[Federal Register Volume 85, Number 123 (Thursday, June 25, 2020)]
[Rules and Regulations]
[Pages 38031-38052]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-12345]
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Rules and Regulations
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains regulatory documents
having general applicability and legal effect, most of which are keyed
to and codified in the Code of Federal Regulations, which is published
under 50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by the Superintendent of Documents.
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Federal Register / Vol. 85, No. 123 / Thursday, June 25, 2020 / Rules
and Regulations
[[Page 38031]]
FEDERAL HOUSING FINANCE AGENCY
12 CFR Part 1281
RIN 2590-AA82
Federal Home Loan Bank Housing Goals Amendments
AGENCY: Federal Housing Finance Agency.
ACTION: Final rule.
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SUMMARY: The Federal Housing Finance Agency (FHFA) is amending the
existing Federal Home Loan Bank (Bank) Housing Goals regulation. The
final rule replaces the existing regulation's four separate
retrospective housing goals with a single prospective mortgage purchase
housing goal with a target level of 20 percent. The final rule also
establishes a separate small member participation housing goal with a
target level of 50 percent. The final rule provides that a Bank may
request FHFA approval of alternative target levels for either or both
of the goals. The final rule also establishes that housing goals apply
to each Bank that acquires any Acquired Member Assets (AMA) mortgages
during a year, eliminating the existing $2.5 billion volume threshold
that previously triggered the application of housing goals for each
Bank. Enforcement of the final rule will phase in over three years.
DATES: The final rule is effective August 24, 2020. Written requests
from Banks proposing alternative target levels are due by September 15,
2020. The enforcement phase-in period applies to calendar years 2021,
2022, and 2023.
FOR FURTHER INFORMATION CONTACT: Ted Wartell, Manager, Housing &
Community Investment, (202) 649-3157, [email protected]; Ethan
Handelman, Senior Policy Analyst, Housing and Community Investment,
(202) 649-3264, [email protected]; or Marshall Adam Pecsek,
Assistant General Counsel, Office of General Counsel, (202) 649-3380,
[email protected]. These are not toll-free numbers. The
telephone number for the Telecommunications Device for the Deaf is
(800) 877-8339. The mailing address for each contact is: Federal
Housing Finance Agency, 400 7th Street SW, Washington, DC 20219.
SUPPLEMENTARY INFORMATION:
I. Issuing This Rule During COVID-19 National Emergency
The COVID-19 national emergency is creating unprecedented economic
disruption to the economy, including the mortgage market. FHFA
recognizes the substantial public and private sector efforts in
responding to the pandemic and considered the ongoing uncertainty and
regulatory burden created by the existing, outdated Bank housing goals
regulation. FHFA has concluded that issuing this final rule is an
important priority to provide greater certainty for the Banks and other
market participants. In addition, features of the final rule such as
the three-year enforcement phase-in (discussed in Section IV.D.) and
the option to propose alternative target levels (discussed in Section
VIII.) will make the housing goals more adaptable during disruptions
such as the COVID-19 national emergency.
II. Background
A. The Federal Home Loan Bank System
The eleven Federal Home Loan Banks are wholesale financial
institutions organized under the Federal Home Loan Bank Act (Bank
Act).\1\ The Banks are cooperatives; only members of a Bank may
purchase the capital stock of a Bank, and only members or certain
eligible housing associates (nonmember borrowers such as state housing
finance agencies) may obtain access to secured loans, known as
advances, or other products provided by a Bank.\2\ Any eligible
institution (generally, a federally insured depository institution or
state-regulated insurance company) may become a member of a Bank if it
satisfies certain criteria and purchases a specified amount of the
Bank's capital stock.\3\
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\1\ See 12 U.S.C. 1421 et seq.
\2\ See 12 U.S.C. 1426(a)(4), 1430(a), 1430b.
\3\ See 12 U.S.C. 1424; 12 CFR part 1263. The Bank Act also
authorizes membership for community development financial
institutions and non-federally-insured credit unions.
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As government-sponsored enterprises, the Banks have certain
privileges under federal law, which allow them to borrow funds at
spreads over the rates on U.S. Treasury securities of comparable
maturity that are narrower than those available to corporate borrowers
generally. The Banks pass along their funding advantage to their
members and housing associates--and ultimately to consumers--by
providing advances and other financial services at rates that would not
otherwise be available to these institutions.\4\ Among those financial
services are the Banks' Acquired Member Assets (AMA) programs, under
which the Banks provide financing for members' housing finance
activities by purchasing mortgage loans.
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\4\ Members are required to pledge specific types of eligible
collateral, mainly mortgages or other real estate-related assets, to
secure any advance taken down from a Bank. See 12 CFR 1266.7.
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B. AMA Programs
FHFA's AMA regulation authorizes the Banks to acquire eligible
mortgages from their members and housing associates as a means of
advancing their housing finance mission, and it prescribes the
parameters within which the Banks may do so.\5\ Through the acquisition
of AMA mortgages, the Banks provide a source of liquidity to their
members and housing associates to further mission-related lending.
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\5\ See 12 CFR part 1268.
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FHFA's AMA regulation authorizes each Bank, at its discretion, to
purchase assets that qualify as AMA subject to the requirements of the
AMA regulation. Currently, each of the Banks except the Atlanta Bank
offers an AMA program for the purchase of single-family mortgages,
though the size of their programs varies. As of December 31, 2018, the
Banks' total outstanding AMA mortgages were $63 billion,\6\
representing less than 6 percent of their total assets. In contrast,
the eleven Banks' total outstanding advances, their primary business
line, represented 68 percent of total assets. Outstanding mortgages
relative to total assets at the Banks offering AMA programs ranged from
a high of 18 percent and 17 percent at the Indianapolis and Topeka
Banks, respectively, to a low of 2 percent or less at the New York and
Atlanta Banks. Further, as a point of comparison, in
[[Page 38032]]
2018, the mortgage purchases of the Federal National Mortgage
Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation
(Freddie Mac) (collectively, the Enterprises), represented 63 percent
of the secondary mortgage market comprising Fannie Mae, Freddie Mac,
the Government National Mortgage Association (Ginnie Mae), and the
Banks. The Banks' combined mortgage purchases represented less than 1
percent of that secondary market.
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\6\ See ``Federal Home Loan Banks, Combined Financial Report for
the Year Ended December 31, 2018,'' 43 (Mar. 27, 2019), available at
http://www.fhlb-of.com/ofweb_userWeb/resources/2018Q4CFR.pdf.
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The AMA programs that the Banks currently offer are the Mortgage
Purchase Program (MPP) and the Mortgage Partnership Finance (MPF)
program. The Banks generally acquire 15- to 30-year conventional,
conforming fixed-rate mortgage loans secured by 1- to 4-unit
properties. The Banks also acquire single-family mortgage loans
guaranteed or insured by a department or agency of the federal
government (i.e., non-conventional mortgages).
C. Overview of the Existing Bank Housing Goals Regulation
The existing Bank housing goals regulation has been in effect since
January 2011.\7\ The regulation implements section 10C(a) of the Bank
Act, which requires the Director of FHFA to ``establish housing goals
with respect to the purchase of mortgages, if any, by the [Banks].''
\8\ Section 10C(b) requires that the Bank housing goals be ``consistent
with'' the housing goals established by FHFA for the Enterprises under
sections 1331 through 1334 of the Federal Housing Enterprises Financial
Safety and Soundness Act of 1992 (Safety and Soundness Act), taking
into consideration ``the unique mission and ownership structure of the
[Banks].'' \9\
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\7\ 12 CFR part 1281.
\8\ 12 U.S.C. 1430c(a).
\9\ 12 U.S.C. 1430c(b).
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The regulation establishes three single-family owner-occupied
purchase money mortgage goals and one single-family refinancing
mortgage goal applicable to the Banks' purchases under their AMA
programs. The goals for purchase money mortgages separately measure the
percentage of purchase money mortgages acquired by a Bank that serve
low-income families, families in low-income areas, and very low-income
families.\10\ The goal for refinancing mortgages measures the
percentage of refinancing mortgages acquired by a Bank that serve low-
income families. The target levels of the housing goals are established
retrospectively by FHFA in the year following the year of the Banks'
AMA mortgage purchases, using Home Mortgage Disclosure Act (HMDA) data
to calculate the percentage of single-family mortgage originations in
the Bank's district that qualify for each of the housing goals.
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\10\ ``Low-income'' and ``very low-income'' are defined in the
final rule, as in the current regulation, as income not in excess of
80 percent and 50 percent of area median income, respectively. For a
discussion of the definition of ``families in low-income areas'' see
Section VI.D.
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The existing regulation provides that a Bank is subject to the
housing goals if its AMA mortgage purchases in a given year exceed a
volume threshold of $2.5 billion in unpaid principal balance. Each
year, FHFA determines whether any Banks have exceeded the volume
threshold. For each Bank that has exceeded the volume threshold, FHFA
determines the Bank's performance under the housing goals by
calculating the percentage share of the Bank's AMA mortgage purchases
that qualify for each housing goal. A Bank meets a housing goal if its
performance is equal to or greater than the target level of the housing
goal established by FHFA based on HMDA data for that year.
III. Proposed Rule and Comments
A. Proposed Rule
On November 2, 2018, FHFA published in the Federal Register a
proposed rule to amend the existing Bank housing goals regulation.\11\
The 90-day public comment period on the proposed rule ended January 31,
2019. FHFA proposed replacing the existing regulation's four single-
family housing goals with a new, combined prospective single-family
housing goal that would measure the affordable share of AMA mortgage
purchases by each Bank. FHFA also proposed establishing a new, separate
prospective housing goal that would measure the extent to which small
members and housing associates sell loans to the Banks under the AMA
programs. The prospective housing goals set forth in the proposed rule
would provide certainty for the Banks by informing them of the housing
goal target levels in advance and would provide clarity and flexibility
for the Banks by consolidating multiple goals.
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\11\ 83 FR 55114.
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B. Overview of Comments on Proposed Rule
FHFA received 23 comment letters in response to the proposed rule.
This number includes a joint comment letter from the presidents of the
eleven Banks. One comment letter was unrelated to the proposed rule.
FHFA also held a number of meetings, including webinars, with Bank
representatives and other stakeholders to describe the contents of the
proposed rule, discuss issues raised by the proposed rule, and obtain
clarifications of specific comments made in the letters.
Overall, commenters supported FHFA's proposed rule because it would
make the housing goals more effective at encouraging affordable housing
and easier to implement for the Banks. The comments on particular
provisions of the proposed housing goals rule are discussed in more
detail starting in Section VI. below.
IV. Summary of Final Rule
A. Elimination of Volume Threshold
The final rule eliminates the current $2.5 billion volume
threshold, such that all Banks are subject to the new housing goals,
regardless of their AMA mortgage purchase volume, consistent with the
proposed rule.
B. New Prospective Housing Goal for Mortgage Purchases
As proposed, the final rule establishes a new single combined
prospective mortgage purchase housing goal in advance that replaces the
four existing retrospective housing goals for home-purchase mortgages
for low-income families, home-purchase mortgages for low-income areas,
home-purchase mortgages for very low-income families, and refinancing
mortgages for low-income families.\12\ The new housing goal includes
each of these four categories, but does not include separate target
levels for each category. The final rule establishes one overall target
level for the new housing goal at 20 percent of the number of a Bank's
total AMA mortgage purchases. The final rule also permits a Bank to
request FHFA approval of an alternative target level for the goal. The
final rule further provides that no more than 25 percent of the
mortgages counted toward the housing goal may be mortgages for families
with incomes above 80 percent of area median income (AMI).
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\12\ Because the housing goals will no longer be based on
retrospective HMDA data, the final rule, as proposed, removes the
definition of ``HMDA'' from Sec. 1281.1.
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C. New Prospective Small Member Participation Housing Goal
As proposed, the final rule establishes a new prospective housing
goal that measures the extent of participation by small members and
housing associates in a Bank's AMA program. Specifically, the final
rule requires that at least 50 percent of a Bank's total AMA users must
be community-based AMA users. ``Community-based AMA user'' is a new
[[Page 38033]]
term defined to mean any user whose average total assets over the
three-year period culminating in the year preceding the one being
measured are no greater than the applicable community-based AMA user
asset cap, which itself is a new term meaning $1,224,000,000, subject
to annual adjustments by FHFA, beginning in 2021, to reflect any
percentage increase in the preceding year's Consumer Price Index (CPI)
for all urban consumers, as published by the U.S. Department of Labor.
The final rule retains the proposed asset cap but incorporates it
directly into the housing goals regulation and delinks the housing
goals regulation from the Bank members regulation. Accordingly, these
new terms replace ``community financial institution or CFI'' and ``CFI
asset cap,'' which were proposed as new terms but neither of which
appears in the final rule. ``AMA user'' is a newly defined term in
Sec. 1281.1 that means a participating financial institution from
which the Bank purchased at least one AMA mortgage during the year for
which the housing goals are being measured. If a Bank is unable to meet
the 50 percent target level, the Bank may still meet the small member
participation housing goal if the percentage of its total AMA users
that are community-based AMA users is at least 3 percentage points
greater than the percentage in the preceding year. The final rule
permits a Bank to request FHFA approval of an alternative target level
for this goal.
