Banking and Finance Law Daily FHFA publishes final rule on the Federal Home Loan Banks’ housing goals
Thursday, June 4, 2020

FHFA publishes final rule on the Federal Home Loan Banks’ housing goals

By Nicole D. Prysby, J.D.

The Federal Housing Finance Agency also published a "Fact Sheet" summarizing the rule.

The Federal Housing Finance Agency (FHFA) announced on June 3, 2020, that it promulgated a final rule modifying the Federal Home Loan Banks’ (FHLBanks) housing goals. The rule, which takes effect 60 days after publication in the Federal Register, is intended to expand homeownership opportunities for underserved communities. Among other things, the final rule: sets a single prospective mortgage purchase housing goal as a share of each FHLBank’s total Acquired Member Asset (AMA) purchases; sets a new small member participation housing goal for participation by small institutions; eliminates the volume threshold; allows FHLBanks to propose different target levels for the goals for mortgage purchases and small member participation; simplifies the eligibility criteria for the goals; and allows federally backed loans that are sold to the FHLBanks by small institutions to count for goal purposes. In addition, the FHFA has published a "Fact Sheet" summarizing the final rule.

The Federal Home Loan Bank Act requires that the Director of the FHFA establish housing goals with respect to FHLBanks. FHLBanks currently offer two AMA programs through which the FHLBanks purchase 15- to 30-year conventional mortgages in addition to loans guaranteed or insured by a department or agency of the U.S. government. Previously, the FHFA issued a final rule in December 2010 that established housing goals for any FHLBank with AMA purchases that exceed a volume threshold of $2.5 billion in a given year. In 2018, the FHFA announced a proposed rule revising the FHLBanks’ housing goals (see Banking and Finance Law Daily, Oct. 30, 2018).

Final rule amendments. The FHFA’s final rule amendments (12 CFR Part 1281) eliminate the current $2.5 billion volume threshold, such that all Banks are subject to the new housing goals, regardless of their AMA mortgage purchase volume, consistent with the proposed rule. The final rule establishes one overall target level for the new housing goal at 20 percent of the number of a Bank’s total AMA mortgage purchases. The final rule permits a Bank to request FHFA approval of an alternative target level for the goal. It provides that no more than 25 percent of the mortgages counted toward the housing goal may be mortgages for families with incomes above 80 percent of area median income. And the final rule requires that at least 50 percent of a Bank’s total AMA users must be community-based AMA users. "Community-based AMA user" is a new term defined to mean any user whose average total assets over the three-year period culminating in the year preceding the one being measured are no greater than the applicable community-based AMA user asset cap, which itself is a new term meaning $1,224,000,000, subject to annual adjustments by the FHFA.

Consistent with the proposed rule, the final rule establishes a three-year phase-in period for enforcement of the two new housing goals, starting with the effective date of the final rule and ending on December 31, 2023. During the phase-in period, the FHFA will monitor and report the Banks’ housing goals performance but will not impose a housing plan remedy in the event that a Bank fails to meet either or both of the housing goal target levels.

Fact Sheet. The FHA’s "Fact Sheet" provides background information about, and a summary of, the final rule.

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