The Federal Housing Finance Agency (FHFA), which regulates government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac, has outlined adjusted housing goals for the country’s largest mortgage investors for 2026 through 2028.
The Federal Housing Enterprises Financial Safety and Soundness Act of 1992 requires the FHFA to establish annual housing goals for mortgages Fannie and Freddie purchase, as it aligns with their “affirmative obligation to facilitate the financing of affordable housing for low- and moderate-income families in a manner consistent with their overall public purposes, while maintaining a strong financial condition and a reasonable economic return.”
The proposed rule filed in the Federal Register on Oct. 2 is open for public comment through Nov. 3. Broadly, the adjusted goals represent a streamlining of prior single-family affordable housing goals and a lowering of target benchmarks in key lending categories.
Specifically, the proposed rule would combine the current low-income census tracts home purchase goals and the minority census tracts home purchase goal into a single low-income areas home purchase goal. Within that goal, the proposed rule pulls back from more aggressive benchmarks of previous rules, adding flexibility for the GSEs, says the FHFA.
Under the current housing goals for Fannie and Freddie, 25% of the mortgages they purchase should be on properties in low-income census tracts to borrowers with incomes no greater than 80% of the area median income (AMI), while 6.5% should be in very-low-income census tracts to borrowers with incomes not exceeding 50% AMI. The FHFA proposes lowering those benchmarks to 21% for low-income census tracts and 3% for very-low-income tracts.
The reduction of these benchmarks led the FHFA to propose an elimination of potentially redundant “measurement buffers” meant to allow Fannie and Freddie to align with market levels in these categories if the benchmark target was rendered too lofty.
The reduction in Fannie and Freddie’s affordable housing goals stems from a stated desire to not exacerbate widening affordability gaps facing low- and moderate-income homebuyers. The proposal cites the middle class as disproportionately affected by Fannie and Freddie’s past benchmarks in low-income and very low-income purchases.
“This adjustment acknowledges the current limitations in affordable inventory,” the proposed rule reads, “facilitating a lending pace that more accurately reflects accessible supply and mitigating the potential for further price escalation that could disproportionately affect the intended beneficiaries of these goals.”
More specifically, the FHFA offers anecdotal feedback from large lenders and trade associations suggesting that extra-lofty affordable housing benchmarks have created untenable conditions for lenders and borrowers.
One lender said that to maintain its relationship with Fannie and Freddie, “they have to pay-up” for loans that satisfy Fannie and Freddie’s housing goals from third-party loan aggregators — loans they would have not ordinarily purchased — in order to deliver those loans to Fannie and Freddie. The lender noted that the lower pricing of goal-qualifying loans is not passed to the borrower whatsoever.
A trade association shared with FHFA that “lenders felt compelled to turn away non-goals business in order to keep their goal percentages high, or place low-income borrowers in conventional loans when another product might be a better fit.”
The FHFA cites congressional testimony from Edward DeMarco, president of the Housing Policy Council, a housing finance trade group, that “the current target level of affordable loans materially exceeds what the market is capable of producing, given today’s market conditions. … As a result, there is a bidding war for these loans but there is no mechanism to ensure the homebuyer benefits.”
Ultimately, an FHFA under the leadership of Director Bill Pulte, a strong ally of the Trump administration, sees itself as fulfilling the president’s orders to address the affordable housing crisis, as outlined in the Jan. 20 memorandum titled “Delivering Emergency Price Relief for American Families and Defeating the Cost-of-Living Crisis.”
“FHFA, in carrying out this policy priority,” the proposal reads, “is assessing the impact of the housing goals on the cost of housing, particularly to middle-class borrowers, who may be turned away or receive higher prices than they would in the absence of overly aggressive housing goals.”
Restricting mortgage liquidity to low-income borrowers to improve liquidity for “middle-class borrowers” is the essence of the proposal, drafted with the understanding that other government lending programs better service low- and very-low-income borrowers.
Concerning multifamily housing goals, the FHFA proposes keeping all its existing benchmarks unchanged: low income (61%), very low income (14%) and small multifamily low income (2%). Those figures indicate the percentage of affordable rental units in multifamily properties financed by Fannie and Freddie.
