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Fannie and Freddie announce tenant protection policy framework
On August 28, Fannie Mae and Freddie Mac (GSEs) each published a multifamily tenant protection policy framework to require minimum lease standards at multifamily properties financed by new enterprise-backed loans. Introduced by the FHFA in July, the policies will take effect in February 2025 and will include (i) a five-day grace period for rent payments, (ii) a 30-day notice for rent increases, and (iii) a 30-day notice of lease expirations.
According to Freddie Mac’s announcement, the GSEs collaborated with the FHFA to review state landlord-tenant laws and engaged stakeholders to identify best practices. Findings from Freddie Mac’s National Survey of Tenant Protections were also considered. Additionally, the GSEs published FAQs related to the standards and an initial policy grid or policy framework that outlined their policy, applicability, updates to loan documents, implementation requirements for borrowers, and monitoring and enforcement details.
FHFA’s OIG issues report on FHFA supervision of FHLBanks
On August 19, the OIG for the FHFA released a report evaluating the agency’s supervision of FHLBanks following the issue of four member banks during spring 2023. The report summarized four findings: (i) the FHFA has not issued written guidance for FHLBanks on subordinating members’ collateral when members seek discount window funding; (ii) the FHFA did not have internal guidance on cross-regulator coordination; (iii) the FHFA has not revised certain examination guidance since 2014; and (iv) the FHFA management lacks an approach to ensure examiners review all topics covered by examination guidance. The evaluation covered examination activities from January 1, 2021, to September 30, 2023, and noted weaknesses in the FHLBanks’ lending philosophies, credit policies, risk assessments and modeling.
To remedy these findings, the report made four recommendations. First, the report recommended that the Division of Federal Home Loan Bank Regulation (DBR) issue written guidance on FHLBanks’ collateral subordination practices. Second, the report urged the DBR to develop and implement protocols for DBR personnel to follow in times of member bank distress and failure. The protocols should include heightened oversight of FHLBanks and coordination with federal and state regulators.
Third, the report called for the FHFA to update the Examination Manual’s Credit Risk Management module and the Advances and Collateral module to incorporate lessons learned from the spring 2023 bank issues. Fourth, the report recommended DBR adopt a process to ensure appropriate examination coverage of all topics within its Examination Manual guidance. The FHFA agreed to all recommendations and committed to implementing corrective actions by 2025.
FHFA releases NPRM on housing goals for 2025-2027
On August 22, FHFA released a proposed rule on its housing goals for Fannie Mae and Freddie Mac (the GSEs) for 2025-2027 as required by the Federal Housing Enterprises Financial Safety and Soundness Act of 1992. FHFA is requesting comments on all aspects of the proposed rule. The rule included goals and subgoals for single-family and multifamily mortgages for low-income and very low-income families, set requirements for housing plans, and made technical changes to 12 C.F.R. § 1282. FHFA also proposed new criteria that would assess if a housing plan would be required for certain single-family housing goals during the 2025-2027 housing goals period. FHFA stated that it proposed these changes “to encourage the [GSEs] to focus on meeting the market levels rather than focusing exclusively on the housing goals benchmark levels in the event of unexpected disruptions to the market[.]”
The proposed rule would amend the housing goals to update the benchmark levels for the total number of purchase money mortgages for low-income families to 25 percent, down from 28 percent; and for very low-income families from 7 percent to 6 percent. Revised subgoals include low-income census tract housing remaining at 4 percent, but the minority census tracts housing subgoal increased from 10 percent to 12 percent. The refinancing housing goal remains at 26 percent. The previous goals were for 2022-2024.
The NPRM also included a new section (Section 1282.21) to codify rules on compliance with housing goals and notice of final determination. The new enforcement factors for 2025-2027 were listed under Section 1282.22. The NPRM included multiple tables outlining FHFA’s housing goals. FHFA will accept written comments on the proposed rule on or before 60 days after publication in the Federal Register.
FHFA releases NPRM on housing goals for 2025-2027
On August 22, FHFA released a proposed rule on its housing goals for Fannie Mae and Freddie Mac (the GSEs) for 2025-2027 as required by the Federal Housing Enterprises Financial Safety and Soundness Act of 1992. FHFA is requesting comments on all aspects of the proposed rule. The rule included goals and subgoals for single-family and multifamily mortgages for low-income and very low-income families, set requirements for housing plans, and made technical changes to 12 C.F.R. § 1282. FHFA also proposed new criteria that would assess if a housing plan would be required for certain single-family housing goals during the 2025-2027 housing goals period. FHFA stated that it proposed these changes “to encourage the [GSEs] to focus on meeting the market levels rather than focusing exclusively on the housing goals benchmark levels in the event of unexpected disruptions to the market[.]”
The proposed rule would amend the housing goals to update the benchmark levels for the total number of purchase money mortgages for low-income families to 25 percent, down from 28 percent; and for very low-income families from 7 percent to 6 percent. Revised subgoals include low-income census tract housing remaining at 4 percent, but the minority census tracts housing subgoal increased from 10 percent to 12 percent. The refinancing housing goal remains at 26 percent. The previous goals were for 2022-2024.
The NPRM also included a new section (Section 1282.21) to codify rules on compliance with housing goals and notice of final determination. The new enforcement factors for 2025-2027 were listed under Section 1282.22. The NPRM included multiple tables outlining FHFA’s housing goals. FHFA will accept written comments on the proposed rule on or before 60 days after publication in the Federal Register.
