The U.S. Department of Housing and Urban Development announced a proposed rule today that would increase the affordable housing goals for Fannie Mae and Freddie Mac.
The proposed rule, which now has a 60-day public comment period, would increase the goals of the two housing government-sponsored enterprises in stages over a four-year period beginning January 2005. It also would establish new home purchase mortgage subgoals under each housing goal, something that hasn’t been set out before.
Here’s a look at the proposed changes:
The low- and moderate-income goal targets families earning an income of less than or equal to an area’s median income. The current goal is 50 percent. Under the proposed changes, that would increase to 52 percent in 2005, 53 percent in 2006, 55 percent in 2007 and 57 percent in 2008.
The underserved areas goal targets housing located in low-income and high-minority census tracts. The current goal is set at 31 percent. The new rules would change that to 38 percent in 2005, 39 percent in 2006 and 2007 and 40 percent in 2008.
HUD is now using 2000 Census data, which indicates there are far more of those high-minority Census tracts than in 1990, which accounts for much of the sharp increase proposed for next year, said John Weicher, HUD’s assistant secretary for housing.
The special affordable housing goal targets very low-income families and low-income families living in low-income areas. Now, the goal is set at 20 percent. That would change to 22 percent in 2005, 24 percent in 2006, 26 percent in 2007 and 28 percent in 2008.
By the end of 2008, the goals would match HUD’s market share estimates for each of those categories, Weicher said. Some loans may qualify for more than one goal.
HUD also is proposing new home purchase mortgage subgoals, which would be based on the GSEs’ purchases of home purchase mortgages on properties within metropolitan areas. The subgoals do not set out a requirement for total home purchase business, but rather set the goals as a percentage of the home purchase loans the GSEs do buy.
Now, there are no such requirements. Under the proposed rules, 45 percent of all home purchase mortgages they buy in 2005 would have to be for low- and moderate-income families. That would increase to 46 percent in 2006, 47 percent in 2007 and 2008.
Home purchase mortgages for underserved areas would have to make up 33 percent in 2005, 34 percent in 2006 and 35 percent in 2007 and 2008. Home purchase mortgages that meet the special affordable housing requirements would have to make up 17 percent in 2005, 18 percent in 2006 and 19 percent in 2007 and 2008.
Weicher said the GSEs should lead the market in home purchase loans, especially in funding affordable loans, but they do not.
“The basic purpose of the GSEs is to promote home ownership, but there are not basic goals to promote that purpose,” Weicher said.
By statute, HUD sets the affordable housing require a percentage of Fannie Mae and Freddie Mac’s lending go to underserved borrowers and communities. The goals were last set for 2000 to 2003, and were extended through 2004.