D. Phase-In Period for Enforcement of the New Housing Goals
Consistent with the proposed rule, the final rule establishes a
three-year phase-in period for enforcement of the two new housing
goals, starting with the effective date of the final rule and ending on
December 31, 2023. During the phase-in period, FHFA will monitor and
report the Banks' housing goals performance but will not impose a
housing plan remedy in the event that a Bank fails to meet either or
both of the housing goal target levels.
E. Other Changes
Consistent with the proposed rule, the final rule revises and
simplifies the criteria and requirements under which mortgages are
either included or excluded from FHFA's measurement of a Bank's
performance under the housing goals. The final rule also revises the
housing goals reporting requirements to reflect the new structure of
the Bank housing goals.
V. Elimination of the Volume Threshold
The final rule eliminates the $2.5 billion volume threshold in the
existing housing goals regulation. This means that all Banks acquiring
any AMA mortgages are subject to the housing goals regardless of their
AMA mortgage purchase volume. The elimination of the volume threshold
is consistent with the proposed rule and addresses the fact that the
threshold has operated as an upper limit on Bank AMA programs.
All eleven commenters who addressed the volume threshold supported
its proposed elimination. Some commenters regarded the volume threshold
as an artificial cap on liquidity. Others characterized it as a way for
the Banks to avoid the goals entirely by keeping mortgage purchases
below the threshold. No commenter opposed the proposed elimination of
the threshold.
Thirty-six state or local advocacy and community development
organizations, in a joint comment letter, supported the proposed
elimination of the volume threshold, stating that it had served to
effectively exempt the vast majority of Banks from the housing goals. A
nonprofit consumer advocacy group commented that FHFA had made a strong
argument for elimination of the volume threshold.
A trade association for credit unions, in support of the proposed
elimination of the volume threshold, commented that the threshold
operated as an upper limit on Bank AMA programs. A lender trade
association asserted that as a result of removing the volume threshold,
the Banks would be expected to either increase their total purchases,
including affordable housing loans, or shift more of their total
mortgage purchases towards affordable housing mortgages in order to
comply with the housing goal, and characterized either result as
desirable. This commenter urged close monitoring of the Banks to ensure
they do not cease their AMA mortgage purchases to avoid noncompliance
with the housing goal if the volume threshold were eliminated, although
the commenter described that as an unlikely outcome.
A U.S. Senator stated that the volume threshold is inconsistent
with the Banks' mission responsibility to meet the affordable housing
needs in their districts. A trade association representing state
housing finance agencies commented that the volume threshold has
effectively exempted most Banks from the housing goals and served as a
de facto upper limit on Banks' AMA purchases, resulting in less
liquidity for affordable mortgage lending. Similarly, a nationwide
nonprofit community development organization asserted that the volume
threshold creates a ``perverse incentive'' for the Banks to limit their
mortgage purchases, also claiming that removal of the threshold will
encourage more AMA participation. An individual credit union commented
that it supported all changes FHFA proposed.
In their joint comment letter, the Banks requested clarity on
FHFA's intent concerning the final rule's effect on the Banks' overall
AMA activity, noting that the proposed rule would allow a Bank to
reduce its overall AMA activity as a means of increasing the percentage
of its AMA purchases that qualify for the goal. FHFA notes that the
final rule does not prohibit a Bank from managing its volume of AMA
activity as a means of meeting the housing goal, nor does the existing
regulation. FHFA recently issued an Advisory Bulletin \13\ addressing
FHFA's expectations for Banks' management of the risks of their AMA
programs. FHFA also expects that the Banks will comply with the final
rule by prioritizing purchases of AMA mortgages for low- and very low-
income families, and for families in low-income areas.
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\13\ ``Acquired Member Assets Risk Management Advisory
Bulletin,'' AB 2020-01 (January 31, 2020).
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As discussed in the proposed rule, the volume threshold was
originally adopted to allow smaller Bank AMA programs to operate
without meeting housing goal target levels, particularly programs
focused on providing liquidity for smaller Bank members. Over time,
however, the volume threshold has instead operated as an upper limit on
Bank AMA programs. Banks below the volume threshold in effect avoid the
housing goals, while Banks above the threshold face application of
housing goals that AMA programs were not designed to, and typically did
not, meet.
Housing goals will better serve their public purpose if they are
flexible enough to be meaningful and achievable for a variety of Bank
AMA programs. The final rule creates a mechanism for the housing goals
to apply to all Banks while allowing flexibility to address unique
situations for particular Banks if necessary. The new process for
setting the target levels of the housing goals should help address
issues faced by smaller AMA programs by allowing the Banks to propose
meaningful and achievable alternative target levels based on the nature
of the AMA program at each Bank.
Accordingly, as proposed, the final rule eliminates the existing
$2.5 billion volume threshold, making the housing
[[Page 38034]]
goals applicable to all Banks regardless of their AMA purchase volume.
Banks may propose alternative target levels to FHFA for approval, as
discussed below in Section VIII.
VI. Prospective Mortgage Purchase Housing Goal
A. Single Combined Goal With Multiple Categories for Eligibility
Section 1281.11(a) of the final rule replaces the four existing
separate retrospective mortgage purchase housing goals with a single
prospective mortgage purchase housing goal that includes all single-
family, first lien AMA mortgages purchased by a Bank, with limited
exceptions. Purchase money or refinancing mortgages meeting the income
or geographic eligibility requirements for any of the existing four
housing goals would count toward performance under this new combined
goal. This includes mortgages for low- or very low-income borrowers and
mortgages for borrowers living in low-income areas.
Refinancing mortgages for low-income borrowers, which previously
counted only for the separate low-income families refinancing goal, are
now included in the new combined goal. By combining the different
categories into a single, combined goal, the final rule also counts
refinancing mortgages for families of any income level who reside in
low-income areas, subject to the cap on counting loans to higher-income
borrowers in low-income areas, discussed in Section VI.D. below.
FHFA's proposal to consolidate the four existing housing goals into
a single combined goal received support from a number of commenters. A
bank trade association, a credit union trade association, and a credit
union generally emphasized the additional flexibility the proposal
would provide the Banks in serving specific needs within their
districts. A lenders trade association commented that given the
relatively small historical sizes of AMA programs, there is little
value in segregating AMA mortgage purchases into more granular
categories, and that a single, consolidated goal would reduce the
Banks' compliance burden.
An organization representing state housing finance agencies also
favored consolidating the goals, noting that, unlike the Enterprises'
mortgage purchases, the Banks' AMA programs are limited in scope and
resources, making it harder for the Banks to develop products or
programs designed to serve each separate goal. It also commented that,
unlike the Enterprises, the Banks generally operate with a regional
focus, and that each Bank district has different needs.
Thirty-six state or local advocacy and community development
organizations, in a joint comment letter, opposed combining the four
existing housing goals into one goal. These commenters stated that the
four housing goals align with the statutory requirement that the Banks'
housing goals be consistent with the Enterprises' housing goals. The
commenters also asserted that the four housing goals target different
populations and neighborhoods, each with unique needs. The commenters
expressed concern that the Banks could satisfy the new single combined
housing goal by purchasing mortgages targeting certain easier-to-serve
populations while providing little support for other populations, such
as very low-income borrowers, that may prove more difficult to serve.
A consumer advocacy organization shared these concerns about
service to very low-income borrowers under the proposal. The commenter
also observed that the proposed rule preamble did not provide analysis
of the past or trending distribution of purchase money and refinance
loans in AMA mortgage acquisitions. It expressed concern about
potential underrepresentation of refinance loans in the Banks' AMA
programs if the final rule adopted the proposed combined goal for
purchase money and refinance loans. The commenter stated that the
combined goal is likely to have less impact in the current and
immediate past rate environments where refinances were at very low
levels, but that this may not always be the case. This commenter did
not object to the proposal but expressed concern that a consolidated
housing goal might reduce access to credit for some categories of low-
income borrowers. The commenter urged FHFA to monitor Bank housing
goals performance closely under the final rule and be prepared to
return to more granular housing goals if AMA mortgage purchases skew
away from serving very low-income borrowers.
After considering the comments, FHFA has concluded that the
proposed new single, combined mortgage purchase housing goal is
appropriate for the Banks' AMA programs. The Banks' AMA programs are
voluntary and serve a small fraction of the secondary market. The new
combined goal draws from the same categories used in the Enterprise and
Bank housing goals regulations,\14\ while giving the Banks additional
flexibility to meet the needs of each of their districts. FHFA also
recognizes that, due to the voluntary nature of the Banks' AMA
programs, requiring AMA programs to serve all the categories of
borrowers at precise target levels, as under the existing Bank housing
goals, may be more likely to discourage Bank participation in AMA
programs than to increase service to underserved borrowers. In
addition, concerns that combining the four existing housing goals
categories would result in certain populations being neglected are at
least partially addressed by the final rule's cap on counting loans to
higher-income borrowers in low-income areas, discussed in Section VI.D.
below.
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\14\ See 12 CFR part 1282.
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Accordingly, for the foregoing reasons, and consistent with the
proposed rule, the final rule establishes a single, combined mortgage
purchase housing goal for low- and very low-income borrowers and
borrowers in low-income areas and counts purchase money and refinance
mortgages identically under the goal. Although the final rule does not
establish specific target levels for each of the four categories under
the new combined goal, FHFA will continue to require the Banks to
report data allowing FHFA to identify and monitor AMA activity under
each of the four categories.
B. Twenty (20) Percent Target Level for the New Mortgage Purchase
Housing Goal
Section 1281.11 of the final rule sets the target level for the new
combined mortgage purchase housing goal at 20 percent of the total
number of AMA mortgage loans purchased by a Bank, consistent with the
proposed rule. This means that a Bank meets the housing goal if 20
percent or more of the AMA mortgage loans it purchases serve some
combination of low-income households, very low-income households, or
households in low-income areas, subject to a 25 percent cap on loans
purchased by the Bank that serve higher-income borrowers in low-income
areas. Consistent with the approach in the existing regulation and the
proposed rule, the mortgage purchase goal is denominated as a
percentage of number of loans, not unpaid principal balance. Also
consistent with the proposed rule, the final rule provides the Banks
with the option to propose alternative Bank district-specific target
levels, discussed further in Section VII. below.
1. Comments Received
Commenters provided mixed responses to the proposed 20 percent
target level for the new mortgage purchase housing goal. A U.S. Senator
supported the proposed target level, noting that many of the targeted
[[Page 38035]]
borrowers have difficulty obtaining financing and that serving them is
consistent with the mission of the Banks. A credit union also supported
the proposed target level, stating that it would not appear to add any
risk to the Banks or do anything other than improve on what already
works well. A lenders trade association commented that the proposed
target level would strike an appropriate balance between rigor and
feasibility, but also recommended that, should any Banks discontinue
their AMA programs as a result of the target level, FHFA be prepared to
reevaluate the target level or work with those Banks on developing
alternative Bank-specific target levels.
Several advocacy organizations recommended a different target level
for the new mortgage purchase housing goal. Thirty-six state or local
advocacy and community development organizations, in a joint comment
letter, opposed the imposition of the same percentage target level on
all Banks, instead recommending Bank district-specific target levels at
levels unspecified in the comment letter. A nonprofit community
revitalization organization regarded the proposed target level as too
low, stating that eight of the eleven Banks already met this target
level each year since 2011. A nonprofit consumer advocacy organization
expressed concern that the proposed target level could encourage at
least six Banks to reduce their AMA mortgage purchase efforts because
their historical performance exceeded the proposed target level. The
commenter favored setting the target level between 25 and 30 percent,
which it noted several Banks had exceeded in the past and which it
believed the Banks could meet in the future. A trade association
representing state housing finance agencies similarly observed that
several Banks have exceeded the proposed target level in recent years,
suggesting that it could prompt some Banks to lower their purchases of
mortgages for low- and moderate-income borrowers.
A credit union trade association took the opposite view, favoring
an initial target level that all Banks have already met. The commenter
stated that the Banks could then focus on building their AMA purchase
volumes overall without fear of missing the goal. The commenter stated
that this would help in assessing the impact of removing the $2.5
billion volume threshold, and that FHFA could then evaluate the data
and set a new incremental target level at the end of the initial three-
year period.
In their joint comment letter, the Banks stated that while a 20
percent target level might be achievable in favorable economic times,
it might also be hard to sustain over the long term. The Banks
indicated that such a level may be difficult to achieve during economic
downturns, which might compromise Banks' prudent management of their
AMA programs. A community bankers trade association similarly commented
that a Bank's ability to reach a 20 percent target level likely depends
on the macroeconomic climate at the time.
Several commenters offered alternative formulations of the goal
that would change the target level. For instance, a nonprofit community
revitalization organization suggested starting with a lower,
unspecified target level and gradually increasing it each year,
culminating in an unspecified target level above 20 percent. The
commenter also suggested establishing specific subgoals based on Bank
district needs and on the types of small member institutions or
geographic areas, e.g., small members located in rural areas.
