This week, the Federal Housing Finance Agency (FHFA) announced a finalized rule that sets the affordable housing goals for Fannie Mae and Freddie Mac, the government-sponsored enterprises (GSEs), for the years 2025 to 2027.
Objectives and Targets
The objectives, initially proposed in August, remain mostly unchanged from the draft version.
Their primary aim is to enhance fair housing access for low-income families and individuals living in economically challenged areas.
In the new rules for single-family mortgages, Fannie Mae and Freddie Mac must now allocate 25% of the loans they purchase to borrowers earning less than 80% of the area median income (AMI).
This marks a slight reduction from the previous target of 28%.
Additionally, adhering to the August proposal, a new goal specifically targeting very low-income borrowers—those with incomes below 50% of AMI—has been introduced.
The GSEs are expected to direct 6% of their purchases to this demographic, down from the earlier 7%.
Meanwhile, the target for refinancing low-income borrowers remains steady at 26%, as does the goal for purchasing in low-income census tracts at 4%.
However, the subgoal for minority census tracts has been raised to 12%, an increase from the prior 10%.
Implementation and Accountability
Sandra Thompson, the FHFA Director, highlighted that these affordable housing objectives will empower the GSEs to fulfill their missions while bolstering stability within housing finance markets.
She stressed the importance of meeting these targets, which are required by existing regulations and laws.
For the GSEs’ single-family goals, the FHFA made it clear that they must meet or exceed the benchmark level for each loan category, which will be determined using historical data from the Home Mortgage Disclosure Act (HMDA).
Consequences of Underperformance
Additionally, the updated rules introduce “measurement buffers,” which function as guidelines for the GSEs if they fail to meet their goals.
Should a GSE’s performance fall short, and the gap between its results and the market level surpasses the defined buffer, that GSE must develop a housing plan outlining steps to improve its performance.
This final rule is expected to go into effect on February 27, 2025, or 60 days after it appears in the Federal Register.
Source: Housingwire