The Federal Housing Finance Agency’s proposed affordable housing goals for Fannie Mae and Freddie Mac from 2022 to 2024 include a subcategory covering lending to minority neighborhoods for the first time.
The new home purchase target in the plan released Wednesday would set a 10% benchmark for qualified single-family lending in census tracts that meet certain demographic and income targets. Minorities would have to make up at least 30% of the population in these areas. In addition, the borrower’s income would have to be at or below the median.
The move builds on a growing number of Biden administration efforts aimed at reducing racial gaps in lending. Recent examples include a new Fannie Mae pilot to underwrite based on rent histories, and a memorandum of understanding between the FHFA and Department of Housing and Urban Development officials on fair-lending enforcement.
“The enterprises’ housing goals over the next three years should support equitable access to sustainable affordable housing opportunities,” andra Thompson, acting director of the FHFA, said in a press release.
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“This proposal will help ensure that the GSEs are fulfilling their mission to serve all homeowners and renters, including lower-income homeowners in communities of color,” Sen. Sherrod Brown, D-Ohio, chairman of the Senate Committee on Banking, Housing and Urban Affairs, said in a separate release.
One mortgage industry trade group welcomed the move, but questioned whether constraints the FHFA’s charges have on purchasing loans with certain characteristics under preferred stock purchase agreements run counter to its aims.
“CHLA applauds FHFA’s release of ambitious housing goals. However this action clearly reinforces the need for Treasury and FHFA to immediately suspend the January PSPA volume caps on so-called ‘higher risk’ loans, ”The Community Home Lenders Association said in a statement.
In addition to creating the new minority area subgoal, the FHFA’s proposal also would add a benchmark for lending in low-income census tracts and raise the bar for the existing single-family and multifamily targets.
Multifamily benchmarks, which are based on units, would increase as follows: low-income, 415,000 (from 300,000); very low income, 88,000 (versus 60,000); and small buildings, 23,000 (versus 10,000). The benchmark for small buildings pertains to properties with five to 50 units serving low-income tenants.