GSEs Miss FHFA's Goals for Low-Income Originations
The Federal Housing Finance Agency (FHFA) will adjust its target goals for facilitating mortgage origination for low- and moderate-income individuals after the government-sponsored enterprises (GSEs) missed a key loan-purchase goal for originations to low- and moderate-income borrowers. FHFA said it plans to lower recommended loan purchase goals for Fannie Mae (FNM) and Freddie Mac (FRE), according to FHFA’s annual housing report. Fannie Mae and Freddie Mac have a mandate to purchase mortgages originated to three groups of disadvantaged borrowers. Low- and moderate-income borrowers are households with incomes less than or equal to area median income (AMI). Underserved areas include dwelling units in metropolitan census tracts with tract median family income less than or equal to 90% of AMI, or minority population of at least 30% and tract median family income less than or equal to 120% of AMI. Special affordable households are those with income less than or equal to 60% of AMI or less than or equal to 80% of AMI and living in low-income areas. According to the report, neither government-sponsored enterprises (GSEs) met the 2008 goals for purchasing loans originated to low- and moderate- income borrowers. Fannie Mae exceeded its goal of purchases of loans originated to borrowers in underserved areas by 0.4%, but Freddie missed its goal by 1.3%. Both GSEs missed the goal for special affordable mortgage purchases. “The goal-qualifying share of home purchase mortgages on properties in metropolitan areas in the primary mortgage market was well below the corresponding home purchase subgoal in 2008,” the annual report said. “This is consistent with FHFA’s determination to declare the three home purchase subgoals for 2008 infeasible.” FHFA said the goals are infeasible because the quantity of mortgages that qualify for the programs is below the 2008 goal levels. In April, then FHFA director James Lockhart proposed the reduced goals. For 2009, FHFA will lower the existing low- and moderate-income goal from 56% of each GSE's total loan purchases to 43%, the existing underserved areas goal from 39% to 32% and the existing special affordable goal from 27% to 18%. The agency said it expects to issue a proposed rule on the GSEs duty to serve underserved markets by Q409. It also expects next year to evaluate and rate their compliance, which it will then report to Congress. In a second report FHFA submitted to Congress Friday, “Default Risk Evaluation in the Single-Family Mortgage Market,” the agency evaluated recent research related to mortgage risk. The report summarizes seven papers analyzing the microeconomic conditions that contribute to the housing market, including underwriting standards, collateral valuation, loan securitization, mortgage modifications, and the effects of foreclosures on home values. The papers, FHFA said, are “a first step toward understanding microeconomic behavior and its consequences during the crisis of the past several years, can inform discussion of options for improving US mortgage markets going forward.” Write to Austin Kilgore.