FHA expands its definition of Government-Sponsored Enterprises (GSEs)
Recently, HUD issued Mortgagee Letter 2024-12, updating its regulations to redefine Government-Sponsored Enterprises (GSEs) as separate from other governmental institutions with respect to FHA requirements for specific loan and mortgage origination activities. Acknowledging that GSEs do not have the infrastructure to comply with FHA origination requirements due to the nature of their lending activities, HUD has exempted GSEs from those specific FHA rules. After a period of public comment, on April 23 HUD published the final rule in the Federal Register, which amends regulations in 24 CFR Parts 202 and 5. The update also clarifies the definition of “Investing Mortgagee” to specify that it is not approved as a Supervised Mortgagee, a Nonsupervised Mortgagee, or a Government Mortgagee. These changes have also been incorporated into HUD Handbook 4000.1.
CFPB and FHFA release data from the National Survey of Mortgage Originations
On July 1, the CFPB and FHFA released updated loan-level data from 2013-2021 through the National Survey of Mortgage Originations (NSMO). NSMO, established in 2014, gathers quarterly data from borrowers who recently obtained mortgages. The survey supports policymaking and research efforts, aiding regulators in understanding emerging mortgage and housing market trends. The survey, a component of the National Mortgage Database (NMDB), tracks mortgage performance, credit information, borrower experiences, and market perceptions, providing insights into consumer behavior and potential areas for improvement in lending processes. The NMDB was designed to fulfill the requirements of the Housing and Economic Recovery Act and Dodd-Frank.
NMDB helps regulators, policymakers, and researchers understand consumer experiences, market trends, and potential areas for reform in the mortgage industry. This year’s release included new data points on appraisal satisfaction, willingness to move, and accommodations for people with disabilities. Among the key findings, 70 percent of respondents reported high satisfaction with their appraisals, while 50 percent indicated unwillingness to move from their primary residences. Of note, 8 percent of borrowers cited accommodations for individuals with disabilities as an important factor when choosing a lender.
Click here to access the NSMO Public Use File.
FHFA requests information on its FHLBank Affordable Housing Program
On June 20, FHFA released its request for input (RFI) on the application process for the Federal Home Loan Banks’ (FHLBanks) Affordable Housing Program (AHP). FHFA invited input on all aspects of the AHP application process, with a deadline for submissions no later than August 19. The AHP housing program was designed to provide funding to purchase, construct, and rehabilitate housing for very low-, low-, and moderate-income households. Each FHLBank provides funding through either a competitive application program that funds both rental and homeownership projects or a homeownership set-aside program that supports owner-occupied housing for income-eligible households. The RFI focused on the competitive application programs and posed eight questions related to the AHP application process, including the use of consultants to apply for AHP funds, and opportunities for improvements to the application process.
FHFA approves Freddie Mac's second mortgage pilot
On June 20, FHFA conditionally approved a limited pilot program for Freddie Mac to begin purchasing certain single-family closed-end second mortgages. This decision came after implementing a new approval process for products from Freddie Mac and Fannie Mae, which became effective in April 2023. The pilot will determine if the new mortgage product “advances Freddie Mac's statutory purposes and benefits borrowers, particularly in rural and underserved communities.”
FHFA's approval will set specific limitations for the pilot, including (i) a $2.5 billion cap on purchases; (ii) a maximum duration of 18 months; (iii) a maximum loan amount of $78,277, (in alignment with the CFPB’s Qualified Mortgage criteria); (iv) a 24-month “seasoning period” for the first mortgage; and (v) a restriction to primary residences only. Following the pilot, the FHFA will evaluate its success and effectiveness. Any proposed expansion or conversion of the pilot into a regular program will require a new round of public comments and FHFA approval, based on the pilot's initial outcomes.
FHFA issues 2023 annual report and noted challenges in housing market
On June 14, the FHFA released its annual report to Congress, as required under the Housing and Economic Recovery Act of 2008, detailing FHFA’s activities and the state of the housing finance industry in 2023. The report highlighted the current housing market’s tight supply of homes, high construction costs, and rising interest rates. All three factors contributed to difficulties buying or refinancing homes, as well as significantly increasing the cost of rent and home prices.
The report also discussed the conservatorships of Fannie Mae and Freddie Mac. Despite remaining undercapitalized, the government-sponsored enterprises built out their capital reserves during 2023 and transferred more credit risks onto private investors. The report detailed the FHFA’s effort to promote equitable access to affordable housing through initiatives focused on energy efficiency products and fair lending practices.
The annual report covered FHFA’s research and regulatory activities, including publications of several working papers on climate risk, mortgage debt, and housing supply. An overview of the FHFA’s regulatory activity included several proposed and final rules, including amendments to the Enterprise Regulatory Capital Framework and the Enterprise Duty to Serve Underserved Markets regulation.
The 2023 annual report followed the FHFA’s report on the FHLBank System, as previously covered by InfoBytes. The FHLBank report recommended actions for banks to provide more consistent and sustained access to home financing. The report highlighted the role of the 11 FHLBanks in providing liquidity to their members and supporting housing and community development. The banks faced increased demand for loans in early 2023 due to volatility in the banking sector but maintained good capital liquidity and lending capacities.
FHFA enhances Fannie and Freddie flex modification policies
Recently, the FHFA announced that Fannie Mae and Freddie Mac will update their Flex Modification policies to help struggling borrowers reduce their mortgage payments. Flex Modification would be for eligible borrowers experiencing a permanent hardship and cannot make regular monthly mortgage payments. According to the FHFA, the enhanced policies will aim to decrease a borrower’s monthly payments by up to 20 percent through three incremental steps: (i) interest rate reduction; (ii) extending the loan term; and (iii) principal forbearance for those with loan-to-value ratios above 50 percent. These updates were built on the Servicing Alignment Initiative started in 2011 and have been aimed at better resolving mortgage payment delinquencies. The new Flex Modification policies will take effect on December 1.