|The Federal Housing Finance Agency (FHFA) adopted a final rule yesterday establishing affordable housing goals for the government sponsored enterprises (GSEs) Fannie Mae and Freddie Mac for 2015 through 2017. The final rule increases the GSEs’ affordable single-family and multifamily goals from those FHFA initially proposed in August 2014.
The new affordable housing goals will take effect 30 days after the final rule is published in the Federal Register.
The final rule would establish a benchmark goal requiring that at least 24 percent of the single-family loans purchased by the Fannie Mae and Freddie Mac each year be made to low-income consumers (those making 80 percent of area median income, or AMI) or below. FHFA’s initial proposal would have established a benchmark goal of 23 percent, identical to the goal for 2014.
FHFA will continue to measure the GSEs’ compliance with the single-family goals through a dual approach that takes into account not just the benchmark goals but also the overall housing market’s support for affordable lending. Under such an approach, Fannie Mae and Freddie Mac will have meet the benchmark goals unless the share of home loans in the overall lending market made to low-income consumers falls below the benchmark. In that case the GSEs’ level of support for low-income lending will simply have to match that of the overall market in order for them to be considered compliant. FHFA argues that this approach sets strong, clear affordable housing goals while also providing the GSEs with the flexibility they need to adjust to changing market circumstances.
In addition, the rule would also establish single-family sub-goals that set benchmarks for the percentage of Fannie Mae and Freddie Mac loan purchases that must be comprised of loans to very low-income consumers (those at 50 percent of AMI or below) and the percentage of loans used to purchase homes in low-income areas. FHFA will also require that at least 21 percent of all new single-family refinance loans purchased by Fannie Mae and Freddie Mac help low-income families.
The final rule also increases both GSEs’ affordable multifamily goals. Both Fannie Mae and Freddie Mac will be expected to support the development of at least 300,000 apartments that are affordable to renters with an income at or below 80 percent AMI. This represents an increase over the 2014 goals of 250,000 for Fannie Mae and 200,000 for Freddie Mac. FHFA originally proposed to maintain Fannie Mae’s multifamily goal at 250,000 and to gradually increase Freddie Mac’s goal to 230,000.
The GSEs also will be required to each support the development of at least 60,000 apartments that are affordable to renters at or below 50 percent of AMI. This is the same goal that Fannie Mae was expected to meet in 2014, and a 20,000 unit increase over Freddie Mac’s 2014 goal.
NCSHA urged FHFA to establish higher multifamily goals for the GSE in its comments on the proposal. NCSHA’s letter pointed out that, over the past three years, both GSEs have financed the development of apartments affordable to low-income and very low-income renters at a level that substantially exceeds the goals FHFA originally proposed. This indicates that the GSEs are capable of supporting on a regular basis the development of affordable rental units at higher numbers, and they should be expected to do so to fulfill their public missions.
The final rule also established a new sub-goal for units in small multifamily properties (those properties with between 5-50 units) affordable to low-income families. Specifically, this sub-goal requires both Fannie Mae and Freddie Mac to support the development of 6,000 such units in 2015, 8,000 units in 2016, and 10,000 units in 2017. This is substantially smaller than the small property goals FHFA first proposed, which would have required Fannie Mae to finance at least 20,000 small multifamily property units in 2015, 25,000 in 2016, and 30,000 in 2017. Freddie Mac would have been expected to finance at least 5,000 small multifamily property units in 2015, 10,000 in 2016, and 15,000 in 2017. FHFA explains in the rule that they lowered the levels for this sub-goal to allow more time to determine how capable the GSEs are of supporting this segment of the market.
NCSHA expressed support for the new small multifamily property sub-goal in its comments, arguing that “such properties play a key role in efforts to provide affordable housing in rural and other less-densely populated areas” and that developers of such properties often struggle to access affordable credit. NCSHA also urged FHFA to monitor developments in the small multifamily market and to consider increasing the levels if market developments make it necessary to do so.