Regulator Lowers GSEs' Housing Goals

Fannie Mae's and Freddie Mac's regulator, the ""Federal Housing Finance Agency"":http://www.fhfa.gov (FHFA), submitted a ""proposed rule"":http://www.fhfa.gov/webfiles/2138/2009EntHsgGoalsMission42809F.pdf to the Federal Register this week to revise the GSEs' housing goals for the year. FHFA wants to reduce the enterprises' 2009 targets to the levels that prevailed before the nation's housing crisis hit, from 2004 through 2006.
The Housing and Economic Recovery Act (HERA) enacted under the Bush administration stated that the GSEs' housing goals established by HUD for fiscal year 2008 would remain in effect for 2009. But after examining them, FHFA Director James B. Lockhart said current market conditions make the pre-set 2009 goals unfeasible.
He cites restrictions on the availability of private mortgage insurance, a surge in refinancing, and the expanding role of the Federal Housing Administration (FHA) in the mortgage marketplace, among other factors, as the reasons why the GSEs' targets for the year should be lowered.
FHFA is requesting that the GSEs' 2009 housing goal and home purchase subgoal levels be reduced to the following (with the percentage quoted being the percent of the total number of dwelling units financed by the enterprises' mortgage purchases):
- Low- and moderate-income housing: 51 percent
- Special affordable housing: 23 percent
- Underserved areas housing: 37 percent
- Low- and moderate-income home purchases: 40 percent
- Special affordable home purchases: 14 percent
- Underserved areas home purchases: 30 percent
By comparison, the enterprises' 2008 goals for each of these areas were:
- Low- and moderate-income housing: 56 percent
- Special affordable housing: 27 percent
- Underserved areas housing: 39 percent
- Low- and moderate-income home purchases: 47 percent
- Special affordable home purchases: 18 percent
- Underserved areas home purchases: 34 percent
Lockhart is also proposing that for the first time, mortgage modifications undertaken by the GSEs, which are consistent with the administration’s loan mod initiatives, be treated as mortgage purchases and counted toward their housing goals.
Lockhart said, ""The enterprises have taken the lead in implementing the administration’s Home Affordable Modification Program. By giving them goals credit for loan modifications, FHFA further encourages this important activity, which is essential to preventing foreclosures and keeping people in their homes. It advances the public purpose of the goals - promoting homeownership for targeted borrowers and communities.""
Fannie Mae and Freddie Mac were created by Congress to support home financing for those communities ""underserved by mortgage credit,"" as well as very low-, low-, and moderate-income families. The GSEs currently provide more than $6.3 trillion in funding for the U.S. mortgage markets.
Lockhart's proposal would exclude purchases of jumbo conforming loans from counting toward the 2009 housing goals. FHFA is soliciting public comment on the ""housing goal adjustments"":http://www.fhfa.gov/webfiles/2138/2009EntHsgGoalsMission42809F.pdf through May 19, before they officially take effect.