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FHFA Proposes Affordable Housing Goals for Fannie, Freddie

The Federal Housing Finance Agency (FHFA) proposed housing goals​ for Fannie Mae and Freddie Mac to promote equitable access to affordable housing that reaches low- and moderate-income families, minority communities, rural areas and other underserved populations over the next three years.

FHFA is proposing two new single-family home purchase subgoals to replace the existing low-income areas subgoal. One new subgoal targets minority communities. The second continues to target low-income neighborhoods.

The new minority census tract subgoal is designed to improve access to fair and sustainable mortgage financing in communities of color. A mortgage qualifies under the new subgoal if:

  • the borrower has an income at or below area median income (AMI); and
  • the property is in a census tract where the median income is below AMI and minorities make up at least 30 percent of the population.

“The new subgoal for minority census tracts was designed to help preserve and support affordable housing in communities of color. The subgoal benefits families at or below area median income, allowing them to stay in the communities they helped build," said FHFA Acting Director Sandra Thompson.

Single family goals 
Multifamily goals

During the mortgage market bubble, the government sponsored enterprises’ (GSEs) share of the market dropped to about 43 percent in 2005. That share rose to about 65 percent in 2012, but declined to about 55 percent in 2015. This share remained relatively stable until 2019, then jumped to 66 percent in 2020, as the GSEs continued to acquire mortgages even as other private market participants stepped back.

Over the same time period, the total government share of the mortgage market (including the Federal Housing Administration, Department of Veterans Affairs, and Rural Housing Service) has generally expanded. In 2015, the total government share accounted for about 30 percent of  overall mortgage originations, considerably up from about 5 percent a decade earlier. That share was relatively stable until 2019, then declined to 22 percent in 2020.

Conforming mortgage market

There are many factors that impact the affordable housing market. Changes to any one of them could significantly impact the ability of the GSEs to meet their goals. In developing the market models, FHFA used Moody’s forecasts as the source for macroeconomic variables where available. The expected increase in mortgage interest rates and house prices likely will impact the ability of low- and very low-income households to purchase homes.

In many ways, 2020 was an unusual year as it saw record volumes of both home purchase and home refinance loans. Low interest rates coupled with rising house prices created an incentive for many homeowners to refinance, resulting in a surge in refinance activity in 2020. The refinance share of overall mortgage originations since 2001 increased from a low of 28 percent in 2018 to 61 percent in 2020. Moody’s forecasts this share to sharply decline to 42 percent in 2021, and continue to decline to 39 percent in 2022, and then to 31 percent and 24 percent in 2023 and 2024, respectively.

According to the Bureau of Labor Statistics (BLS), the unemployment rate peaked at 14.8 percent in April 2020, and fell to 5.9 percent in June 2021. The Congressional Budget Office projects this number to be 4.6 percent in the fourth quarter of 2021 and that employment will surpass its pre-pandemic level in mid-2022.

FHFA will continue to monitor how these changes in the housing market and recent legislation may impact various segments of the market, including those targeted by the housing goals.

Interested parties are invited to submit comments on this proposed rule within 60 days of publication in the Federal Register. Comments should be submitted to the Federal Housing Finance Agency, Division of Housing Mission and Goals, 400 7th St., SW, Washington, D.C. 20219 or via FHFA.gov.


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