FHFA may lower some Fannie Mae, Freddie Mac housing goals

The Federal Housing Finance Agency is proposing to downsize a couple of Fannie Mae and Freddie Mac's single-family affordable-housing goal benchmarks due to market constraints, but it also could raise one.

The proposed benchmark for the low-income home purchase goal would drop from 28% to 25%. The very-low income home-purchase benchmark would fall from 7% to 6%. However, a subgoal benchmark for minority census tracts would increase from 10% to 12%. The home purchase benchmark for low-income census tracts would remain unchanged at 4%, as would the benchmark for the 26% low-income refinance goal.

The lowering of some of the benchmarks reflects a need to both adjust for market constraints and ensure the financial stability of the two government-sponsored enterprises, according to their regulator and conservator.

"Given persistent challenges in the housing market, FHFA is proposing benchmark levels that reflect these dynamics," Director Sandra Thompson said in a press release.

Fannie and Freddie are evaluated by the FHFA based on two measures for single-family goals, benchmark and market levels, with the percentage of their loan purchases qualifying for credit needing to equal or surpass at least one of these. 

In line with a former FHFA economist's earlier projection, the larger of the two enterprises did have some trouble meeting two benchmark-level measures set for the 2022-2024 period, but its performance was considered acceptable because it beat market metrics.

Fannie's 27.4% missed the 28% low-income home purchase benchmark goal for 2022 but beat the 26.8% market number, its latest annual securities filing shows. At 6.9%, its very-low income number was below the 7% benchmark, but above the market's 6.8%. 

Freddie's 29% exceeded both the low-income home purchase benchmark goal for the period and beat the market level. Its very-low income number was 7.1% and also was above the benchmark and market numbers.

Both GSEs exceeded the minority census tract subgoal's 10% benchmark and 12.1% market level, potentially justifying a higher number going forward. Freddie's number was 12.8% and Fannie's was 13.5%.

The progress in this area could be seen as significant given that historically Fannie and Freddie have made less progress in lending to minority homeowners than the Federal Housing Administration, which generally allows more leeway in underwriting.

The new proposal for 2025-2027 also calls for a very-low income goal of 14% for apartment loans and a 2% small multifamily low-income subgoal. The benchmark for a very-low income multifamily subgoal has been 12%. The small low-income subgoal has been 2.5%.

The overall multifamily low-income goal would remain consistent at 61%.

The FHFA is accepting public comments on the proposed goals and will continue to do so for 60 days after they are published in the Federal Register.