Fannie Mae met all of the housing goals the Federal Housing Finance Agency imposed for 2020, but Freddie Mac failed its low-income refinance goal.
The government-sponsored enterprise lagged the wider market in its acquisitions of low-income refinances. Freddie Mac has 45 days to submit a plan to the FHFA for actions it will take over the next three years to get back on track, according to a letter the regulator sent to Freddie Mac.
The FHFA determined the wider market’s low-income share of refinances was 21%, while only 19.7% of the nearly 2.5 million refinanced mortgages Freddie Mac acquired last year were low-income. The FHFA also determined that meeting the 2020 goal was feasible for Freddie Mac. The GSE met the goal the prior year, when 22.4% of its refinanced mortgages were low-income.
In a statement, FHFA Acting Director Sandra Thompson emphasized the benefit for borrowers who refinance with current historically low mortgage rates. Thompson charged Freddie Mac with developing a business strategy to help more low-income households take advantage of the opportunity.
“Meeting the housing goals is not optional, and FHFA will continue to work with the Enterprises to ensure they meet their statutory and Conservatorship Scorecard requirements,” Thompson said.
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In August, Thompson proposed more ambitious affordability goals for the GSEs. The new goals, which go into effect in 2022, included two new single-family home purchase subgoals to replace the existing low-income areas subgoal: One new subgoal targets low-income neighborhoods, while the other targets minority communities.
Notably, the low-income refinance goal will increase to 26% from 21%.
The FHFA also put a greater emphasis on affordability in its annual scorecard for the GSEs, which the regulator and conservator uses to communicate its priorities and expectations to Fannie Mae and Freddie Mac.
The GSEs have sometimes struggled to meet their affordability goals. Still, housing affordability advocates have said the goals have historically been so conservative they are “meaningless.” Advocates argue the GSEs should be leading the market on affordability, not trailing behind it.
In the last 11 years, Fannie Mae missed its low-income purchase goals three times and failed to meet its very low income goals five times. Freddie Mac missed its low and very low income goals five times each since 2010, per an August 2021 report on their performance.