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The multifamily housing goals are based only on preset benchmark levels because of the lack of multifamily data comparable to single-family HMDA data. Figure 16 on the preceding page shows data concerning the Enterprises’ housing goals for 2014 and 2015. FHFA’s official figures on Enterprise goal performance in 2014 are based on FHFA’s analysis of loan-level data the Enterprises provided to FHFA in early 2015. In addition, FHFA completed its retrospective comparison of the market for 2014 using HMDA data. In December, FHFA sent final determination letters to the Enterprises regarding their 2014 goal performance and FHFA’s calculation of market performance for 2014, and these determinations are reflected in Figure 16. Due to the fact that Freddie Mac’s performance on the lowincome and very low-income home purchase goals fell short of both the benchmark level and market performance in 2014, FHFA required Freddie Mac to submit a housing plan outlining steps it will take to achieve these goals in future years. Freddie Mac delivered a plan as required and FHFA sent a letter to Freddie Mac indicating its approval of the plan on March 31, 2016. FHFA is closely monitoring Freddie Mac’s performance on these goals on a monthly basis and is increasing the number of goal-related meetings with Freddie Mac. While FHFA has concluded its process for assessing the Enterprises’ housing goals performance in 2014, that process is still underway for 2015. Figure 16 on the preceding page shows the goal levels and preliminary figures on Enterprise housing goals performance in 2015, based on information the Enterprises submitted in their March 2016 Annual Housing Activities Reports for 2015. Once 2015 market data under HMDA becomes available later in 2016, FHFA will make its final determinations on whether the Enterprises’ 2015 performance satisfied their housing goals requirements. Duty to Serve FHFA is required by HERA to issue a regulation to implement the Duty to Serve requirements specified in the statute. The statute requires the Enterprises to provide leadership to facilitate a secondary market for mortgages on housing for very low-, low-, and moderate-income families in three underserved markets: 1) manufactured housing; 2) affordable housing preservation; and 3) rural housing. In December, FHFA issued a proposed rule for a 90-day public comment period ending on March 17, 2016. Under the proposed rule, the Enterprises would each be required to submit to FHFA a draft Underserved Markets Plan covering a three-year period, and the public would be invited to provide input on the draft Plans. For the manufactured housing market, Duty to Serve credit under the proposed rule would be provided for eligible Enterprise activities related to manufactured homes financed as real property and blanket loans for certain categories of manufactured housing communities. For the affordable housing preservation market, Duty to Serve credit would be provided under the proposed rule for eligible Enterprise activities related to preserving the affordability of housing for renters and homebuyers, including activities under the programs specified in the Safety and Soundness Act. Duty to Serve credit would also be provided under the proposed rule for activities related to existing small multifamily rental properties, energy efficiency improvements on existing multifamily rental and singlefamily first-lien properties, shared equity homeownership programs and the U.S. Department of Housing and Urban Development’s Choice Neighborhoods Initiative and Rental Assistance Demonstration program. For the rural market, Duty to Serve credit would be provided under the proposed rule for eligible Enterprise activities related to housing in rural areas, including activities serving the following high-needs rural regions and populations: Middle Appalachia, the Lower Mississippi Delta, colonias, members of a Native American tribe located in a Native American area, and migrant and seasonal agricultural workers. The proposed rule also would provide Duty to Serve credit for qualifying activities that promote residential economic diversity in one or more underserved markets. 48 FEDERAL HOUSING FINANCE AGENCY
SUPERVISION AND OVERSIGHT Federal Home Loan Bank Mission and Affordable Housing Programs In 2015, FHFA continued its supervision and oversight to ensure that the FHLBanks are focused on their housing finance and community development mission. Core Mission of the Federal Home Loan Banks FHFA’s Core Mission Activities (CMA) regulation (12 CFR Part 1265.2) describes the mission of the FHLBanks as providing financial products and services to members and housing associates that assist and enhance those institutions’ financing of housing and community lending. Long- and short-term advances (loans) to their members (primarily collateralized by residential mortgage loans and government and agency securities) have historically been the primary mission asset of the FHLBanks. The CMA regulation includes other types of assets, such as mortgage loans that qualify as AMA, in the definition of core mission activities. In 2015, FHFA provided further guidance on core mission activities by publishing Advisory Bulletin AB 2015-05, “FHLBank Core Mission Achievement.” As described in the Advisory Bulletin, FHFA will measure each FHLBank’s core mission achievement by calculating the ratio of its Primary Mission Assets (advances plus AMA) relative to consolidated obligations. The Advisory Bulletin establishes three general categories: 1) ratios at or above 70 percent indicate that a FHLBank’s activities are achieving core mission; 2) ratios between the thresholds indicate that other mission activities need to be considered; and 3) ratios below 55 percent indicate that more fundamental questions about the activities of the FHLBank need to be addressed. FHFA began calculating these ratios at year-end 2015 using annual average par values as reported by the FHLBanks in FHFA’s Call Report System. FHFA will assess each FHLBank’s core mission achievement on an annual basis as part of the examination process. FHFA’s regulation on strategic business plans requires each Bank’s board of directors to adopt, maintain, and periodically review a strategic business plan that “describes how the business activities of the Bank will achieve the mission of the Bank consistent with” the core mission activities provisions. FHFA expects that each FHLBank’s strategic plan will address mission achievement and expects any FHLBank with a core mission ratio that is markedly below the preferred level to have a more thorough core mission strategic plan. At year-end 2015, the FHLBank System core mission ratio exceeded 70 percent. Eight of the FHLBanks had ratios of 70 percent or higher, another FHLBank reached 69 percent, and the remaining two FHLBanks had core mission ratios between 55 and 60 percent. FHLBank Affordable Housing Program The Bank Act requires each of the 11 FHLBanks to establish an Affordable Housing Program (AHP) to provide financing for the construction, purchase, or rehabilitation of affordable housing for very low- and low- or moderateincome households. AHP subsidies must be used either to finance homeownership by households with incomes at or below 80 percent of the area median income or finance the purchase, construction, or rehabilitation of rental housing in which at least 20 percent of the units will be occupied by, and affordable to, households with incomes at or below 50 percent of the area median income. AHP applicants are FHLBank member financial institutions that pass the subsidy through to an eligible beneficiary in the form of subsidized advances or grants. Each FHLBank annually funds its AHP with 10 percent of its preceding year’s net earnings, subject to a minimum $100 million contribution by the FHLBank System as a whole. REPORT TO <strong>CONGRESS</strong> • 2015 49
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