06, Implementation of the
Federal Civil Penalties Inflation Adjustment Act Improvements Act of
2015, published February 24, 2016. OMB subsequently issued guidance on
the 2017-2025 annual inflation adjustments in Memorandums M-17-11, M-
18-03, M-19-04, M-20-05, M-21-10, M-22-07, M-23-05, M-24-07, and M-25-
02. OMB's guidance establishes multipliers used to calculate required
adjustments.
---------------------------------------------------------------------------
\149\ See 28 U.S.C. 2461 note, sec. 4(a), 5(b)(2).
---------------------------------------------------------------------------
The Adjustment Improvements Act provides that the initial catch-up
adjustment will be based on the percent change between the Consumer
Price Index for all Urban Consumers (CPI-U) for October 2015 and the
CPI-U for the month of October in the year that the civil money penalty
was established or adjusted under a provision of law other than the
Inflation Adjustment Act. Previous inflation adjustments made under the
Inflation Adjustment Act prior to the Adjustment Improvements Act are
not considered in making the catch-up adjustment.
HERA amended section 1345 of the Safety and Soundness Act in
calendar year 2008. Because FHFA has not published explicitly adjusted
maximum civil money penalty amounts for section 1345 since it was
amended, this proposed rule treats 2008 as the year that the maximum
civil money penalty amounts were last set.
OMB established a multiplier of 1.09819 for catch-up adjustments to
civil money penalties last set in 2008. For each maximum civil money
penalty calculation, FHFA determined the catch-up adjusted maximum
penalty amount by calculating the product of the inflation multiplier
and the previous maximum penalty amount, and then rounded the product
to the nearest whole dollar as required by the Adjustment Improvements
Act.
The table below sets out the initial catch-up adjustments through
2016 accordingly.
[[Page 47659]]
Initial Catch-Up Adjustments Required by the Adjustment Improvements Act
----------------------------------------------------------------------------------------------------------------
Rounded catch-up Catch-up adjusted
U.S. Code citation Description Previous maximum inflation maximum penalty
penalty amount increase amount
----------------------------------------------------------------------------------------------------------------
12 U.S.C. 4585(b)(1)........... Maximum penalty for $100,000 $9,819 $109,819
failure described in
1345(a)(1), for each
day that the failure
occurs.
12 U.S.C. 4585(b)(2)........... Maximum penalty for 50,000 4,910 54,910
failure described in
1345(a)(2), (3), or
(4), for each day
that the failure
occurs.
----------------------------------------------------------------------------------------------------------------
The Adjustment Improvements Act directs federal agencies to
calculate each annual civil money penalty adjustment as the percent
change between the CPI-U for the previous October and the CPI-U for
October of the calendar year before.\150\ Each year, OMB establishes a
multiplier that agencies can use to calculate the annual inflation
adjustment. The table below shows the maximum civil money penalty
amounts annually adjusted for each year from 2017 to 2025. The annual
adjustments were calculated using inflation multipliers identified in
OMB guidance based on the percent change between the CPI-U for the
previous October and the CPI-U for October of the calendar year before.
For each maximum civil money penalty calculation, FHFA determined the
annual adjusted maximum penalty amount by calculating the product of
the inflation multiplier and the previous maximum penalty amount, and
then rounded the product to the nearest whole dollar as required by the
Adjustment Improvements Act.
---------------------------------------------------------------------------
\150\ 28 U.S.C. 2461 note.
---------------------------------------------------------------------------
Although the table below shows the maximum penalty amount in each
year that the Adjustment Improvements Act required an adjustment, FHFA
proposes to apply adjusted civil money penalty amounts prospectively
from the effective date of a final rule. In the final rule, FHFA may
include annual adjustments for 2026 when OMB issues guidance on the
inflation multiplier to calculate the applicable adjustment required by
January 15, 2026.
----------------------------------------------------------------------------------------------------------------
Previous Rounded Adjusted
Year and OMB maximum catch-up maximum
U.S. Code citation Description inflation penalty inflation penalty
multiplier amount increase amount
----------------------------------------------------------------------------------------------------------------
12 U.S.C. 4585(b)(1).............. Maximum penalty for 2017; 1.01636 $109,819 $1,797 $111,616
failure described 2018; 1.02041 111,616 2,278 113,894
in 1345(a)(1), for
each day that the
failure occurs.