The Banks jointly recommended that the proposed 20 percent target
level decrease to 10 percent in two situations. First, the 20 percent
target level would drop if, in a single year, one or more AMA users who
had individually or collectively provided 10 percent or more of the AMA
mortgages ceased being a member of the Bank. Second, the 20 percent
target level would drop upon a material increase in mortgage
delinquencies (defined as delinquencies exceeding 90 days), as measured
in either FHFA's published mortgage-backed securities statistics or in
a Bank's AMA mortgage portfolio.
A community bankers trade association recommended that FHFA set an
alternate floor that would be triggered upon an unexpected economic
downturn that made the 20 percent target level too onerous, providing
10 percent as an example of such a floor. The commenter stated that
members need to view the AMA programs as consistent and reliable, and
doubts about the reliability of a Bank as an outlet for their mortgage
production may result in members limiting their AMA activity.
The Banks jointly commented that any new housing goal should be
established such that each Bank is in compliance as of the effective
date. Accordingly, the Banks recommended having a separate percentage
floor for any Bank performing below the 20 percent target level from
the outset. Alternatively, the Banks suggested that a Bank that has
submitted an alternative target level for FHFA approval should not be
subject to the 20 percent target level while the review process is
pending. The Banks further suggested, as an alternative to a percentage
floor, that FHFA could establish a range of possible target levels in
the regulation, and then periodically set a specific target level
within the range by way of a supervisory letter to the Banks.
2. FHFA Determination on the Target Level for the Mortgage Purchase
Housing Goal
The final rule establishes the target level for the prospective
mortgage purchase housing goal at 20 percent, the same level as in the
proposed rule. In determining the target level for the new mortgage
purchase goal, FHFA considered the comments received, as well as
national housing needs, the past performance of the Banks under the
housing goal, the ability of the Banks to lead the industry in making
mortgage credit available, and the size of the mortgage market for
affordable loans relative to the overall mortgage market. The factors
considered by FHFA in setting the Bank housing goal are similar to the
factors that FHFA is required by statute to consider in setting the
Enterprise housing goals.\15\ Those factors include: (1) National
housing needs; (2) economic, housing, and demographic conditions; (3)
past performance on the housing goals; (4) ability to lead the industry
in making mortgage credit available; (5) the size of the affordable
market relative to the overall market; and (6) the financial condition
of the Enterprises.
---------------------------------------------------------------------------
\15\ See 12 U.S.C. 4562(e).
---------------------------------------------------------------------------
a. National Housing Needs, Including Underserved Borrowers
In determining the target level for the new mortgage purchase
housing goal, FHFA considered the nation's affordable housing needs,
which affect both homeowners and renters, while focusing on
homeownership as the policy area most directly connected to the Bank
housing goals. The national homeownership rate declined every year from
2004 to 2017, with particularly sharp declines for younger households
and African American households.\16\ Tight access to mortgage credit is
an ongoing factor in the lack of access to homeownership, particularly
in places with lower-cost homes.\17\ Workers in essential sectors like
construction often cannot afford to purchase even modestly priced homes
in most metropolitan statistical areas.
[[Page 38036]]
As an example, a typical carpenter could afford the median home price
with a three percent down payment in only 40 percent of metropolitan
statistical areas in a recent analysis.\18\ Workers in less well-paid
professions struggle even more. Improved financing opportunities can
help mitigate homeownership difficulties for underserved borrowers.
FHFA recognizes these affordable housing challenges and has considered
them in selecting a target level for the prospective mortgage purchase
housing goal.
---------------------------------------------------------------------------
\16\ See Joint Center for Housing Studies of Harvard University,
``The State of the Nation's Housing 2017,'' 21 (2017), available at
http://www.jchs.harvard.edu/sites/default/files/harvard_jchs_state_of_the_nations_housing_2017_0.pdf.
\17\ Id. at 23.
\18\ National Housing Conference, ``Paycheck to Paycheck 2018,''
3 (Apr. 2018), available at https://www.nhc.org/wp-content/uploads/2019/04/P2P2018_Final.pdf.
---------------------------------------------------------------------------
b. Past Performance on the Prospective Mortgage Purchase Housing Goal
In setting the target level for the mortgage purchase housing goal
at 20 percent, FHFA also analyzed what the Banks' past performance
under the goal would have been if the goal had been in effect at that
time (including all loans that would have been counted under the
proposed rule). Chart 1 below replicates and extends the proposed rule
preamble analysis to include 2018 performance and to reflect the
formulation of the prospective mortgage purchase housing goal in the
final rule, which excludes non-conventional loans sold by AMA users
with assets above the community-based AMA user asset cap. A full color
version of Chart 1 and the other charts below appear in this preamble
to the final rule as published on FHFA's website. The tables and charts
in this preamble mask the identity of individual Banks by using letters
instead of names to maintain confidentiality of Bank data. The letters
identifying the Banks have been randomized for each table and chart
(e.g., Bank A may refer to different Banks in different tables).
[GRAPHIC] [TIFF OMITTED] TR25JN20.014
Chart 1 shows generally that Bank AMA performance as measured by
the new prospective mortgage purchase housing goal was above the 20
percent target level for most Banks in most years since 2011. Bank I
would have met or exceeded the 20 percent target level in 2015-2017 if
all non-conventional loans were included (as in the proposed rule), but
Bank I performed below 20 percent in 2015-2017 based on exclusion of
non-conventional loans from institutions exceeding the community-based
AMA user asset cap (as in the final rule). Bank I's 2018 performance
was back above 20 percent.
Three Banks--E, G and H--show performance of zero for some years in
the chart. These Banks were not purchasing AMA loans at the beginning
of the time series and began building their AMA programs over time. In
addition, Bank H purchased only non-conventional AMA loans for several
years in the series, so the exclusion of such loans sold by
institutions above the community-based AMA user asset cap has large
effects on both the numerator and denominator of the goals performance
percentage. Hence, Bank H performance is zero in some years and very
high in others. Bank H did not have an active AMA program in 2019.
c. Ability of the Banks To Lead the Industry in Making Mortgage Credit
Available
FHFA has also considered the ability of the Banks to lead the
industry in making mortgage credit available. To assess the ability of
the Banks to lead the industry, FHFA started by
[[Page 38037]]
comparing how the Banks would have performed under the prospective
mortgage purchase housing goal in 2018 with how Fannie Mae and Freddie
Mac would have performed if they had been subject to the same goal in
2018. Table 1 below shows performance percentages for each Enterprise,
applying the same calculation method applicable under the Bank housing
goals established in this final rule.
[GRAPHIC] [TIFF OMITTED] TR25JN20.015
As shown in Table 1, the Enterprise performance under the Bank
housing goals would have exceeded the performance of most Banks in
2018. Fannie Mae's performance under the prospective mortgage purchase
housing goal would have been 36 percent, and Freddie Mac's performance
would have been 33 percent. As discussed above, all but two Banks would
have exceeded the 20 percent target level in 2018, but only four Banks
would have had performance levels above 30 percent (including one Bank
whose performance has varied widely). The average performance for all
Banks combined in 2018 would have been 26.6 percent.
There are a number of factors that help explain the difference
between the performance of the Banks and the performance of the
Enterprises. FHFA, through the AMA regulation, requires that if the
Banks establish AMA programs, AMA users must bear a substantial portion
of the credit risk associated with the loans they sell by providing a
credit enhancement obligation, which the PFI must fully secure.
Additionally, some Banks, through their capital structure plans, have
AMA stock purchase requirements for members selling loans to the Bank.
Taken together, the credit enhancement obligation, collateral
requirement and potential member stock purchase requirement result in
loans for which the Bank AMA program is the best execution qualifying
for the mortgage purchase housing goal at a lower rate than loans sold
to the Enterprises.
Other factors that help explain the difference in performance
include the vast difference between the size of the Enterprises'
mortgage portfolios and the Banks' mortgage portfolios. The Enterprises
together serve more than 60 percent of the single-family secondary
market, while the Banks' AMA programs serve less than one percent.
Further, Banks are permitted to purchase AMA mortgages only from
members in their districts, while the Enterprises serve a national
market. In 2018, Bank System members totaled 6,863, of which only 861
sold mortgages to the Banks. Additionally, the Enterprises are
chartered to provide stability and liquidity in the secondary market
for residential mortgages by purchasing and making commitments to
purchase residential mortgages. The Banks, in contrast, operate AMA
programs at their discretion.
In setting the target level for the mortgage purchase housing goal
at 20 percent, FHFA recognizes that the Banks' AMA programs have little
ability to lead the industry due to their limited size relative to the
overall mortgage market. The mortgage credit enhancement requirements
of AMA programs and the supervisory expectations in the AMA Advisory
Bulletin address safety and soundness considerations. These factors
further explain the difference between the historical performance of
the Banks on the new mortgage purchase housing goal and the nationwide
market level for the mortgage market as a whole.
d. Size of the Affordable Market Relative to the Overall Market
The Banks' AMA mortgage purchases represent less than one percent
of secondary mortgage market purchases by Ginnie Mae, Fannie Mae, and
Freddie Mac, as discussed above and in the proposed rule preamble.
Using a target level based on a market-wide measure would not be
appropriate for the housing goals applicable to the AMA programs, which
are currently a set of niche programs for Bank members and housing
associates \19\ due to the Banks' unique structure and role in the
market.
---------------------------------------------------------------------------
\19\ Eligible, non-member housing associates may participate in
a Bank's AMA program. However, since 2000, no housing associate has
sold an AMA loan to a Bank.
---------------------------------------------------------------------------
[[Page 38038]]
e. Target Level Set at 20 Percent in Final Rule
Based upon FHFA's consideration of the comments, the serious
affordable housing challenges nationwide, the past performance of the
Banks, the affordable market levels, and the other factors discussed
above, Sec. 1281.11(a)(1) of the final rule sets the target level for
the new mortgage purchase housing goal at 20 percent of the total
number of AMA mortgage loans purchased by a Bank in the year being
measured. This target level will encourage the Banks to continue to
make meaningful contributions to affordable housing while recognizing
the limited ability of the Banks to affect the overall housing market.
In considering an appropriate target level, FHFA evaluated whether
to set specific target levels by Bank district, as recommended by some
commenters. Bank districts vary widely, ranging from two to sixteen
states or territories in one district. Available national data do not
enable FHFA to set district-specific target levels with sufficient
accuracy to be effective for housing goals. However, the option
requested by the Banks for FHFA approval of alternative district-
specific target levels, which is included in the final rule, will allow
Banks to propose alternative target levels supported by data and
subject to public comment.
The final rule addresses concerns raised by several commenters
about how the new mortgage purchase housing goal will function under
unexpected market conditions or other adverse circumstances through a
combination of the following mechanisms:
1. Enforcement period. Section 1281.15(a) of the final rule
provides for an initial three-year period during which FHFA will not
impose a housing plan if a Bank fails to meet a housing goal. During
this period, FHFA will still measure the Banks' performance under both
housing goals and make determinations of Bank compliance with those
goals. This period will provide the Banks time to adjust their AMA
programs as needed to ensure that purchase of affordable housing
mortgages is an integral, ongoing part of their business plans. It will
also provide FHFA with an opportunity to collect data on Bank
performance under the housing goals to guide implementation going
forward. The proposed rule described this period as a ``three-year''
period, but the proposed rule text would have provided for the
imposition of a housing plan only for ``any year after 2021,'' rather
than ``2022.'' The final rule corrects this drafting error and extends
the phase-in period to account for the initial application of the final
rule in 2021 by providing for the possible imposition of a housing plan
for ``any year after 2023.'' FHFA received no comments specifically
addressing the extension of a phase-in period through 2021 as opposed
to any other year.
2. Alternative target levels. Section 1281.11(a)(1)(ii) of the
final rule provides a Bank with the option to propose, for FHFA
approval, an alternative district-specific target level for the new
mortgage purchase housing goal. Banks concerned about their ability to
meet the 20 percent target level may pursue this option.
3. Infeasibility determination. Because the target level is
calculated as a percentage of a Bank's total AMA mortgage purchases,
the same way it is calculated in the current regulation, the target
level should remain feasible under a range of market conditions,
particularly changes that affect the volume of mortgage activity
overall. If unexpected market conditions arise that make achievement of
the target level infeasible for a Bank, FHFA has the discretion to
determine that the goal was infeasible under Sec. 1281.15(a) of the
regulation. If FHFA determines that the goal was infeasible, the Bank
would not be required to submit a housing plan. The regulation requires
FHFA to consider market and economic conditions and the financial
condition of the Bank in determining whether a goal was infeasible.
These factors are similar to the factors suggested in the Banks'
comment as possible criteria for setting a lower target level.
C. Treatment of Non-Conventional Mortgages Under the New Mortgage
Purchase Housing Goal
Section 1281.13(c) of the final rule allows single-family mortgages
guaranteed or insured by a department or agency of the federal
government (i.e., non-conventional mortgages) to count toward the
mortgage purchase housing goal only if the mortgages were acquired by
the Bank from a community-based AMA user (i.e., an AMA user with assets
not in excess of the community-based AMA user asset cap). This is a
change from the current regulation, which excludes all non-conventional
loans from counting towards a Bank's housing goals performance
regardless of the size of the selling institution. It is also a change
from the proposed rule, which would have allowed all non-conventional
mortgage loans to count towards a Bank's housing goal performance if
the loans met the other applicable criteria.
