Fannie Mae, Freddie Mac housing goals need revisions: MBA

The Mortgage Bankers Association largely supports the Federal Housing Finance Agency reduction of certain low-income single-family finance goals for the government-sponsored enterprises.

But the one goal that was not changed in the proposal from the agency called U.S. Housing Finance by its director, the single-family low-income refinance goal, might not be attainable due to market forces, a comment letter on the proposal released last month said.

Also, the removal of measurement buffers impacts not just attainment of this particular goal, but the broader picture as well, the MBA said.

The letter was addressed to Director Bill Pulte and signed by the MBA's Pete Mills, senior vice president, residential policy and strategy industry engagement, and Jamie Woodwell, who holds a similar title for commercial/multifamily policy.

Why MBA thinks the refi goal needs revision

"The current administration has stressed its desire to lower interest rates, which would spur refinance activity, driving up the denominator for the low-income refinance goal calculation and driving the achieved percentage lower," the MBA letter said.

"Additionally, we have heard concerns that a potential increase in the volume of higher balance loans in Q1 2026 could also impact the denominator for this goal, as a result of how goals are applied to lenders."

The management buffers were removed across the board because benchmarks were set at the low end of expected model forecasts, the MBA letter said. 

The issues with the FHFA underlying dataset

"We continue to receive feedback regarding the lag of data inputs used to calculate the housing goals," the letter stated. "While FHFA considers various factors when setting benchmark levels for 2026-2028, their forecast models produce values using historical HMDA data through 2023, and the current method for benchmark calculation may not reflect key market data."

This is because lenders are constantly adjusting to changes in the housing market and striving to meet a static goal created by year-old data can be challenging when faced with interest rate shifts, changes in origination and refinance volume, macroeconomic conditions and inventory of homes for sale, the MBA said.

In July, FHFA proposed a repeal of its fair lending, fair housing and equitable housing finance rule. Among the reasons given by the agency was that it was not in compliance with Pres. Trump's executive orders and it was duplicative with rules enforced by other agencies.

Specific to the low-income refi goal, the letter points out no data series currently exists which can be used in a forecast model for this loan purpose. Plus, the percentage of low-income refi originations is "inversely proportional" to refinance loans produced in the overall market.

"Preserving measurement buffers will mitigate market distortions whenever goal levels and market production are misaligned due to unforeseen economic conditions," the letter stated. 

MBA's comments about the multifamily benchmarks

While MBA said the proposed multifamily benchmarks "strike an appropriate balance," it is concerned about the decline in market-rate lending volume by Fannie Mae and Freddie Mac in recent years.

"A healthy multifamily ecosystem depends on both affordable and market-rate production — since turnover in market-rate units often opens up opportunities for lower-income renters," the letter said.

"MBA therefore urges FHFA to ensure the Enterprises maintain a balanced approach — meeting affordability targets while continuing to provide vital liquidity for market-rate multifamily housing."

Make more mortgages eligible for inclusion

In the letter, the group adds its members want more focus on increasing the population of mortgages eligible for meeting these goals.

"Affordable lending has been a significant challenge, particularly in the current interest rate environment," MBA said. "The fact remains that even during high volumes, a limited number of these loans can be produced each year."

It suggests FHFA explore including loans with cash-flow underwriting and rental payment history.

"To expand the population of affordable lending, the industry must first have an aligned understanding of what the total addressable market is for affordable lending, and we recommend that FHFA explore options for creating transparency on the total population of goals-eligible loans," this section of the letter concludes.

What the CHLA is looking for from U.S. Federal Housing

The Community Home Lenders of America, an organization whose membership consists of independent mortgage bankers, submitted its own letter on the FHFA Strategic Plan for Fiscal Years 2026 -2030.

Because its members are not eligible for Federal Home Loan Bank membership, the organization limited its response to issues concerning the GSEs.

The CHLA statement referenced the September letter signed by 46 IMBs sent to Director Pulte and Treasury Secretary Scott Bessent.

It had five objectives for a conservatorship exit which CHLA reiterated in its latest comment. These are:

• Guarantee fee parity and a competitive cash window.
• No Wall Street bank charters for GSE loans.
• Keep Fannie and Freddie separate under a utility operating model.
• GSEs should maintain critical mortgage loan products.
• The GSEs should purchase MBS to lower mortgage rates.The latest letter warned an envisioned end to the FHFA's conservatorship powers means the GSE's first priority will be their own profitability, which in turn could result in higher fees, curtailing specialty mortgage products and/or returning to volume discounts for larger lenders.

"CHLA has long supported the Enterprises exiting conservatorship, in order to avoid the whipsaws of changing policies of each new Administration and to gain efficiencies of being run as a private corporation," the letter said. "And, while the Enterprises would no longer be directly accountable to a conservator, we are hopeful that Fannie Mae and Freddie Mac will maintain their affordable housing mission."
The group warned if any new GSE charters are made, they should not be allowed to give preferential treatment to what it termed "mega-lenders."

"Nor should preferential treatment be given through mechanisms like up-front risk sharing or granting a few Wall Street banks access to 'U.S. Fin-Tech.'"

When it comes to buying MBS, CHLA supports "temporary, opportunistic purchases" to lower mortgage rates, when the spreads are historically high. Others, including the analysts at Bank of America Securities, said the Federal Reserve, now that quantitative tightening is ending, is better as a backstop buyer.

Comments from the Council of Federal Home Loan Banks

The Council of Federal Home Loan Banks also sent in a letter on the strategic plan, complimenting FHFA for rescinding what it termed outdated guidance and advisory bulletins.

The letter pointed out that certain regulations and advisories have limited the 11 FLHBs ability to provide liquidity to their members and wants the FHFA to continue refining those frameworks, balancing safety and soundness while allowing the System to do more to address housing challenges. It also requests revisions to the FHLBanks Affordable Housing Program, referring to an August 2024 comment letter for its suggestions.

"Director Pulte has proposed a strategic plan that charts a bold path to sustain the FHLBank System's long-term stability and impact," said Ryan Donovan, president and CEO of the Council of Federal Home Loan Banks, in a press release. "We will be a constructive partner to ensure the FHLBanks keep delivering reliable liquidity in a safe and sound manner to help keep mortgage credit affordable."