2019; 1.02522 113,894 2,872 116,766
2020; 1.01764 116,766 2,060 118,826
2021; 1.01182 118,826 1,405 120,231
2022; 1.06222 120,231 7,481 127,712
2023; 1.07745 127,712 10,431 137,603
2024; 1.03241 137,603 4,460 142,063
2025; 1.02598 142,063 3,691 145,754
12 U.S.C. 4585(b)(2).............. Maximum penalty for 2017; 1.01636 $54,910 898 55,808
failure described 2018; 1.02041 55,808 1,139 56,947
in 1345(a)(2), (3), 2019; 1.02522 56,947 1,436 58,383
or (4), for each
day that the
failure occurs.
2020; 1.01764 58,383 1,030 59,413
2021; 1.01182 59,413 702 60,115
2022; 1.06222 60,115 3,740 63,855
2023; 1.07745 63,855 4,946 68,801
2024; 1.03241 68,801 2,230 71,031
2025; 1.02598 71,031 1,845 72,876
----------------------------------------------------------------------------------------------------------------
IX. Technical Changes
A. Consistent Housing Goal and Subgoal Terminology
The current regulation refers to the single-family housing goals in
12 CFR 1282.12 as the ``low-income families housing goal,'' ``very low-
income families housing goal,'' ``low-income areas housing goal,''
``low-income census tracts housing subgoal,'' ``minority census tracts
housing subgoal,'' and ``refinancing housing goal.''
To distinguish the goals related to home purchase mortgages from
the goal related to refinance mortgages, FHFA often uses the terms
``low-income home purchase goal'' and ``very low-income home purchase
goal'' to refer to the low-income families housing goal and the very
low-income families housing goal, respectively, described in 12 CFR
1282.12(c) and (d). Similarly, FHFA uses the term ``low-income areas
home purchase goal'' to refer to the low-income areas housing goal
described in 12 CFR 1282.12(e). FHFA typically refers to the
refinancing housing goal in 12 CFR 1282.12(h) as the ``low-income
refinance goal.''
This rule proposes to revise the current regulation to incorporate
the terminology that it commonly uses for the single-family housing
goals. This change will promote the consistent use of terms and
eliminate potential confusion by allowing the public and regulated
entities to trace housing goals references to regulatory requirements.
B. Public Notice of Low-Income Areas Home Purchase Goal
Section 1282.12(e) of the Enterprise Housing Goals regulation
currently provides that FHFA will set a low-income areas home purchase
goal annually ``by FHFA notice,'' but does not specify the form of
notice. Consistent with other notices provided for within the
Enterprise Housing Goals
[[Page 47660]]
regulation, FHFA's practice has been to provide this notice to the
public on FHFA's website and to the Enterprises. FHFA is clarifying
that this notice will be made available on its website.
X. Considerations of Differences Between the Banks and the Enterprises
When promulgating regulations relating to the Banks, section
1313(f) of the Safety and Soundness Act requires the Director of FHFA
to consider the differences between the Banks and the Enterprises with
respect to the Banks' cooperative ownership structure; mission of
providing liquidity to members; affordable housing and community
development mission; capital structure; and joint and several
liability. FHFA, in preparing this proposed rule, considered the
differences between the Banks and the Enterprises as they relate to the
above factors. FHFA also considered these differences in light of
section 10C of the Bank Act, which requires that the Bank housing goals
be consistent with the Enterprise housing goals, with consideration of
the unique mission and ownership structure of the Banks. The public may
comment on whether these differences should result in any revisions to
the proposed amendments to 12 CFR parts 1209 and 1281 that relate to
the civil money penalties that the Director may impose against a Bank
that fails to submit or follow an acceptable housing plan.
XI. Regulatory Impact
A. Paperwork Reduction Act
The proposed rule would not contain any information collection
requirement that would require the approval of the OMB under the
Paperwork Reduction Act (44 U.S.C. 3501 et seq.). Therefore, FHFA has
not submitted the proposed rule to OMB for review for purposes of the
Paperwork Reduction Act.
B. Regulatory Flexibility Act
The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) requires that
a regulation that has a significant economic impact on a substantial
number of small entities, small businesses, or small organizations must
include an initial regulatory flexibility analysis describing the
regulation's impact on small entities. Such an analysis need not be
undertaken if the agency has certified that the regulation will not
have a significant economic impact on a substantial number of small
entities. 5 U.S.C. 605(b). FHFA has considered the impact of the
proposed rule under the Regulatory Flexibility Act. FHFA certifies that
the proposed rule, if adopted as a final rule, will not have a
significant economic impact on a substantial number of small entities
because the rule applies to Fannie Mae, Freddie Mac, and the Federal
Home Loan Banks, which are not small entities for purposes of the
Regulatory Flexibility Act.