A rural-focused nonprofit organization, a nonprofit national
organization, a nonprofit consumer advocacy organization, a banker's
trade association, and a U.S. Senator supported the proposal to count
all non-conventional mortgage loans toward the mortgage purchase
housing goal. The nonprofit consumer advocacy organization urged FHFA
to monitor closely how this new housing goal treatment would affect the
mix of AMA mortgages purchased by the Bank. No commenter opposed the
proposal.
The final rule represents a middle ground between the current
regulation (excluding all non-conventional loans) and the proposed rule
(including all non-conventional loans). The current Bank housing goals
regulation is consistent with the Enterprise housing goals regulation
in excluding non-conventional single-family loans from counting toward
the Enterprise housing goals. Loans backed by the federal government
have been excluded from the Enterprise single-family housing goals for
many years. The exclusion is intended to avoid giving housing goals
credit to the Enterprises for loans where the primary form of support
comes from the federal government rather than the Enterprises.
The final rule allows non-conventional loans to count towards the
Bank housing goals only in limited circumstances. The Banks' unique
mission and ownership structure address the limited liquidity available
in particular to small AMA users. The final rule, therefore, allows
non-conventional loans purchased from small AMA users to count toward
the performance of the Banks under the housing goals. This approach
will allow non-conventional loans from small AMA users to count without
creating an incentive for the Banks to purchase a high volume of non-
conventional loans from larger members in order to improve their
performance under the housing goals.
[[Page 38039]]
Non-conventional loans will be excluded from the numerator and the
denominator in the housing goal calculation unless purchased from a
small AMA user. The final rule only addresses whether and how non-
conventional loans count for purposes of the housing goals. It does not
prevent the Banks from purchasing such loans through their AMA
programs. Eligibility for purchase is governed by the AMA regulation.
D. Cap on Loans to Higher-Income Borrowers Counting Toward the Mortgage
Purchase Goal
Section 1281.11(a)(2) of the final rule provides that no more than
25 percent of the mortgages purchased by a Bank that are counted
towards the mortgage purchase housing goal may be for higher-income
borrowers, defined as borrowers with incomes above 80 percent of area
median income, in low-income areas. As discussed above, the final rule
combines each of the four current Bank housing goals into a single
housing goal incorporating the categories in the four goals. One of the
four goals categories focuses on mortgages for families in low-income
areas, which may include some mortgages for families with incomes above
80 percent of area median income. The 25 percent cap will limit the
extent to which a Bank may rely on mortgages for such higher-income
families in low-income areas to meet the mortgage purchase housing
goal. The cap does not prohibit the purchase of such mortgages by a
Bank, although purchases of loans to higher-income borrowers in low-
income areas that exceed the cap will have the effect of lowering the
housing goal performance number that is calculated for the Bank.
The definition of ``families in low-income areas'' remains
unchanged in the final rule from the current regulation, other than one
technical, conforming revision included in the proposed rule.\20\ The
definition includes (1) families in low-income census tracts regardless
of family income, (2) moderate-income families in minority census
tracts (i.e., census tracts with minority population of at least 30
percent and a median income less than the area median income), and (3)
moderate-income families in designated disaster areas. ``Moderate
income'' is defined in the regulation as income not in excess of area
median income. These criteria are summarized in Table 2 below:
---------------------------------------------------------------------------
\20\ In its 2015 final rule amending the Enterprise housing
goals regulation, FHFA removed the reference to ``block numbering
areas'' under the first prong of the ``families in low-income
areas'' definition to conform to the terminology used by the U.S.
Census Bureau. As proposed, Sec. 1281.1 of the final rule makes a
similar conforming revision to the definition of ``families in low-
income areas'' in the Bank housing goals regulation by removing the
reference to ``block numbering areas.''
[GRAPHIC] [TIFF OMITTED] TR25JN20.016
The definition of ``families in low-income areas'' is different
from the other components included in the housing goal because it does
not include an income limitation for borrowers. For properties located
in low-income census tracts, each mortgage purchase counts toward a
Bank's achievement of the housing goal, regardless of family income.
For properties in minority census tracts and for properties in
designated disaster areas, mortgage purchases count if family income is
less than or equal to the area median income, which would include
families with incomes above 80 percent up to 100 percent of area median
income.
As a result, it is possible for loans to higher-income households
in low-income areas to count toward achievement of the housing goal.
The final rule does not exclude such mortgages for higher-income
families from counting entirely; rather, it limits the extent to which
a Bank may rely on loans in low-income areas for families with incomes
above 80 percent of area median income to be counted for purposes of
meeting the housing goal. Loans to higher-income borrowers in low-
income areas that exceed the cap will still be counted in the
denominator when calculating the performance for the Bank, with the
effect that loans above the cap will effectively lower the Bank's
calculated housing goals performance. The 25 percent cap is intended to
balance the need for homeownership investment in
[[Page 38040]]
communities that have lacked consistent, large-scale homeownership
investment, on the one hand (which would support counting all loans
that meet the criteria for low-income areas), and concern about the
impact of an influx of higher-income households on existing residents,
on the other hand (which would support excluding all loans to higher-
income borrowers in low-income areas).\21\
---------------------------------------------------------------------------
\21\ For information on the effects of gentrification, see
generally Federal Reserve Bank of Philadelphia, ``Research Symposium
on Gentrification and Neighborhood Change'' (May 25, 2016),
available at https://www.philadelphiafed.org/community-development/events/2016/research-symposium-on-gentrification; Diane K. Levy,
Jennifer Comey & Sandra Padilla, ``IN THE FACE OF GENTRIFICATION:
Case Studies of Local Efforts to Mitigate Displacement'' (Urban
Institute 2006), available at https://www.urban.org/sites/default/files/publication/50791/411294-In-the-Face-of-Gentrification.PDF.
---------------------------------------------------------------------------
The final rule therefore caps the percentage of mortgages to
higher-income borrowers that a Bank can count toward the housing goal
at 25 percent. Note that the cap does not prevent Banks from purchasing
these loans to higher-income borrowers pursuant to the AMA rule. The
cap limits the extent to which such loans count toward the goal, but
includes all such loans in the denominator when calculating the Bank's
housing goals performance. This means that if the number of mortgages
purchased by a Bank that are for families with incomes exceeding 80
percent of area median income who are located in low-income areas would
contribute more than 25 percent of a Bank's performance on the housing
goal, then any such mortgages above the 25 percent cap will be excluded
from the numerator in calculating a Bank's performance under the goal.
Those mortgages above the 25 percent cap will still be included in the
denominator.
Commenters generally favored the proposed 25 percent cap. A U.S.
Senator supported the proposed cap, as did advocacy organizations,
nonprofits, and a lenders trade association. The Banks did not oppose
the establishment of a cap, but they requested that FHFA set it at 30
percent instead of 25 percent.
Thirty-six state or local advocacy and community development
organizations, in a joint comment letter, supported the proposed 25
percent cap. They pointed to evidence of gentrification and
displacement of lower-income borrowers in low-income areas and in high-
minority census tracts, including in markets where housing has become
very expensive and affordable housing is scarce, and stated that the
proposed cap would preserve housing opportunities for low-income
families in those areas without reducing lending for non-low-income
families generally.
A nonprofit consumer advocacy group strongly supported the proposed
25 percent cap, stating that community revitalization of historically
underserved areas requires support from households with a mix of
incomes but that the goals should primarily benefit low- and moderate-
income borrowers.
A nationwide nonprofit community development organization supported
the proposed 25 percent cap, and also stated that higher-income
borrowers in low-income areas are important for ensuring that new
investment flows into historically disinvested communities. A trade
association representing state housing finance agencies commented that
the proposed 25 percent cap would ensure that AMA programs continue to
support lending to low- and moderate-income borrowers while not
neglecting underserved communities.
A lenders trade association commented that the proposed 25 percent
cap would mitigate against the risk that AMA mortgage purchases would
be concentrated among higher-income households in low-income areas,
stating that allowing those mortgages to constitute the majority of a
Bank's affordable loan purchases would limit the effectiveness of the
housing goal.
A credit union trade association commented that the proposed 25
percent cap would help balance the benefit of new investment with the
impact on existing residents, but also expressed concern that it could
burden credit unions, which have defined fields of membership that
limit the scope of localities and persons they may serve. This
commenter also noted that the proposed rule preamble did not present
data on the benefits that mortgages to higher-income borrowers living
in low-income areas have on those areas and described the proposed 25
percent cap as arbitrary and in need of additional justification.
Nevertheless, the commenter wrote that the cap would help to balance
the benefit of new investment with the impact on existing residents.
FHFA recognizes that mortgages for higher-income borrowers in low-
income areas may provide indirect benefits to neighboring communities
and homeowners, but such effects, by their nature, are difficult to
quantify. In addition, the market is already providing mortgages to
borrowers with incomes exceeding 80 percent of AMI in low-income areas
at increasing levels, as discussed in the proposed rule preamble.\22\
The potential positive effects from Bank purchases of mortgages for
higher income borrowers are also limited by the relatively limited size
of the Banks' AMA programs as a share of overall secondary market
activity. FHFA has determined that concerns about the Banks relying
excessively on loans to higher income borrowers outweigh the possible
benefits, and therefore the final rule establishes the 25 percent cap
on counting mortgages for higher-income borrowers in low-income areas.
---------------------------------------------------------------------------
\22\ See Federal Home Loan Bank Housing Goals Amendments, 83 FR
55114, 55120, Table 3 (Nov. 2, 2018), available at https://www.govinfo.gov/content/pkg/FR-2018-11-02/pdf/2018-23890.pdf.
---------------------------------------------------------------------------
To help determine the appropriate level for a cap on loans to
borrowers with incomes above 80 percent of area median income counting
toward the mortgage purchase housing goal, FHFA analyzed whether there
would have been a difference in how many Banks met the mortgage
purchase goal's target level under a 25 percent cap as opposed to a 30
percent cap. From 2011 to 2018, a 30 percent cap would have twice
allowed an additional Bank (once in 2018 and once in 2015) to count
more loans toward the goal and therefore exceed the 20 percent target
level, as compared to a 25 percent cap. Table 3 below summarizes the
results of the analysis and shows, for context, the number of Banks
with active AMA programs each year.
[[Page 38041]]
[GRAPHIC] [TIFF OMITTED] TR25JN20.017
FHFA also analyzed the number of Banks that would have had
mortgages excluded from counting toward the mortgage purchase housing
goal due to the cap. For this analysis, FHFA measured whether each Bank
purchased more loans to higher-income borrowers in low-income areas
than would have counted toward the goal at both the 25 percent cap and
30 percent cap levels. This analysis found that more Banks would have
had loans excluded from counting toward the goal under the 25 percent
cap than under the 30 percent cap. Under the 25 percent cap, most Banks
in most years would have had mortgages to higher-income borrowers in
low-income areas excluded from consideration for the mortgage purchase
housing goal. Under the 30 percent cap, the number of Banks with
mortgages excluded due to the cap would have been significantly lower.
Table 4 below summarizes the analysis of Banks that would have had
loans excluded due to the cap.
[GRAPHIC] [TIFF OMITTED] TR25JN20.018
As illustrated by Table 3 and Table 4, the 25 percent cap would
have had little impact on the performance of the Banks under the
mortgage purchase housing goal, but it would have limited the incentive
for Banks to purchase mortgages for borrowers with incomes in excess of
80 percent of AMI in low-income areas in order to meet the goal. FHFA
therefore has concluded that the 25 percent cap is an appropriate level
to encourage the Banks to focus efforts on meeting the goal by
purchasing loans to low-income borrowers, while recognizing that loans
to higher-income borrowers in low-income areas are valuable and will
continue to occur.
VII. New Small Member Participation Housing Goal
Consistent with the proposed rule, Sec. 1281.11(b) of the final
rule establishes a new small member participation housing goal that
requires each Bank annually to ensure that the percentage of total AMA
users that are community-based AMA users meets at least one of the
following: (1) 50 percent, (2) a percentage that is three percentage
points higher than the percentage from the preceding year, or (3) an
alternative target level approved by FHFA. This new small member
participation housing goal reflects the cooperative structure of the
Banks and the recognition that smaller lenders are well-positioned to
reach borrowers with affordable housing needs.
A majority of the AMA users participating in AMA programs are small
when measured by asset size, but a larger portion of the number of AMA
mortgages purchased by the Banks come from AMA users of greater asset
size. In 2018, 83 percent of individual AMA users had total assets
below $1.173 billion, the applicable 2018 CFI asset cap, established
pursuant to 12 U.S.C.
[[Page 38042]]
1422(10)(B). Those AMA users sold 51 percent of the total number of AMA
mortgages purchased by the Banks. Charts 2 and 3 below show the
distribution of each Bank's AMA users by asset size and share of the
number of loans purchased by the Bank from them.
