Goals are very important, especially within an economy that seems to still be on the downhill.

The Housing and Economic Recovery Act of 2008 (HERA) requires the Federal Housing Finance Agency (FHFA) to establish the mortgage market goals for different target segments. The Freddie Mac and Fannie Mae conservator, therefore, has released its final housing goals for the government-sponsored enterprises. These new rules will apply for the year 2010 to 2011.

The recently established rules have three goals: one for single-family, owner-occupied home purchases; one for very low-income families; and another one for families living in geographical areas with lower-income populations, with high number of minority residents, or that were declared by the state as a disaster area. The last one, disaster areas, includes a sub-goal of addressing lower-income and minority areas needs.

Last February 26, FHFA published their preliminary goals to be able to solicit comments. When the goals were finalized, there have been no changes with low-income and very low-income home purchase mortgages goals. Goals for low-income refinances, accommodating recent market conditions, came to a final downsized goal.

The four single-family goals have been given four benchmarks: 27% low-income home purchases, 8% very low-income family home purchases, annually FHFA-set percentage of low-income/high minority/disaster areas home purchases (sub-goal of13%), and 21% low-income family refinancing. These benchmarks are said to be minimum goal-qualifying mortgage shares.

As set by HERA, there are also seven factors that FHFA had to consider in creating the final single-family housing goals:

• national housing needs;
• economic, demographic, and housing conditions plus projected market developments;
• Enterprises’ previous performance and effort in achieving housing goals;
• Enterprises’ ability to lead the industry in creating available mortgage credit;
• other reliable mortgage data that may be available;
• purchase money of other conventional mortgage market or refinance market that caters to the same family types; and
• maintaining sound financial condition of the Enterprises.

Because the current market conditions are on a downward trend, the final multifamily goals have been lowered. Fannie Mae needs to acquire mortgages financing at least 177,750 low-income and 42,750 very low-income rental units; Freddie Mac’s targets are 161,250 and 21,000. Acquisition of mortgages for low-income units in 5 to 50-unit properties will also have to be reported by the Enterprises.

It is to be noted that mortgage purchases in private-label securities – such as commercial mortgage-backed securities – are prohibited from any credit. GSEs are still expected to support affordable housing but should not risk everything – like with uneconomic or high-risk activities – just to meet the goals set by FHFA.