C. Executive Order 12866, Regulatory Planning and Review
Executive Order 12866 requires agencies to submit ``significant
regulatory actions'' to the Office of Management and Budget, Office of
Information and Regulatory Affairs (OIRA) for review. OIRA has
determined the proposed rule to be a significant regulatory action
under section 3(f) of Executive Order 12866, and economically
significant under section 3(f)(1) of Executive Order 12866. FHFA
submitted a regulatory impact analysis to OIRA, which reviews the
potential costs and benefits of this proposed rule. The analysis is
available on FHFA's rulemaking website https://www.fhfa.gov/regulation/rulemaking and is part of the docket file for this proposed rule.
D. Executive Order 13563: Improving Regulation and Regulatory Review
Executive Order 13563 directs agencies to analyze regulations that
are ``outmoded, ineffective, insufficient, or excessively burdensome,
and to modify, streamline, expand, or repeal them in accordance with
what has been learned.'' Executive Order 13563 also directs that, where
relevant, feasible, and consistent with regulatory objectives, and to
the extent permitted by law, agencies are to identify and consider
regulatory approaches that reduce burdens and maintain flexibility and
freedom of choice for the public. FHFA has developed this proposed rule
in a manner consistent with these requirements.
E. Executive Order 14192: Unleashing Prosperity Through Deregulation
Executive Order 14192 requires that for each new regulation issued,
at least 10 existing regulations be identified for elimination.
Executive Order 14192 also directs that any new incremental costs
associated with new regulations shall, to the extent permitted by law,
be offset by the elimination of existing costs associated with at least
10 prior regulations. FHFA's implementation of these requirements will
be informed by M-25-20, Guidance Implementing Section 3 of Executive
Order 14192, Titled ``Unleashing Prosperity Through Deregulation''
(March 26, 2025). This proposed rule is expected to be an Executive
Order 14192 deregulatory action given the associated cost savings.
XII. Providing Accountability Through Transparency Act of 2023
The Providing Accountability Through Transparency Act of 2023 (5
U.S.C. 553(b)(4)) requires that a notice of proposed rulemaking include
the internet address of a summary of not more than 100 words in length
of a proposed rule, in plain language, that shall be posted on the
internet website under section 206(d) of the E-Government Act of 2002
(44 U.S.C. 3501 note) (commonly known as Regulations.gov). FHFA's
proposed rule and the required summary can be found at https://www.regulations.gov.
XIII. Severability
The proposed rule would make explicit FHFA's intent that all
provisions of the Enterprise housing goals regulation be severable by
adding a severability clause, as new 12 CFR 1282.11(c). The regulation
contains many thematically related but ultimately independent
regulatory requirements, each of which can function independently. For
example, FHFA establishes each goal and subgoal independently from one
another, utilizing separate formulas and consideration of differing
statutory factors. If one goal or subgoal is found to be invalid or
unenforceable for any reason, it is FHFA's intention that the remaining
goals continue in effect. Adding a severability clause to the
regulation would ensure that each of the distinct policy objectives in
the regulation would be realized to the greatest extent possible.
List of Subjects
12 CFR Part 1209
Administrative practice and procedure, Penalties.
12 CFR Part 1281
Credit, Federal home loan banks, Housing, Mortgages, Reporting and
recordkeeping requirements.
12 CFR Part 1282
Mortgages, Reporting and recordkeeping requirements.
Accordingly, for the reasons stated in the preamble, under the
authority of 12 U.S.C. 4526, FHFA proposes to amend parts 1209, 1281,
and 1282 of title 12 of the Code of Federal Regulations, as follows:
[[Page 47661]]
SUBCHAPTER A--ORGANIZATION AND OPERATIONS
PART 1209--RULES OF PRACTICE AND PROCEDURE
0
1. The authority citation for part 1209 continues to read as follows:
Authority: 5 U.S.C. 554, 556, 557, and 701 et seq.; 12 U.S.C.
1430c(d); 12 U.S.C. 4501, 4502, 4503, 4511, 4513, 4513b, 4517, 4526,
4566(c)(1) and (c)(7), 4581-4588, 4631-4641; and 28 U.S.C. 2461
note.
0
2. Revise Sec. 1209.1(c)(4) to read as follows:
Sec. 1209.1 Scope.
* * * * *
(c) * * *
(4) Enforcement proceedings under sections 1341 through 1348 of the
Safety and Soundness Act, as amended (12 U.S.C. 4581 through 4588), and
section 10C of the Federal Home Loan Bank Act, as amended (12 U.S.C.