[GRAPHIC] [TIFF OMITTED] TR25JN20.019
[GRAPHIC] [TIFF OMITTED] TR25JN20.020
A. Purpose of the Small Member Participation Housing Goal
The new small member participation housing goal should encourage
Banks to maintain a focus in their AMA programs on small AMA users. As
discussed in the proposed rule preamble, loans purchased from
community-based AMA users (referred to generally as ``small AMA users''
or ``small members'' in the proposed rule) are more likely to be
affordable home loans to low-income households than loans purchased
from large AMA users. Table 5 below illustrates that in 2018, small
(i.e., community-based) AMA users sold low-income or very low-income
AMA loans to the Banks at a rate four percentage points greater than
large AMA users. The proposed rule preamble reported the same
difference using 2017 data.
[[Page 38043]]
[GRAPHIC] [TIFF OMITTED] TR25JN20.021
Small lenders often rely on selling loans to the Banks as their
connection to the secondary mortgage market, whereas larger lenders may
have multiple secondary market executions available.\23\ The small
member participation goal should encourage the Banks to continue to
support small AMA users that might otherwise have difficulty accessing
national capital markets, rather than primarily to augment the
financial results of large AMA users that have no such difficulty.\24\
Small lenders are also an important source of credit access for rural
areas, places of persistent poverty, and other underserved populations.
---------------------------------------------------------------------------
\23\ See generally ``Housing Finance Reform: Protecting Small
Lender Access to the Secondary Mortgage Market, Hearing Before the
S. Comm. on Banking, Housing and Urban Affairs,'' 113th Cong., 1st
Sess. (2013) (website), available at https://www.banking.senate.gov/hearings/housing-finance-reform-protecting-small-lender-access-to-the-secondary-mortgage-market.
\24\ For this reason, FHFA grounds the small member
participation housing goal not just in the housing goals section of
the Bank Act, 12 U.S.C. 1430c, but also in the statutory basis for
the AMA program more generally. See 12 U.S.C. 1430, 1430b, 1431;
Texas Savings & Community Bankers Ass'n v. Federal Housing Finance
Board, 201 F.3d 551 (5th Cir. 2000).
---------------------------------------------------------------------------
The Banks already serve many small AMA users, so the small member
participation housing goal should encourage the Banks to maintain that
focus over time. FHFA anticipates that the working relationships
between Banks and small AMA users will result in ongoing purchases of
AMA mortgages to benefit borrowers in need of financing for affordable
housing.
B. Target Level for the Small Member Participation Housing Goal
Section 1281.11(b)(1) of the final rule establishes the target
level for the small member participation housing goal as 50 percent for
community-based AMA users relative to total AMA users for each Bank,
consistent with the proposed rule. Section 1281.11(b)(2) of the final
rule, as proposed, also provides that a Bank may satisfy the goal by
showing improvement in its community-based AMA user participation of
300 basis points (for example, from 36 percent to 39 percent) over the
previous year's performance. In addition, as proposed, Sec.
1281.11(b)(3) of the final rule allows a Bank to propose an alternative
target level for FHFA approval.
Many commenters supported the proposed small member participation
goal, and no commenters opposed it although, as discussed below,
several commenters requested changes to the proposed target level, and
some expressed concerns about whether certain types of AMA users would
satisfy the proposed CFI asset cap-based size requirements. As noted in
Section IV.C., the final rule retains the quantitative standard for the
proposed cap but incorporates the standard directly to the Bank housing
goals regulation. Several commenters supported, for purposes of
determining community-based AMA user status, the use of the three-year-
average standard used to determine CFI eligibility.\25\ The language in
the final rule adopts that standard. Comments from a trade association
representing state housing finance agencies, a lenders trade
association, a credit union, a nonprofit, a community bankers trade
association, and a U.S. Senator supported the proposed 50 percent
target level on the basis that it would encourage small AMA user
participation. The U.S. Senator specifically expressed support for the
proposal allowing a Bank to meet the goal by demonstrating improvement
over the previous year's performance.
---------------------------------------------------------------------------
\25\ See 12 U.S.C. 1422(10)(A)(ii); 12 CFR 1263.1 (par. (2),
definition of ``community financial institution or CFI'').
---------------------------------------------------------------------------
The Banks recommended that the rule establish a range of specific
target levels and that FHFA make periodic determinations of a specific
target level within the range for the Banks to meet, based on data
reported by a national trade organization. The Banks did not specify
this range, but they suggested a target level of 40 percent, rather
than 50 percent, on the basis that they expect declines in Bank
membership.
In contrast, a consumer advocacy group and a community
revitalization organization recommended setting a target level higher
than 50 percent for the goal. The consumer advocacy group stated that
the data in the proposed rule preamble suggest that a 50 percent target
level is too low since 9 of the 11 Banks are far above that level. The
community revitalization organization stated that a 50 percent target
level would not motivate the Banks to do the outreach necessary to
increase participation by small members, particularly community
development financial institutions (CDFIs).
A credit union trade association requested more information to
better understand the proposed 50 percent target level. It requested
more data, including additional background on trends in the market and
overall small member participation in the market.
FHFA found that the small member participation rates in 2018 were
quite similar to the 2017 participation rates described in the proposed
rule preamble. As shown in Table 6 below, most of the Banks had shares
of small (i.e., community-based) AMA users well above the proposed 50
percent target level. Incremental progress for the two Banks below the
50 percent target level would require adding only a single new
community-based AMA user.
[[Page 38044]]
[GRAPHIC] [TIFF OMITTED] TR25JN20.022
The Enterprise housing goals regulation does not include any goal
similar to the small member participation housing goal. FHFA is
establishing the goal for the Banks, which are cooperatives owned by
their members and which place high value on supporting small members.
Maintaining and improving small member participation in the AMA
programs supports liquidity for affordable housing. As discussed above,
small members of the Banks have originated mortgages to low-income
borrowers at a higher rate than larger members.
In response to the comment seeking additional data on small
institutions, FHFA considered whether other data sources such as HMDA
data and banking regulator-published data could be used to provide
comparisons regarding small institution performance in lending to low-
income and very low-income borrowers. FHFA did not find readily
accessible market-wide data linking institution asset size to mortgage
origination data that would allow FHFA to analyze market-wide trends.
For the above reasons, FHFA has concluded that 50 percent is an
appropriate target level for the small member participation housing
goal. It is demonstrably achievable for most Banks, while motivating
them to maintain or expand efforts to recruit small member
participation in AMA programs. Banks expecting a substantial decline in
membership or other unusual circumstances may propose an alternative
target level for FHFA approval, as further discussed in Section VIII.
below. The provision allowing a Bank to meet the goal instead by
demonstrating progress of 300 basis points in small AMA user
participation addresses the needs of Banks with small AMA programs that
are still building member participation.
C. Standard for AMA Users With Assets Not in Excess of the CFI Asset
Cap/Community-Based AMA User Asset Cap
FHFA received comments from several commenters, including two
credit union trade associations, that the final rule should not
preclude credit unions, CDFIs, state housing finance agencies, and
others from being counted as small AMA users for purposes of the small
member participation housing goal. These comments appear to stem from a
misreading of the proposed rule. Under the proposed and final rules, a
certain percentage of each Bank's AMA users would need to be
institutions with assets not in excess of the CFI asset cap. The final
rule does not require, nor would the proposed rule have required, that
any particular percentage of AMA users be CFIs. CFIs are treated no
differently than other types of institutions for purposes of the small
member participation housing goal. Further, as noted in Section IV.C.
above, the final rule retains the proposed quantitative CFI asset cap
standard but adopts the relevant standard directly rather than via
cross-reference to the Bank membership regulation. The final rule
adopts the three-year average of total assets and a determination of
total assets relative to the cap once per year, as is used for the CFI
asset cap.
[[Page 38045]]
A trade association for state housing finance agencies recommended
that the final rule treat all state housing finance agencies as small
AMA users regardless of their total asset size, to encourage
interaction between the Banks and state housing finance agencies.
Designation as a small AMA user would not provide any significant
incentive to a state housing finance agency to sell mortgages through
the AMA programs, as the designation would not change the terms of the
AMA programs. Because the Banks generally meet the 50 percent target
level already, the only incentive provided by such a designation would
be a small incentive to a Bank to do outreach and solicit mortgages
from such entities. Therefore, FHFA has concluded that providing a
special designation of state housing finance agencies as community-
based AMA users regardless of their total asset size is not warranted.
VIII. Alternative Target Levels for Housing Goals
Section 1281.11(c)(1) of the final rule provides each Bank, upon
approval of its board of directors, the opportunity to submit for FHFA
prior approval an alternative target level for either or both of the
housing goals. A Bank's request must include proposed target levels for
three consecutive years following the calendar year in which the
proposal is submitted. A Bank is not required to propose the same
target level for each of the three years. In the absence of FHFA's
approval of a Bank's proposed alternative target level, the Bank is
subject to the target level established in the final rule.
Section 1281.11(c)(2) requires that a Bank's submission include a
detailed explanation of: (i) Why the applicable target level (20
percent for the mortgage purchase housing goal and 50 percent for the
small member participation housing goal) is infeasible; (ii) why the
Bank's proposed alternative target level is achievable; and (iii) how
the Bank's proposed alternative target level will meaningfully further
affordable housing mortgage lending in its district.
A significant number of commenters expressed support for allowing
the Banks to submit requests for alternative target levels. These
commenters included a credit union, the Banks, a bank trade
association, a U.S. Senator, a credit union trade association, a
consumer advocacy organization, and a nonprofit. No commenters opposed
the proposal.
Thirty-six state or local advocacy and community development
organizations, in a joint comment letter, recommended that FHFA require
well-reasoned justification that a Bank's proposed alternative target
level is a stretch for the Bank. A lenders trade association commented
that Bank proposals for alternative target levels should be informed by
thorough data analysis and compelling evidence in order to receive FHFA
approval.
The Banks expressed concern that the lack of a detailed timeline in
the proposed rule for FHFA's review and response would create
uncertainty for Banks whose past performance was well below the target
level for a housing goal and who propose an alternative target level. A
credit union trade association expressed similar concern.
FHFA believes that the final rule's submission deadline of
September 15 should allow sufficient time for review, discussions as
needed, and response to the Bank before the start of the applicable
calendar year. In addition, the Banks may propose alternative target
levels at any time before the annual deadline of September 15, subject
to the three-year waiting period.
A. Frequency of Bank Requests
Section 1281.11(c) of the final rule allows a Bank to request an
alternative target level no more than once every three years, subject
to two exceptions discussed below. The request must be submitted by
September 15 of the year preceding the year in which the alternative
target level would apply. The September 15 deadline is earlier than the
October 31 deadline in the proposed rule. The earlier deadline will
allow time for any comments to be submitted by the public on the
proposed alternative target levels, as discussed further in Section
VIII.C. below.
Section 1281.11(c)(1) of the final rule provides that each request
for an alternative target level must be approved by the Bank's board of
directors. The proposed rule was silent on the level of approval needed
for a Bank's request for an alternative target level. The final rule
clarifies that the Bank's board of directors must approve any request
for an alternative target level, which is consistent with other
regulatory requirements and established practice regarding similar Bank
requests.
Also in contrast to the proposed rule, which would have allowed a
Bank submission only in the year the final rule becomes effective, and
every three years thereafter, the final rule does not restrict a
submission to any particular calendar years. For example, under the
final rule, a Bank could make a submission on or before September 15,
2022, and would then be prohibited from making an additional submission
until 2025 (three years from the date of the previous submission). The
Bank could submit its 2025 request at any time until the September 15,
2025 deadline. If a Bank made its first request for alternative target
levels on or before September 15, 2023, the Bank would then be
prohibited from making another submission until 2026, with a deadline
of September 15, 2026.
A community bankers trade association suggested that Banks be
allowed to propose alternative target levels every year to allow Banks
to better adapt to market conditions. FHFA notes, however, that the
housing goals, by their nature, are a long-term planning tool rather
than a year-to-year steering mechanism. Their aim is to ensure that the
Banks make affordable housing part of their ongoing business planning
for their AMA programs. Too frequent steering adjustment could lead
either to overly ambitious target levels attempting to maximize support
for affordable home lending, or overly pessimistic target levels
anticipating weak market activity. The target levels in the final rule
are designed to be more stable over time and somewhat flexible to
market volume. Should markets take a sudden turn, FHFA retains the
flexibility to determine a goal infeasible for a particular Bank.
Accordingly, in light of the long-term nature of the housing goals
and the Banks' desire for additional flexibility, the final rule allows
a Bank to submit a proposed alternative target level once every three
years and does not limit the submission to any particular calendar
years.
B. Exceptions to Three-Year Waiting Period
Notwithstanding the three-year waiting period, Sec.
1281.11(c)(3)(ii) of the final rule provides that FHFA may at any time
require a Bank to submit a request for an alternative target level to
address discontinuation of an AMA product or program or approval of a
new AMA product or program. This provision is largely consistent with
the proposed rule, with the addition of the reference to ``product'' in
the final rule. Both terms ``AMA program'' and ``AMA product'' are
defined in Sec. 1268.1 of the AMA regulation.
In addition, Sec. 1281.11(c)(3)(iii) of the final rule adds an
exception to the three-year waiting period that allows a Bank's board
of directors to submit a request to FHFA at any time for an alternative
target level if warranted given particular economic, operational, or
other circumstances. FHFA does not intend this provision to be used
frequently or regularly.
