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Federal Register / Vol. 86, No. 246 / Tuesday, December 28, 2021 / Rules and Regulations II. Discussion of Proposed Rule and Public Comments FHFA published a Notice of Proposed Rulemaking NPRM or proposed rule in the Federal Register on August 25, 2021
that proposed new benchmark levels for each of the single-family and multifamily housing goals. The NPRM
also proposed the replacement of the existing single-family low-income areas subgoal with separate area-based subgoals targeting the individual components of the low-income areas subgoal minority census tracts and lowincome census tracts. The NPRM also included proposed technical changes to the regulation.8 The public comment period on the proposed rule ended on October 25, 2021.
Overview. FHFA received 24
comment letters from 27 organizations and individuals in response to the proposed rule. Comments were submitted by both Fannie Mae and Freddie Mac, as well as by five nonprofit organizations, and ten trade associations representing lenders, home builders, credit unions, and other mortgage market participants. FHFA
also received four comment letters from policy advocacy organizations, with one letter representing the views of three organizations and another representing the views of two organizations.
Individuals submitted the remaining six comments. FHFA has reviewed and considered all of the comments. A
number of comments raised issues unrelated to the housing goals or beyond the scope of the proposed rule, and those comments are not addressed in this final rule. Specific provisions of the proposed rule, and the comments received on those provisions, are discussed below and throughout this final rule.
Single-family benchmark levels.
FHFA proposed increases to the benchmark levels for the single-family housing goals. FHFA also proposed establishing a new area-based subgoals structure, which divided the existing low-income area purchase subgoal into two subgoals a minority census tracts subgoal and a low-income census tracts subgoal. A majority of commenters, including Fannie Mae and Freddie Mac, expressed overall support for the proposed benchmark levels for the single-family goals, including the areabased subgoals. Many of these commenters characterized their support for the proposed single-family benchmark levels as strong and enthusiastic. Several of these commenters specifically commended 8 See
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FHFA for proposing higher benchmark levels, which they described as in-line with the Enterprises public missions and responsibilities to provide access to stable and affordable housing for all communities. Many of these commenters described the proposed increases in the benchmark levels as the type of concrete action necessary to address the affordable housing needs the country is facing, as well as to build a more equitable housing finance market. Several of them, including Fannie Mae, also described the proposed higher benchmark levels as reasonable, realistic, and achievable.
Many of the commenters supporting the proposed benchmark levels described them as appropriately higher and necessary in order to support the Enterprises mission to enable equitable and sustainable access to affordable housing. A number of these commenters focused on the critical role the goals play in providing credit for low-income and very low-income borrowers by ensuring that the Enterprises properly focus on this important aspect of their mission.
Several commenters noted that higher benchmark levels will incentivize Fannie Mae and Freddie Mac to marshal their considerable resources and market presence to address the nations affordable housing crisis. A number of commenters found the proposed singlefamily benchmark levels to be reasonable in relation to the market forecast. One commenter specifically supported setting the proposed benchmark levels for the low-income and very low-income purchase goals slightly above the midpoint of the projected confidence interval in the market forecast, as discussed in the proposed rule, on the basis that this will encourage the Enterprises to expend significant effort and execute thoughtful strategies to meet meaningful, yet attainable, goals.
Single-family home purchase housing goals. Both Fannie Mae and Freddie Mac commented that the proposed increases in the benchmark levels for the single-family home purchase housing goals were substantial compared to the 20182020 and 2021
goals. Freddie Mac specifically noted that the proposed increases would set targets that exceed past performance by both Enterprises and the market as a whole in most of the past ten years.
Although Fannie Mae and Freddie Mac expressed support for the proposed increases to the single-family home purchase benchmark levels, both Enterprises expressed concerns about uncertainty in the housing and loan origination markets. Fannie Mae
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expressed cautious optimism regarding its ability to achieve the proposed single-family home purchase benchmarks based on historical performance, while Freddie Mac committed to making every effort to meet the proposed goals. However, both Fannie Mae and Freddie Mac emphasized that market factors and regulatory issues outside the Enterprises control could pose risks to their ability to meet the proposed benchmark levels during the period covered by the final rule. Freddie Mac specifically requested a designated implementation period to adjust to the significant increases in the singlefamily benchmark levels in light of the current and foreseeable market conditions. Both Enterprises encouraged FHFA to consider how external factors could complicate their efforts to achieve the proposed benchmark levels given the current and forecasted conditions in the housing and origination markets.
They emphasized how extreme home price appreciation, the shortfall in affordable housing supply, and disruptions in income and employment stability resulting from the COVID19
pandemic could reduce demand and disproportionately impact lower-income borrowers mortgage loan eligibility. The Enterprises also emphasized how secondary market dynamics, such as lender interest in holding loans in their portfolios rather than selling them, consumer demand, lender preference for conventional loans versus nonconventional loans, and the secondary market activities of other investors will influence the Enterprises ability to achieve the proposed benchmark levels.
Area-based subgoals. The NPRM
proposed establishing a new area-based subgoals structure by dividing the existing low-income areas purchase subgoal into two subgoals: A minority census tracts subgoal and a low-income census tracts subgoal. Most commenters offered strong support for the proposed area-based subgoals structure. Several commenters, including Freddie Mac, applauded FHFA for its focus on equitable housing finance and efforts to address the minority homeownership gap through these proposed subgoals.
One commenter stated that the proposed minority census tracts subgoal is a necessary step toward ensuring the Enterprises fulfill their statutory duty to facilitate the financing of affordable housing for all lowand moderateincome families, including families of color. A number of commenters urged FHFA to increase the benchmark level for the minority census tracts subgoal above the proposed 10 percent. Two
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