1430c), except where the Rules of Practice and Procedure in subpart C
are inconsistent with such statutory provisions or with part 1281 or
1282 of this title, in which case the statutory or regulatory
provisions shall apply.
0
3. Revise Sec. 1209.80 to read as follows:
Sec. 1209.80 Inflation adjustments.
The maximum amount of each civil money penalty within FHFA's
jurisdiction, as set by the Safety and Soundness Act and thereafter
adjusted in accordance with the Inflation Adjustment Act, is as
follows:
Table 1 To Sec. 1209.80
----------------------------------------------------------------------------------------------------------------
Catch-up adjusted
U.S. Code citation Description maximum penalty
amount
----------------------------------------------------------------------------------------------------------------
12 U.S.C. 4636(b)(1)......................... First Tier.................................... $14,575
12 U.S.C. 4636(b)(2)......................... Second Tier................................... 72,876
12 U.S.C. 4636(b)(4)......................... Third Tier (Regulated Entity or Entity- 2,915,057
Affiliated party).
12 U.S.C. 4585(b)(1)......................... Maximum penalty for failure described in 145,754
section 1345(a)(1), for each day that the
failure occurs.
12 U.S.C. 4585(b)(2)......................... Maximum penalty for failure described in 72,876
section 1345(a)(2), (3), or (4), for each day
that the failure occurs.
----------------------------------------------------------------------------------------------------------------
0
4. Revise Sec. 1209.81 to read as follows:
Sec. 1209.81 Applicability.
(a) Applicability to penalties under 12 U.S.C. 4636. The inflation
adjustments set out in Sec. 1209.80 for 12 U.S.C. 4636 shall apply to
civil money penalties assessed in accordance with the provisions of the
Safety and Soundness Act, 12 U.S.C. 4636, and subparts B and C of this
part, for violations occurring on or after January 15, 2025. (b)
Applicability to penalties under 12 U.S.C. 4585. The inflation
adjustments set out in Sec. 1209.80 for 12 U.S.C. 4585 shall apply to
civil money penalties assessed under the provisions of the Safety and
Soundness Act, 12 U.S.C. 4585 and subpart C of this part. The inflation
adjusted maximum civil money penalty amounts shall apply to violations
occurring on or after the effective date of this section.
SUBCHAPTER E--HOUSING GOALS AND MISSION
PART 1281--FEDERAL HOME LOAN BANK HOUSING GOALS
0
5. The authority citation for part 1281 continues to read as follows:
Authority: 12 U.S.C. 1430, 1430b, 1430c, 1431.
Sec. 1281.15 [Amended]
0
6. In Sec. 1281.15(f), add the phrase ``and applicable provisions in
part 1209 of this title'' after ``in 12 U.S.C. 4581 through 4588'' in
the last sentence.
PART 1282--ENTERPRISE HOUSING GOALS AND MISSION
0
7. The authority citation for part 1282 continues to read as follows:
Authority: 12 U.S.C. 4501, 4502, 4511, 4513, 4526, 4561-4566.
0
8. Amend Sec. 1282.11 by:
0
a. Revising paragraph (a)(1); and
0
b. Adding paragraph (c).
The revision and addition read as follows:
Sec. 1282.11 General.
(a) * * *
(1) Three single-family owner-occupied purchase money mortgage
housing goals, a single-family owner-occupied purchase money mortgage
housing subgoal, a single-family refinancing mortgage housing goal, two
multifamily housing goals, and a multifamily housing subgoal;
* * * * *
(c) Severability. FHFA intends the various provisions of this part
to be separate and severable from one another. If any provision of this
part, or any application of a provision, is stayed or determined to be
invalid or unenforceable, the remaining provisions or applications will
continue in effect.
0
9. Amend Sec. 1282.12 by:
0
a. Revising the heading to paragraphs (c), (d), and (e);
0
b. Revising paragraphs (c)(2), (d)(2), and (e)(2);
0
c. Removing paragraph (g);
0
e. Redesignating paragraph (h) as paragraph (g);
0
f. Revising paragraph (f); and
0
g. In newly redesignated paragraph (g), revising the heading and
paragraph (g)(2). The revisions read as follows:
Sec. 1282.12 Single-family housing goals.
* * * * *
(c) Low-income home purchase goal. * * *
(2) The benchmark level, which for 2026, 2027, and 2028 shall be 21
percent of the total number of purchase money mortgages purchased by
that Enterprise in each year that finance owner-occupied single-family
properties.
(d) Very low-income home purchase goal. * * *
(2) The benchmark level, which for 2026, 2027, and 2028 shall be
3.5 percent of the total number of purchase money mortgages purchased
by that Enterprise in each year that finance owner-occupied single-
family properties.