[[Page 38046]]
C. Public Notice and Comment on Proposed Alternative Target Levels
Section 1281.11(c)(4) of the final rule provides that FHFA will
make each request for alternative target levels available for public
comment on FHFA's website for at least 30 days. This provision was not
included in the proposed rule but has been added in the final rule in
response to comments received on the proposed rule. Thirty-six state or
local advocacy and community development organizations, in a joint
comment letter, as well as a nonprofit consumer advocacy organization,
suggested that requests for alternative target levels be subject to
public comment before FHFA's approval. A bank trade association
emphasized that proposals for alternative target levels should be based
on thorough data analysis and compelling evidence. FHFA is persuaded by
these comments. While public comment will add time to the review
process, information beyond what a proposing Bank submits will aid FHFA
in evaluating proposed alternative target levels, especially if that
information is rooted in knowledge of district housing and economic
conditions.
Materials posted for public comment will not include any
confidential or proprietary information submitted by a Bank. The final
rule requires that a Bank submit information that it considers to be
confidential or proprietary as a separate document, clearly designated
as confidential or proprietary, to facilitate posting for public
comment.
IX. Participation Interests in AMA Mortgages
The final rule, as proposed, addresses participations under two
different scenarios. Under the first scenario, a Bank purchases a
mortgage and later sells a participation interest in the mortgage to
another Bank. Section 1281.13(b)(1) provides that participations among
Banks that are executed after the mortgage was first acquired by a Bank
will not be counted as mortgage purchases by a Bank purchasing such a
participation for purposes of the mortgage purchase housing goal. This
is consistent with FHFA's practice under the current regulation. This
exclusion applies even if the participation is executed on the same day
as the original mortgage acquisition by a Bank.
Under the second scenario, two or more Banks each purchase
participation interests in the same mortgage simultaneously. Section
1281.13(e) of the final rule provides that participations among Banks
that are entered simultaneously pursuant to an existing participation
agreement will be counted as mortgage purchases on a pro rata basis
toward the mortgage purchase housing goal for each Bank according to
each Bank's percentage interest. This provision codifies existing FHFA
practice on the treatment of participations under this scenario. FHFA
received no comments on this proposal and the final rule adopts this
change as proposed.
X. Other Comments Received
FHFA received several other comments that are addressed below,
grouped by topic.
A. Adjustment to Target Levels for Unexpected Adverse Events
Several commenters asked how FHFA could adjust the housing goals or
its evaluations of Bank performance in case of unexpected adverse
events. The final rule provides several flexibilities in the case of
such events. First, as under the current regulation, the goal target
levels are based on a percentage of total mortgage purchases, so they
have some inherent ability to remain applicable even as overall market
volume expands or contracts, unlike a numerical target level.
Second, the Banks may propose alternative target levels, no more
frequently than every three years. FHFA may allow a Bank to submit more
frequently if unexpected circumstances warrant.
Third, as under the current regulation, when FHFA makes its annual
determination of housing goals performance, it takes into account the
feasibility of achieving the housing goals. If FHFA determines that a
housing goal was infeasible for a particular Bank, the Bank is not
required to submit a housing plan to FHFA. Even if FHFA determines that
a housing goal was feasible for a particular Bank, FHFA has the option
to forego requiring a housing plan from the Bank if warranted.
B. Counting Rules
The Banks asked whether loans purchased through the MPF Government
product while held on balance sheet for eventual deployment into an MPF
Government MBS count toward the housing goals. Since these loans are
purchased through an AMA program, they count if they otherwise meet the
criteria for the mortgage purchase housing goal and were sold to the
Bank by a community-based AMA user, i.e., an AMA user with assets not
in excess of the community-based AMA user asset cap.
The Banks also asked how MPF loans facilitated by other Banks but
technically purchased directly by the Chicago Bank from a member or
housing associate of another Bank would count toward the mortgage
purchase goal. For housing goals purposes, FHFA will count such loans
toward the performance of the Bank of which the seller is a member or
housing associate, continuing current practice.
C. Manufactured Housing
A nonprofit affordable housing advocacy organization with an
interest in expanding access to manufactured housing noted that the
proposed rule would allow chattel loans on manufactured housing to
count for purposes of the housing goals and requested that FHFA ensure
such loans do not originate from predatory lending practices. A
nonprofit manufactured housing community trade association and a
national nonprofit manufactured housing intermediary recommended that
FHFA issue more detailed guidance on the purchase of loans secured by
manufactured housing generally. To date, there have been few, if any,
purchases of chattel loans by the Banks. Accordingly, the final rule
does not add housing goals restrictions specific to the Banks'
purchases of loans secured by manufactured housing.
Section 1281.13 of the final rule, consistent with the proposed
rule, eliminates a provision of the regulation that precludes ``HOEPA
mortgages'' and ``mortgages with unacceptable terms and conditions''
from counting towards the housing goals. As discussed in the proposed
rule preamble, guidance issued by FHFA to the Banks generally on the
purchases of mortgages with certain predatory features rendered this
provision in the housing goals regulation redundant. None of the
comments caused FHFA to determine that this guidance is inadequate.
Moreover, one of the purposes of the final rule, as discussed in the
proposed rule preamble, is to better align the housing goals with the
AMA regulation so that limitations on the types of loans eligible for
Bank purchase are specified in the AMA regulation, not in the Bank
housing goals regulation. In addition, FHFA did not propose any
amendments to the AMA regulation.
D. Monitoring
Many commenters requested that FHFA monitor various aspects of the
Banks' housing goals activity closely, especially in the first years of
activity
[[Page 38047]]
under the revised housing goals, including:
Monitoring for any Banks' disincentive to participate in
AMA programs;
Monitoring the AMA loan composition over time;
Monitoring whether any Banks require members to meet the
mortgage purchase goal individually in loans sold to the Bank; and
Monitoring Bank performance on the small member
participation housing goal.
FHFA will monitor for these and other factors to ensure that the
housing goals function as intended.
XI. Other Provisions in the Final Rule
The final rule also revises other provisions of the Bank housing
goals regulation, as discussed below.
A. Changes to Definitions--Sec. 1281.1
As proposed, Sec. 1281.1 of the final rule adds, revises, or
removes certain definitions of terms used in the current Bank housing
goals regulation. Specifically, the final rule adds definitions of
``AMA mortgage,'' ``AMA program,'' and ``AMA user.'' The final rule
revises the definitions of ``dwelling unit,'' ``families in low-income
areas,'' ``median income,'' ``metropolitan area,'' ``mortgage,'' and
``non-metropolitan area.'' The final rule removes the definitions of
``Acquired Member Assets (AMA) program,'' ``AMA-approved mortgage,''
``conforming mortgage,'' ``HMDA,'' ``HOEPA mortgage,'' ``HUD,''
``mortgage data,'' ``mortgage with unacceptable terms or conditions,''
``owner-occupied housing,'' ``residential mortgage,'' and ``second
mortgage. In contrast to the proposed rule, the final rule does not
remove the definition of ``conventional mortgage'' for the reasons
discussed under Section VI.D. above. Also in contrast to the proposed
rule, the final rule does not add ``CFI asset cap'' or ``community
financial institution or CFI'' as defined terms, instead adding new
terms ``community-based AMA user'' and ``community-based AMA user asset
cap.'' In response to the proposed revisions to Sec. 1281.1, other
than those addressed in Section VII.C. above regarding the proposed
rule's use of ``CFI asset cap'' and ``CFI,'' FHFA did not receive any
comments. The changes to these definitions not discussed elsewhere in
the preamble are discussed below.
1. Definition of ``AMA mortgage''
As proposed, the final rule replaces the term ``AMA-approved
mortgage,'' with ``AMA mortgage'' as a technical, non-substantive
change. The Bank housing goals regulation currently defines ``AMA-
approved mortgage'' to mean a mortgage that meets the requirements of
an AMA program, with cross-references to the AMA regulation and the New
Business Activities regulation.\26\ Section 1281.1 of the final rule
replaces the term ``AMA-approved mortgage'' with ``AMA mortgage'' and
defines it to mean a mortgage that was purchased by a Bank under an AMA
program.
---------------------------------------------------------------------------
\26\ 12 CFR part 1272.
---------------------------------------------------------------------------
2. Definition of ``AMA Program''
The final rule replaces the term ``Acquired Member Assets (AMA)
program,'' with ``AMA program'' as a technical change. The current Bank
housing goals regulation defines ``Acquired Member Assets (AMA)
program'' as a program that authorizes a Bank to hold assets acquired
from a member or housing associate by a purchase or funding transaction
subject to the requirements of the AMA regulation and New Business
Activities regulation. At the time the current Bank housing goals
regulation was adopted, the term ``AMA program'' was not a defined term
in the AMA regulation. A definition for the term ``AMA program'' was
subsequently added to the AMA regulation in 2016.\27\ There is no
substantive difference between the definition of ``Acquired Member
Assets (AMA) program'' in the Bank housing goals regulation and the
definition of ``AMA program'' in the AMA regulation. Accordingly, for
consistency in terminology between the two regulations, Sec. 1281.1 of
the final rule replaces the definition of ``Acquired Member Assets
(AMA) program'' in the housing goals regulation to conform it to the
definition of ``AMA program'' in the AMA regulation.
---------------------------------------------------------------------------
\27\ 12 CFR 1268.1.
---------------------------------------------------------------------------
3. Definition of ``AMA User''
As proposed, Sec. 1281.1 of the final rule adds a number of new
definitions to implement the small member participation housing goal.
The final rule adds ``AMA user'' as a participating financial
institution (which can be a member or housing associate) \28\ under the
AMA regulation \29\ from which a Bank purchased at least one AMA
mortgage during the year for which the housing goal is being measured.
---------------------------------------------------------------------------
\28\ Although eligible housing associates may participate in a
Bank's AMA program and the participation of a housing associate may
count towards the small member participation housing goal, as noted
above, since 2000, no housing associate has sold an AMA mortgage
loan to a Bank.
\29\ 12 CFR 1268.1.
---------------------------------------------------------------------------
4. Definition of ``conforming mortgage''
The current Bank housing goals regulation defines ``conforming
mortgage'' as a conventional, AMA-approved single-family mortgage with
an original principal obligation that does not exceed the dollar
limitation under the AMA regulation or under the Freddie Mac conforming
loan limits. Only purchases of mortgages under AMA programs count for
purposes of the housing goals, and the AMA programs include limits on
the size of mortgages that may be purchased by a Bank. Thus, it is not
necessary for the housing goals regulation to include a separate limit
on the size of mortgages that may be counted for purposes of the
housing goals. Accordingly, as proposed, the final rule removes the
definition of ``conforming mortgage'' from the housing goals regulation
as unnecessary.
5. Definition of ``conventional mortgage''
The current Bank housing goals regulation defines ``conventional
mortgage'' as any mortgage that does not include a guaranty, insurance
or other obligation by the United States or any of its agencies or
instrumentalities. This definition was included in the regulation
because only conventional mortgages counted towards the Bank housing
goals. The proposed rule would have expanded the coverage of the Bank
housing goals to include both conventional mortgages and non-
conventional mortgages. Therefore, under the proposed rule, there would
have been no need to distinguish between conventional mortgages and
non-conventional mortgages so the definition of ``conventional
mortgage'' was no longer necessary.
However, because the final rule provides that non-conventional
mortgages purchased from community-based AMA users will count towards
the mortgage purchase goal, Sec. 1281.1 of the final rule retains
``conventional mortgage'' as a defined term.
6. Definition of ``dwelling unit''
The current Bank housing goals regulation defines ``dwelling unit''
to mean a room or unified combination of rooms intended for use, in
whole or in part, as a dwelling by one or more persons, and includes a
dwelling unit in a single-family property, multifamily property, or
other residential or mixed-use property. In the 2015 final rule
amending the Enterprise housing goals regulation, FHFA revised the
analogous definition to exclude a combination of rooms that does not
have plumbing or
[[Page 38048]]
kitchen facilities.\30\ Accordingly, to align the definitions in the
two regulations, as proposed, Sec. 1281.1 of the final rule revises
the definition of ``dwelling unit'' in the Bank housing goals
regulation to exclude a combination of rooms that does not have
plumbing or kitchen facilities.
---------------------------------------------------------------------------
\30\ See 80 FR 53392 (Sept. 3, 2015), codified at 12 CFR 1282.1.
---------------------------------------------------------------------------
7. Definition of ``HOEPA mortgage''
The current Bank housing goals regulation defines ``HOEPA
mortgage'' as a mortgage covered by the definition of ``high-cost
mortgage'' under the Truth in Lending Act. This definition was included
because the housing goals regulation excludes HOEPA mortgages from
counting toward achievement of the Bank housing goals. However, the
final rule removes the provision excluding HOEPA mortgages from
counting for purposes of the Bank housing goals. Therefore, the final
rule removes the definition of ``HOEPA mortgage'' as no longer
necessary.
