FHFA floats new housing goals amid broader proposal review

Fannie Mae and Freddie Mac could change how they approach affordable housing goals next year if their oversight agency's new affordable-housing goal proposal moves forward.

Some of the proposed benchmarks the Federal Housing Finance Agency published Thursday aren't as high as those from a year ago and shift away from competitive efforts to serve low-income borrowers, instead showing deference to other public and private programs.

"In some instances it is appropriate to set benchmarks that are lower than the market forecasts to encourage other secondary market outlets to participate in the market," the FHFA said in the 2026 proposal filed in the Federal Register.

(While a public sector shutdown has been in effect since Oct. 1 due to an impasse in congressional negotiations, the two government-sponsored enterprises operate outside of the federal budget process and were still able to update the register.)

The proposed single-family benchmarks

• The owner-occupied home purchase goal would fall from 25% to 21% for those with low incomes, defined as no higher than 80% of the area median. For those with very low incomes no higher than 50% of AMI, the goal drops from 6% to 3.5% 

• A sub-goal for minority census tracts would be combined with the one for low-income regions. The result would be a single low-income home purchase sub-goal.

• The low-income refinance goal stays at 16%. (Multifamily goals also are unchanged.)
  

The FHFA also proposed and lowered its home purchase goals last year by 3 percentage points for the low-income purchase goal. It lowered that goal by 1 percentage point for very low income AMIs. It had raised its sub-goal for minority census tracts by 2 percentage points at that time.

More on why the FHFA says it wants to lower some goals

The FHFA, which has been rebranded but retains its previous legal title in the register, showed a specific interest in deferring to direct government agencies like the Federal Housing Administration, banks, state housing finance agencies and private-label securitizers in its goals

The agency said it plans to "undertake a critical examination of how the enterprises' activities intersect with, impact, and compete with FHA's mission, the health of the PLS market, and financial institutions' obligations under the Community Reinvestment Act."

FHFA did acknowledge that "if housing goals are set too low, there is a risk of a decrease in liquidity and outreach to low- and moderate-income borrowers," but said three factors would prevent that from occurring:

• Fannie and Freddie's broader missions around serving low- and moderate-income borrowers, 

• pay-ups for custom pools of certain affordable housing loans that investors buy for prepayment protection, and

• A sizable and profitable low-mod market exists outside of that covered by the other agencies
  

"It is not in the enterprises' interest to cease purchases from this market because it would result in a substantial loss of business and market reach," FHFA said.
Ceding more loans at the lower end of the income spectrum to FHA may be conducive to exploring a new stock offering related to the GSEs, which have been in conservatorship since 2008.

If the goals move forward, lenders may find themselves with fewer options available for low-income borrowers in some cases. FHA rates for low-income borrowers are typically higher than the enterprises' in cases where those consumers qualify for loans Fannie or Freddie will buy.

FHA has insurance charges aimed at covering its risks for backing loans that typically are made to borrowers with thinner financial buffers against distress than those the enterprises purchase.

The FHFA will be accepting comments on its proposed affordable housing goals until Nov. 3.

Other proposals the FHFA is withdrawing

The agency also announced in a separate Federal Register filing that it is withdrawing a few proposals the previous administration had put into place but did not finalize:

• Minimum liquidity requirements for the enterprises: This 2021 initiative was aimed at ensuring Fannie and Freddie would be able to meet their obligations in stressed markets by drawing up requirements for certain eligible assets and enforcement.

• Amendments to Federal Home Loan Bank capital requirements: The 2024 proposal  would have introduced some flexibility in limits on unsecured extensions of credit in derivative transactions by expanding the allowable exclusions.

• Other FHLB clarifications: This 2024 proposal generally focused on amended rules for directorships and related compensation, board and committee meeting conduct, employee conflicts of interest and responsibilities associated with different roles.
  

FHFA is both the conservator and regulator for Fannie and Freddie. It regulates the FHLBanks.