(e) Low-income areas home purchase goal. * * *
(2) A benchmark level which shall be set annually by FHFA by notice
based on the benchmark level for the low-income areas home purchase
subgoal, plus an adjustment factor reflecting the additional
incremental share of mortgages for moderate-income families in
designated disaster areas in the most recent year for which such data
is available. FHFA will make the notice available on FHFA's website,
www.fhfa.gov.
(f) Low-income areas home purchase subgoal. The percentage share of
each
[[Page 47662]]
Enterprise's total purchases of purchase money mortgages on owner-
occupied single-family housing that consists of mortgages for families
in low-income census tracts or for moderate-income families in minority
census tracts shall meet or exceed either:
(1) The share of such mortgages in the market as defined in
paragraph (b) of this section in each year; or
(2) The benchmark level, which for 2026, 2027, and 2028 shall be 16
percent of the total number of purchase money mortgages purchased by
that Enterprise in each year that finance owner-occupied single-family
properties.
(g) Low-income refinance goal. * * *
(2) The benchmark level, which for 2026, 2027, and 2028 shall be 26
percent of the total number of refinancing mortgages purchased by that
Enterprise in each year that finance owner-occupied single-family
properties.
* * * * *
Sec. 1282.13 [Amended]
0
10. In Sec. 1282.13(b), (c), and (d), remove the phrase ``for 2025,
2026, and 2027'' and add in its place the phrase ``for 2026, 2027, and
2028''.
Sec. 1282.15 [Amended]
0
11. In Sec. 1282.15(b)(2), remove the word ``subgoals'' and add in its
place the word ``subgoal''.
0
12. Revise Sec. 1282.20 to read as follows:
Sec. 1282.20 Preliminary determination of compliance with housing
goals; notice of preliminary determination.
(a) Preliminary determination. On an annual basis, the Director
will evaluate each Enterprise's performance under each single-family
housing goal and subgoal and each multifamily housing goal and subgoal.
(b) Notice of preliminary determination. If the Director
preliminarily determines that an Enterprise has failed, or that there
is a substantial probability that an Enterprise will fail, to meet any
housing goal or subgoal, the Director will provide written notice to
the Enterprise of the preliminary determination of its performance
under each housing goal and subgoal established by this subpart, before
public disclosure of the preliminary determination. The written notice
will include the reasons for such determination, and the information on
which the Director based the determination.
(c) Response by Enterprise. Any notification to an Enterprise of a
preliminary determination under this section will provide the
Enterprise with an opportunity to respond in writing in accordance with
the procedures at 12 U.S.C. 4566(b)(1) and (2). Relevant information in
a timely written response from an Enterprise will be included in the
information the Director considers when making a determination of
housing goals compliance under Sec. 1282.21.
0
13. Revise Sec. 1282.21 to read as follows:
Sec. 1282.21 Determination of compliance with housing goals, notice
of determination.
(a) Determination. On an annual basis, the Director will make a
final determination of each Enterprise's performance under each single-
family housing goal and subgoal and each multifamily housing goal and
subgoal. The determination will address whether an Enterprise has
failed, or there is a substantial probability that an Enterprise will
fail, to meet any housing goal or subgoal and whether the achievement
of that housing goal or subgoal was or is feasible.
(b) Notice of determination. The Director will provide each
Enterprise with written notification of the determination in accordance
with the procedures at 12 U.S.C. 4562(f) and 12 U.S.C. 4566(b)(3). If
the Enterprise has met each of the housing goals and subgoals, the
notification will provide the Enterprise with an opportunity to comment
on the determination during the 30-day period beginning upon receipt of
the notification by the Enterprise. If the Enterprise has failed, or
there is a substantial probability that an Enterprise will fail, to
meet any housing goal or subgoal that FHFA determines was or is
feasible, the notification will specify whether the Enterprise is
required to submit a housing plan for approval under Sec. 1282.22.
Sec. 1282.22 [Amended]
0
14. Amend Sec. 1282.22 by:
0
a. Removing paragraph (b);
0
b. Redesignating paragraphs (c), (d), (e), (f), (g) as paragraphs (b),
(c), (d), (e), (f); and
0
c. Revising newly redesignated paragraph (f) to add the phrase ``and
applicable provisions in part 1209 of this title,'' after ``12 U.S.C.
4585,''.
* * * * *
Clinton Jones,
General Counsel, Federal Housing Finance Agency.
[FR Doc. 2025-19428 Filed 10-1-25; 8:45 am]
BILLING CODE 8070-01-P