8. Definitions of ``median income,'' ``metropolitan area,'' ``non-
metropolitan area,'' and ``HUD''
The current Bank housing goals regulation defines ``median
income,'' with respect to an area, as the unadjusted median family
income for the area as determined by the Department of Housing and
Urban Development (HUD). The current definition further provides that
FHFA will provide the Banks annually with information specifying how
the median family income estimates for metropolitan areas are to be
applied for the purposes of determining median family income. FHFA's
practice is to calculate the applicable median income figures for both
metropolitan and non-metropolitan areas and to provide the median
income information to the Banks. Accordingly, as proposed, Sec. 1281.1
of the final rule aligns the definition of ``median income'' with
FHFA's practice, by revising it to mean, with respect to an area, the
unadjusted median family income for the area as determined by FHFA. The
final rule also revises the definition to provide that FHFA will
provide the Banks annually with information specifying how the median
family income estimates for both metropolitan and non-metropolitan
areas are to be applied for purposes of determining median income.
The current Bank housing goals regulation defines ``metropolitan
area'' as a metropolitan statistical area (MSA), or a portion of such
an area, including Metropolitan Divisions, for which median family
income estimates are determined by HUD. The regulation defines ``non-
metropolitan area'' as a county, or a portion of a county, including
those counties that comprise Micropolitan Statistical Areas, located
outside any metropolitan area for which median family income estimates
are published annually by HUD. As proposed, Sec. 1281.1 of the final
rule aligns the definition of ``metropolitan area'' with FHFA's
practice by revising it to mean an MSA, or a portion of such an area,
including Metropolitan Divisions, for which median incomes are
determined by FHFA. The final rule aligns the definition of ``non-
metropolitan area'' with FHFA's practice by revising it to mean a
county, or a portion of a county, including those counties that
comprise Micropolitan Statistical Areas, located outside any
metropolitan area, for which median incomes are determined by FHFA.
The current Bank housing goals regulation defines ``HUD'' as the
United States Department of Housing and Urban Development. Because the
term ``HUD'' was used only in the definitions of ``median income,''
``metropolitan area,'' and ``non-metropolitan area'' and the final rule
removes the references to ``HUD'' from those definitions, the
definition of ``HUD'' is no longer necessary and is removed, as
proposed.
9. Definition of ``Mortgage''--Inclusion of Chattel Loans on
Manufactured Housing
The current Bank housing goals regulation includes a detailed
definition of ``mortgage'' which includes all loans secured by real
estate and any interests in such mortgages. The definition is based on
the definition of ``mortgage'' in the Enterprise housing goals
regulation and excludes chattel loans on manufactured housing. As
proposed, Sec. 1281.1 of the final rule revises the definition of
``mortgage'' in the Bank housing goals regulation to include chattel
loans on manufactured housing. While the Banks have purchased few, if
any, chattel loans on manufactured housing, the AMA regulation does not
prohibit such purchases. Adding chattel loans on manufactured housing
to the definition of ``mortgage'' in the Bank housing goals regulation
simplifies the Bank housing goals by removing a potential difference
between the coverage of the Bank housing goals and the AMA regulation.
10. Definition of ``mortgage with unacceptable terms or conditions''
The current Bank housing goals regulation defines ``mortgage with
unacceptable terms or conditions'' as a mortgage that has one or more
of a series of terms or conditions that FHFA determined to be harmful
to borrowers. This definition was included in the regulation because
the regulation excludes such mortgages from counting toward achievement
of the Bank housing goals. Because the final rule removes the provision
excluding mortgages with unacceptable terms or conditions from counting
for purposes of the Bank housing goals, this definition is no longer
necessary and is also removed, as proposed.
11. Definition of ``owner-occupied housing''
The current Bank housing goals regulation defines ``owner-occupied
housing'' as single-family housing in which a mortgagor resides,
including two- to four-unit owner-occupied properties where one or more
units are used for rental purposes. The definition of ``owner-occupied
housing'' was included in the regulation because the Bank housing goals
are currently limited to mortgages on owner-occupied housing. As
proposed, the final rule expands the coverage of the Bank housing goals
to include all AMA mortgages, including mortgages not only on owner-
occupied single-family properties but also investor-owned single-family
properties. The final rule does not establish separate criteria for
evaluating whether a mortgage on an investor-owned property could be
counted for purposes of the housing goals. Any such mortgages will be
evaluated based on the income of the mortgagor in the same manner as
the evaluation of a mortgage on an owner-occupied property. Because the
regulation will no longer limit the Bank housing goals to mortgages on
owner-occupied housing, the final rule removes the definition of
``owner-occupied housing'' from the Bank housing goals regulation as
unnecessary.
12. Definition of ``residential mortgage''
The current Bank housing goals regulation defines ``residential
mortgage'' as a mortgage on single-family housing. The term
``residential mortgage'' is not used anywhere else in the regulation or
in the final rule. Accordingly, as proposed, the final rule removes the
definition of ``residential mortgage'' as unnecessary.
13. Definition of ``second mortgage''
The current Bank housing goals regulation defines ``second
mortgage'' as any mortgage that has a lien position subordinate only to
the lien of the first mortgage. This term is used in Sec.
1281.13(b)(8), which provides that
[[Page 38049]]
``purchases of subordinate lien mortgages (second mortgages),'' do not
count for purposes of the housing goals. The final rule clarifies that
this prohibition applies to all mortgages that are subordinate to the
first mortgages, not only second mortgages. Because ``second mortgage''
will no longer appear in the regulation, as proposed, the final rule
removes this definition as unnecessary.
B. General--Sec. 1281.10
Consistent with the proposed rule, the final rule revises Sec.
1281.10 to reflect the new structure of the housing goals and removal
of the volume threshold.
C. Changes to Bank Housing Goals--Sec. Sec. 1281.11 and 1281.14
The final rule also adopts a proposed conforming change to Sec.
1281.14(a) by eliminating the Bank volume threshold as a consideration
in determining whether the Director evaluates annual performance of
Bank performance under each housing goal.
In addition, the final rule requires that no more than 25 percent
of the mortgages that are counted toward a Bank's achievement of the
prospective mortgage purchase housing goal may be mortgages for
families with incomes above 80 percent of area median income. This is
consistent, in substance, with the proposed rule, which would have
established the same requirement, but which would have characterized it
as a requirement that at least 75 percent of the mortgages that are
counted toward a Bank's achievement of the prospective mortgage
purchase housing goal must be for low-income or very low-income
families. The final rule also includes language clarifying that any
purchases of mortgages for families with incomes above 80 percent of
area median income in excess of the 25 percent cap shall be treated as
a mortgage purchase for purposes of the housing goals and shall be
included in the denominator for the housing goal, but such mortgages
shall not be included in the numerator in calculating a Bank's
performance under the housing goals.
D. General Counting Requirements--Sec. 1281.12
The final rule adopts all proposed revisions to Sec. 1281.12. The
current Bank housing goals regulation defines the ``numerator'' and
``denominator'' used to calculate performance under the current housing
goals. The final rule deletes paragraph (a) as unnecessary in light of
the mortgage goal calculation standards reflected in Sec. 1281.11 of
the final rule.
The current Bank housing goals regulation also provides that
mortgages with missing data or information necessary for counting are
included in the denominator when calculating a Bank's performance, but
not in the numerator. This effectively penalizes a Bank's performance
by treating mortgages with missing data or information as if they were
loans that did not meet the applicable criteria. Accordingly, the final
rule also removes paragraph (b)(1), so that mortgages with missing data
or information are disregarded (i.e., not included in the numerator or
denominator) for purposes of measuring a Bank's performance on the
housing goals.
Finally, paragraph (c), which provides that a mortgage may only
count once towards achievement of a housing goal even if it satisfies
more than one goal, is redesignated as paragraph (b) and revised to
permit each mortgage to be counted only once toward achievement of the
prospective mortgage purchase housing goal, even if it satisfies
multiple categories under the goal.
The final rule also makes conforming redesignations of paragraphs
throughout the remainder of Sec. 1281.12.
E. Special Counting Requirements--Sec. 1281.13
Paragraph (b) of Sec. 1281.13 currently enumerates categories of
transactions or activities that are not counted for purposes of the
housing goals and are not included in the numerator or the denominator
in calculating a Bank's housing goals performance. The proposed rule
would have removed references to ``numerator'' and ``denominator'' as
unnecessary in light of the simplified calculation methodology
reflected in Sec. 1281.11. However, the final rule retains clarifying
language to specify that loans which are ``not counted for purposes of
the housing goals'' are excluded from both the numerator and
denominator.
F. Determination of Compliance With Housing Goals; Notice of
Determination--Sec. 1281.14
The final rule adopts all proposed revisions to Sec. 1281.14. The
final rule amends Sec. 1281.14(a) by removing the reference to the
volume threshold, which is no longer applicable. The final rule also
amends Sec. 1281.14(a) to require that FHFA publish its annual
determinations of Bank housing goals compliance and specifies the types
of data to be included in the published determinations.
G. Housing Plans--Sec. 1281.15
The final rule revises Sec. 1281.15 to provide that the Director
may only require that a Bank submit a housing plan for any year after
2023. As discussed in Section IV.D. above, this is in contrast to the
proposed rule, which would have extended this period only through 2021.
This reflects the phase-in period for the new housing goals,
eliminating possibility of a housing plan during the first three years
in which the prospective mortgage purchase and small member
participation housing goals are operative. Because a Bank may be
required to submit a housing plan while awaiting FHFA's response to a
proposal by the Bank for an alternative goal target level, the final
rule amends Sec. 1281.15 by adding new paragraph (b)(5) to require
that the housing plan address any alternative target levels the Bank is
requesting. This is generally consistent with the proposed rule, with
certain technical revisions including replacing the reference to
``Bank-specific housing goals'' with ``alternative target levels'' for
consistency and clarity.
H. Reporting Requirements--Sec. Sec. 1281.1 and 1281.20
Consistent with the proposed rule, the final rule amends Subpart C
of the current regulation to simplify and clarify the reporting
requirements for the Banks under the new housing goals. The final rule,
as proposed, revises the reporting requirements to reflect the new
housing goals structure and to eliminate provisions that are either
duplicative of, or potentially inconsistent with, the existing Bank
reporting requirements in FHFA's Data Reporting Manual (DRM). The DRM,
which is amended from time to time, includes detailed requirements
about the data elements that the Banks must report and the timing and
format of the required reporting.
The final rule, as proposed, consolidates the four sections that
currently exist in Subpart C of the Bank housing goals regulation into
a single section. Accordingly, Sec. Sec. 1281.21, 1281.22 and 1281.23
are removed from the regulation. Section 1281.20 includes the new
reporting requirements. Section 1281.20(a) requires the Banks to submit
to FHFA any data that FHFA determines to be necessary to evaluate
transactions and activities under the Bank housing goals. Section
1281.20(b) and (c) set out the data reporting requirements for the
prospective mortgage purchase housing goal and the small member
participation housing goal, respectively, and require such submissions
to be made in
[[Page 38050]]
accordance with the DRM. Section 1281.20(d) continues to permit FHFA to
require a Bank to provide such additional reports, information, and
data as FHFA may request from time to time.
Consistent with the proposed rule, the final rule also removes the
provision in the current regulation that addresses errors, omissions or
discrepancies in the data reported by a Bank. This provision is
unnecessary in light of FHFA's existing supervisory and regulatory
authorities and procedures.
Finally, consistent with the proposed rule, the final rule removes
the definition of ``mortgage data'' from the regulation. The regulation
defines ``mortgage data'' as data obtained from the Banks under the
DRM. The final rule's revisions to the reporting requirements in
Subpart C remove all references to the term ``mortgage data,'' making
the definition unnecessary.
XII. 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 requested comments from the public about whether these
differences should result in any revisions to the proposed rule, but no
significant, relevant comments were received. FHFA, in preparing this
final rule, considered the differences between the Banks and the
Enterprises as they relate to the above factors and determined these
amendments to the Bank Housing Goal regulation to be appropriate and
reflect the unique differences between the Banks and Enterprises. 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, and similarly determined these
amendments to be appropriate in light of relevant factors.\31\
---------------------------------------------------------------------------
\31\ See 12 U.S.C. 1430c.
---------------------------------------------------------------------------
XIII. Paperwork Reduction Act
The final rule does not contain any information collection
requirement that would require the approval of OMB under the Paperwork
Reduction Act (44 U.S.C. 3501 et seq.). Therefore, FHFA has not
submitted any information to OMB for review.
XIV. 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
final rule under the Regulatory Flexibility Act. The General Counsel of
FHFA certifies that the final rule is not likely to have a significant
economic impact on a substantial number of small entities because the
final rule applies to the Banks, which are not small entities for
purposes of the Regulatory Flexibility Act.
XV. Congressional Review Act
In accordance with the Congressional Review Act (5 U.S.C. 801 et
seq.), FHFA has determined that this final rule is a major rule and has
verified this determination with the Office of Information and
Regulatory Affairs of OMB.
List of Subjects in 12 CFR Part 1281
Credit, Federal home loan banks, Housing, Mortgages, Reporting and
recordkeeping requirements.
