Since 2010 the Federal Housing Finance Agency has established annual affordable housing goals for Fannie Mae and Freddie Mac. There were five categories of single-family goals prior to 2022; a sixth goal was added for 2022 and subsequent years. There are also three categories of multifamily goals. In their 10-K forms for 2022 the enterprises gave descriptive information on their goal performance in 2022.
The single-family goals for 2022 were:
- Low-income home purchase (LIHP) goal, for borrowers with incomes no greater than 80 percent of Area Median Income (AMI). This was set at 28 percent of all home purchase mortgages acquired in 2022;
- Very low-income home purchase (VLIHP) goal, for borrowers with incomes no greater than 50 percent of AMI. This was set at 7 percent of all home purchase mortgages acquired in 2022;
- Low-income areas home purchase goal, minority census tracts home purchase subgoal, low-income census tracts home purchase subgoal, and a low-income refinance goal–detailed definitions of and 2022 levels of these goals can be found on FHFA's web site.
The focus of this column is the LIHP and VLIHP single-family goals, so no discussion of the other single-family goals or the multifamily goals is contained herein.
The enterprises obtain income information for all borrowers whose home purchase and refinance mortgages they acquire. From this information they calculate goal performance. The loan-level data is also provided to FHFA so that it can independently determine goal performance. The enterprises submit detailed quantitative reports to FHFA on goal performance in their annual mortgage reports (AMRs) to FHFA in late March. However, qualitative information on goal performance is contained in their recent 10-K reports, submitted to the SEC on February 14 by Fannie Mae and on February 24 by Freddie Mac. From these reports, it appears that Freddie Mac is more confident than Fannie Mae about having met all of the 2022 housing goals.
Specifically, Freddie Mac states that "at this time, based on preliminary information, we are on track to meet all six of our single-family goals and all three of our multifamily goals." It should be noted, however, that official performance on all goals is determined by FHFA, based on analysis of the loan-level data received from the enterprises, though in recent years official performance figures have been very close to, or identical to, performance reported by the enterprises.
Fannie Mae is much less sanguine than Freddie Mac about performance on the single-family goals. Fannie Mae does believe that they met the 2022 multifamily goals, stating that "we believe we met all of our 2022 multifamily housing goals, and FHFA will make a final determination regarding this performance later in the year."
With regard to the single-family goals, Fannie Mae states that "we believe we met all of our single-family housing goal benchmarks other than the low-income home purchase benchmark and the very low-income home purchase benchmark."
However, Fannie Mae goes on to say that "we are in compliance with the single-family housing goals if we met either the benchmarks or market share measures, so we may still meet our goals."
By "market share measures" (also referred to as "market performance") Fannie Mae is referring to FHFA's practice in recent years of analyzing, with a few exceptions, HMDA data on all conventional conforming home purchase or refinance mortgages in the market to determine the shares of such mortgages that would have qualified for each of the single-family goals.
Then an enterprise would have met the goal even if its performance falls short of the benchmark level. For example, if an enterprise performance on a 26 percent goal is 25 percent, but the market share/performance is 24 percent, the enterprise would have met the goal.
"Market share" analysis is a useful check on the reasonableness of benchmark levels, but is impacted by any errors in the HMDA data, and results are often not announced until well after the release of HMDA data later in the year. For example, market share and official performance for 2020 were not announced until December 2021.
In conclusion, based on their 10-K reports, in 2022 Freddie Mac outperformed Fannie Mae on the low-income and very low-income home purchase goals. Further, whether or not Fannie Mae achieved these two goals is a matter to be determined later in 2023.
