Freddie Mac misses low-income refi affordable housing target: FHFA

Freddie Mac fell short on its performance goal related to low-income mortgage refinancings in 2020 and has been ordered to submit a corrective action plan by the Federal Housing Finance Agency.

Otherwise, Freddie Mac met the single-family mortgage purchase goals for low-income families, very low-income families, and low-income areas, and all of the multifamily goals. Fannie Mae met all of its single-family and multifamily goals, the FHFA said.

In 2019, both companies met all of their single-family affordable housing goals.

The low-income refinance benchmark, measuring loans made to families with incomes under 80% of the area median for both government-sponsored enterprises, was 21%. The FHFA's final determination for Freddie Mac’s activity during 2020 for this goal was 19.7%, while for Fannie Mae it was 21.2%; those were unchanged from the preliminary findings made in September. In 2019, Freddie Mac's share in this category was 22.4%, while for Fannie Mae, it was 23.8%.

"It is imperative that Freddie Mac develop a business strategy to support more low-income households in taking advantage of this important refinance opportunity," FHFA Acting Director Sandra Thompson said in a press release. "With the new housing plan announced today, Freddie Mac can start correcting course and put itself on a path to meet its obligations in the future."

(On Dec. 14, President Biden nominated Thompson to head the agency on a permanent basis.)

The number of low-income borrowers refinancing was high in 2020 relative to other years, reflecting the overall market in a record year for total originations, which helped both agencies meet the majority of their goals. Refis made up 64% of total originations last year as measured by the economists at Fannie Mae, Freddie Mac and the Mortgage Bankers Association.

"We met seven out of eight affordable housing goals and purchased a record level of low-income refinance loans in 2020," Freddie Mac noted in a statement, when asked about the FHFA’s findings. "We have a focused strategy to encourage additional refinance activity and help improve fairness in the housing finance system."

The GSE acknowledged that it did slightly underperform in one market-share based category in the FHFA’s report.

"FHFA has further determined that achievement of this 2020 goal by Freddie Mac was feasible," a letter sent on Dec. 20 to Freddie Mac CEO Michael DeVito said. "In making these determinations, FHFA analyzed the size and composition of the conventional conforming primary mortgage market, as measured using the Home Mortgage Disclosure Act data for 2020."

In a separate statement responding to the FHFA, Fannie Mae said it “is committed to achieving the housing goals set by FHFA as part of our continued efforts to support equitable access to sustainable affordable housing opportunities in a safe and sound manner," that company said in a statement.

Earlier this year, the FHFA under then-Director Mark Calabria, launched a conforming low-income refi program. Fannie Mae's version is called Refi Now, while Freddie Mac's is Refi Possible. Those programs will help the GSEs meet their 2021 goals.

In September, the FHFA issued a proposed rule raising the single-family housing goals for the next three years. The new low-income refinance goal will be 26%.

Freddie Mac now has 45 days to submit a plan to the FHFA on how it will improve its performance when it comes to purchasing low-income refinancings for 2022 through 2024.