Authority and Issuance
For the reasons stated in the SUPPLEMENTARY INFORMATION, under the
authority of 12 U.S.C. 4526, 1430, 1430b, 1430c, and 1431, FHFA is
amending part 1281 of Title 12 of the Code of Federal Regulations as
follows:
CHAPTER XII--FEDERAL HOUSING FINANCE AGENCY
SUBCHAPTER E--HOUSING GOALS AND MISSION
PART 1281--FEDERAL HOME LOAN BANK HOUSING GOALS
0
1. Revise the authority citation for part 1281 to read as follows:
Authority: 12 U.S.C. 1430, 1430b, 1430c, 1431.
0
2. Amend Sec. 1281.1 by:
0
a. Removing the definitions of ``Acquired Member Assets (AMA) program''
and ``AMA-approved mortgage'';
0
b. Adding definitions for ``AMA mortgage'', ``AMA program'', and ``AMA
user'' in alphabetical order;
0
c. Removing the definition of ``Conforming mortgage'';
0
d. Adding in alphabetical order the definitions for ``Community-based
AMA user'' and ``Community-based AMA user asset cap'';
0
e. Revising the definition of ``Dwelling unit'' and paragraph (1) of
the definition of ``Families in low-income areas'';
0
f. Removing the definitions of ``HMDA'', ``HOEPA mortgage'', and
``HUD'';
0
g. Revising the definitions of ``Median income'', ``Metropolitan
area'', and ``Mortgage'';
0
h. Removing the definitions of ``Mortgage data'' and ``Mortgage with
unacceptable terms or conditions'';
0
i. Revising the definition of ``Non-metropolitan area''; and
0
j. Removing the definitions of ``Owner-occupied housing'',
``Residential mortgage'', and ``Second mortgage''.
The revisions and additions read as follows:
Sec. 1281.1 Definitions.
* * * * *
AMA mortgage means a mortgage that was purchased by a Bank under an
AMA program.
AMA program has the meaning set forth in Sec. 1268.1 of this
chapter.
AMA user means any participating financial institution, as defined
in Sec. 1268.1 of this chapter, from which the Bank purchased at least
one AMA mortgage during the year for which the housing goals are being
measured.
* * * * *
Community-based AMA user means any AMA user whose average total
assets over the three-year period culminating in the year preceding the
one being measured are no greater than the applicable community-based
AMA user asset cap.
Community-based AMA user asset cap means $1,224,000,000, subject to
annual adjustments by FHFA, beginning in 2021, to reflect any
percentage increase in the preceding year's Consumer Price Index (CPI)
for all urban consumers, as published by the U.S. Department of Labor.
* * * * *
Dwelling unit means a room or unified combination of rooms with
plumbing and kitchen facilities intended for use, in whole or in part,
as a dwelling by one or more persons, and includes a dwelling unit in a
single-family property, multifamily property, or other residential or
mixed-use property.
[[Page 38051]]
Families in low-income areas * * *
(1) Any family that resides in a census tract in which the median
income does not exceed 80 percent of the area median income;
* * * * *
Median income means, with respect to an area, the unadjusted median
family income for the area as determined by FHFA. FHFA will provide the
Banks annually with information specifying how the median family income
estimates for metropolitan and non-metropolitan areas are to be applied
for purposes of determining median income.
Metropolitan area means a metropolitan statistical area (MSA), or a
portion of such an area, including Metropolitan Divisions, for which
median incomes are determined by FHFA.
* * * * *
Mortgage means a member of such classes of liens, including
subordinate liens, as are commonly given or are legally effective to
secure advances on, or the unpaid purchase price of, real estate under
the laws of the State in which the real estate is located, or a
manufactured home that is personal property under the laws of the State
in which the manufactured home is located, together with the credit
instruments, if any, secured thereby, and includes interests in
mortgages. Mortgage includes a mortgage, lien, including a subordinate
lien, or other security interest on the stock or membership certificate
issued to a tenant-stockholder or resident-member by a cooperative
housing corporation, as defined in section 216 of the Internal Revenue
Code of 1986, and on the proprietary lease, occupancy agreement, or
right of tenancy in the dwelling unit of the tenant-stockholder or
resident-member in such cooperative housing corporation.
* * * * *
Non-metropolitan area means a county, or a portion of a county,
including those counties that comprise Micropolitan Statistical Areas,
located outside any metropolitan area, for which median incomes are
determined by FHFA.
* * * * *
0
3. Amend Sec. 1281.10 by revising paragraphs (a) and (b) to read as
follows:
Sec. 1281.10 General.
* * * * *
(a) A prospective mortgage purchase housing goal;
(b) A small member participation housing goal;
* * * * *
0
4. Revise Sec. 1281.11 to read as follows:
Sec. 1281.11 Bank housing goals.
(a) Prospective mortgage purchase housing goal--(1) Target levels.
For each calendar year, the percentage of a Bank's AMA mortgages
acquired during the calendar year that are for very low-income
families, low-income families, or families in low-income areas must
meet or exceed either:
(i) A target level of 20 percent; or
(ii) An alternative target level proposed by the Bank and approved
by FHFA under paragraph (c) of this section.
(2) Cap on low-income areas loans counted toward goal. No more than
25 percent of the mortgages that are counted toward a Bank's
achievement of the prospective mortgage purchase housing goal may be
mortgages for families with incomes above 80 percent of area median
income. Any purchases of mortgages for families with incomes above 80
percent of area median income in excess of the 25 percent cap shall be
treated as mortgage purchases for purposes of the housing goals and
shall be included in the denominator for the housing goal, but such
mortgages shall not be included in the numerator in calculating a
Bank's performance under the housing goal.
(b) Small member participation housing goal. For each calendar
year, the percentage of a Bank's total AMA users that are community-
based AMA users must meet or exceed one of the following:
(1) A target level of 50 percent;
(2) A percentage that is three percentage points greater than the
percentage from the preceding calendar year; or
(3) An alternative target level proposed by the Bank and approved
by FHFA under paragraph (c) of this section.
(c) Alternative target levels--(1) Submission of Bank requests. A
Bank, upon approval of its board of directors, may submit a written
request to FHFA for approval of different target levels for the
prospective mortgage purchase housing goal, the small member
participation housing goal, or both. A Bank's request under this
paragraph must include proposed target levels for three consecutive
years following the calendar year in which the request is submitted. A
Bank is not required to propose the same target level for each of the
three years.
(2) Content of Bank request. A Bank's request under paragraph
(c)(1) of this section for an alternative target level must include a
detailed explanation of:
(i) Why the target level for the goal in paragraphs (a) and (b) of
this section, as applicable, is infeasible;
(ii) Why the Bank's proposed alternative target level is
achievable; and
(iii) How the Bank's proposed alternative target level will
meaningfully further affordable housing mortgage lending in its
district.
(3) Frequency of Bank requests--(i) Three-year period. A Bank may
not submit a request under paragraph (c)(1) of this section for an
alternative target level more frequently than once every three years,
except as provided in paragraphs (c)(3)(ii) or (c)(3)(iii) of this
section. The deadline for submitting a request under paragraph (c)(1)
of this section is September 15 of the calendar year preceding the
calendar year in which the alternative target level would apply. FHFA
will review each Bank request that is received by the deadline and will
notify the Bank in writing if its request is approved. If FHFA does not
notify a Bank that its request is approved, the Bank will remain
subject to the target levels in paragraphs (a) and (b) of this section,
as applicable.
(ii) Exception for changes in AMA products or programs. FHFA may
require a Bank to submit a request under paragraph (c)(1) of this
section for an alternative target level to address discontinuation of
an AMA product or program or approval of a new AMA product or program.
(iii) Exception for special circumstances. A Bank may submit a
request under paragraph (c)(1) of this section for an alternative
target level more frequently than once every three years if warranted
given economic, operational, or other circumstances.
(4) Public comment. FHFA will publish each request that is
submitted under paragraph (c)(1) of this section for an alternative
target level on FHFA's public website for a period of at least 30 days,
to provide the public an opportunity to comment on the request. FHFA
will publish each request without redactions or other changes, except
that FHFA will not publish any confidential or proprietary material. A
Bank must submit any material supporting its request under paragraph
(c)(1) of this section that it considers to be confidential or
proprietary as a separate document, clearly designated as confidential
or proprietary.
0
5. Revise Sec. 1281.12 to read as follows:
Sec. 1281.12 General counting requirements.
(a) General. Mortgage purchases financing single-family properties
shall be evaluated based on the income of the mortgagors and the area
median income
[[Page 38052]]
at the time the mortgage was originated. To determine whether mortgages
may be counted under a particular family income level (e.g., low- or
very low-income), the income of the mortgagor is compared to the median
income for the area at the time the mortgage was originated, using the
appropriate percentage factor provided under Sec. 1281.1.
(b) No double-counting. A mortgage may be counted only once toward
the achievement of the prospective mortgage purchase housing goal, even
if it satisfies multiple criteria for the prospective mortgage purchase
housing goal.
(c) Application of median income. For purposes of determining an
area's median income under Sec. 1281.1, the area is:
(1) The metropolitan area, if the residence that secures the
mortgage is in a metropolitan area; and
(2) In all other areas, the county in which the property is
located, except that where the State non-metropolitan median income is
higher than the county's median income, the area is the State non-
metropolitan area.
(d) Sampling not permitted. Performance under the housing goals for
each year shall be based on a tabulation of each mortgage during that
year; a sampling of such purchases is not acceptable.
0
6. Amend Sec. 1282.13 by:
0
a. Revising paragraph (b)introductory text, (b)(1) and (8);
0
b. Adding paragraph (c)(4);
0
c. Removing paragraph (d);
0
d. Redesignating paragraph (e) as paragraph (d); and
0
e. Adding new paragraph (e).
The revisions and additions read as follows:
Sec. 1281.13 Special counting requirements.
* * * * *
(b) Not counted. The following transactions or activities shall not
be counted for purposes of the housing goals, meaning that in
calculating the applicable percentage target level, they shall be
excluded from both the numerator (i.e., AMA mortgages acquired during
the calendar year that are for very low-income families, low-income
families, or families in low-income areas) and the denominator (i.e.,
total AMA mortgages acquired during the calendar year), even if the
transaction or activity would otherwise be counted under paragraph (c)
of this section:
(1) Purchases of participation interests in AMA mortgages from
another Bank, except as provided in paragraph (e) of this section;
* * * * *
(8) Purchases of subordinate lien mortgages;
* * * * *
(c) * * *
(4) Non-conventional mortgages. The purchase of a non-conventional
single-family mortgage shall be treated as a mortgage purchase for
purposes of the housing goals only if the mortgage was acquired from a
community-based AMA user.
* * * * *
(e) Mortgage participation transactions. Where two or more Banks
acquire a participation interest in the same mortgage simultaneously,
the mortgage will be counted on a pro rata basis for the prospective
mortgage purchase housing goal for each Bank with a participation
interest.
0
7. Amend Sec. 1281.14 by revising paragraph (a) to read as follows:
Sec. 1281.14 Determination of compliance with housing goals; notice
of determination.
(a) Determination of compliance with housing goals. On an annual
basis, FHFA will determine each Bank's performance under each housing
goal and will publish the final determinations. FHFA will publish its
final determination including the numbers and percentages for each
Bank's AMA purchases that meet each of the housing goals criteria,
including loans to low-income families, loans to very low-income
families, and loans to families in low-income areas, including by each
of the defined categories. FHFA's determination will include these
numbers in total and separated into purchase money mortgages,
refinancing mortgages, conventional mortgages, and non-conventional
mortgages.
* * * * *
0
8. Amend Sec. 1281.15 by revising paragraphs (a) and (b) to read as
follows:
Sec. 1281.15 Housing plans.
(a) Housing plan requirement. For any year after 2023, if the
Director determines that a Bank has failed to meet any housing goal and
that the achievement of the housing goal was feasible, the Director may
require the Bank to submit a housing plan for approval by the Director.
(b) Nature of plan. If the Director requires a housing plan, the
housing plan shall:
(1) Be feasible;
(2) Be sufficiently specific to enable the Director to monitor
compliance periodically;
(3) Describe the specific actions that the Bank will take to
achieve the housing goal for the next calendar year;
(4) Address any additional matters relevant to the housing plan as
required, in writing, by the Director; and
(5) Address any alternative target levels for which the Bank has
submitted a request under Sec. 1281.11(c)(1).
* * * * *
0
9. Revise Subpart C to read as follows:
Subpart C--Reporting Requirements
Sec. 1281.20 Reporting requirements.
(a) General. Each Bank must collect and submit to FHFA any data
that FHFA determines to be necessary for FHFA to evaluate transactions
and activities under the Bank housing goals.
(b) Reporting for prospective mortgage purchase housing goal. Each
Bank must collect data on each AMA mortgage purchased by the Bank. The
data must include any data elements specified by FHFA. On no less
frequent than an annual basis, each Bank must submit such data to FHFA
in accordance with the Data Reporting Manual.
(c) Reporting for small member participation housing goal. Each
Bank must collect data on AMA user asset size. On no less frequent than
an annual basis, each Bank must submit such data to FHFA in accordance
with the Data Reporting Manual.
(d) Other reporting. Each Bank must provide to FHFA such additional
reports, information, and data as FHFA may request from time to time.
Mark A. Calabria,
Director, Federal Housing Finance Agency.
[FR Doc. 2020-12345 Filed 6-24-20; 8:45 am]
BILLING CODE 8070-01-P