FHFA Issues Final Rules for GSE Portfolios, Equal Hiring, and FHLB Goals

by devteam December 27th, 2010 | Share

The Federal Home Finance AgencyrnFHFA) has issued the final rules for the three financial entities it oversees andrnan advance notice of proposed rulemaking for the Federal Home Loan Banks (Banks.)  The three final rules, all of which have been through a period of public comment, concern GSErnportfolio holdings, FHLBank and GSE inclusion of women and minorities, andrnFHLBank goals.  The proposed rulernpertains to membership in the FHLBanks and will be outlined in a separaternarticle.</p

GSE Portfolios</p

FHFA is adopting without changernthe interim rule on portfolio limits promulgated in January 2009.  This rule is identical to the portfoliornlimits specified in each of the Enterprise’s Senior Preferred Stock PurchasernAgreement (PSPA) with the Department of the Treasury which governs the terms ofrnthe conservatorship of each of the failed institutions.</p

The PSPAs have identical portfoliorncriteria for both Enterprises.  Startingrnon December 31, 2010 and each year thereafter as long as the Enterprises arernsubject to their respective PSPAs, each must reduce its mortgage assets to 90rnpercent of the level of assets it held on December 31 of the previous yearrnuntil the maximum size of each portfolio reaches $250 billion.  The Enterprise’s cannot have a portfolio asrnof December 31, 2010 that exceeds $810 billion.  </p

Under the rule, Treasury and FHFArnas conservator of the Enterprises has the right to amend the PSPAs and thernDirector of FHFA is authorized to order an Enterprise to dispose of or acquire anyrnasset under terms and conditions determined by the Director.</p

Minority and Women Inclusion</p

This rule establishes minimumrnstandards for the inclusion of women, minorities, individuals with disabilitiesrnand the businesses owned by any of these groups in employment, contracts, and businessrnactivities of all kinds. However, the final rule only addresses Part A dealingrnwith general applicability topics.  Becausernof possible conflicts with provisions of the Dodd-Frank Financial Reform Actrnthat have not yet been promulgated, final rules Parts B and C governing inclusionrnand diversity at FHFA, the Enterprises, FHLBank, and the Office of Finance arernreserved to a later date.</p

During the comment period forrnthis rule there were objections to FHFA’s expansion of the Housing and EconomicrnRecovery Act (HERA) diversity requirement to include persons withrndisabilities.  FHFA has determined thatrnHERA language allows FHFA and its director the latitude to do this, and thernexpansion stands in the final regulation.  rnHowever, FHFA has reduced the reporting requirements for persons with disabilitiesrnbecause of comments from stakeholders regarding privacy issues that if found sufficientlyrncompelling.</p

The rule mandates that the Officernof Finance, the Enterprises, and FHLBank establish an Office of Minority andrnWomen Inclusion and publish a statement confirming its commitment to thernprinciples of equal opportunity and employment and contracting.  Each shall also:</p<ul class="unIndentedList"<lideveloprnpolicies and procedures to ensure inclusion and utilization of women, minorities,rnpersons with disabilities, and businesses under their ownership;</li<liconfirmrnits adherence to the principles of equal opportunity and non-discrimination;</li<lidescribernits policy against discrimination in employment and contracting;</li<liestablishrninternal procedures to receive and attempt to resolve complaints;</li<liestablishrneffective procedures for handling requests for reasonable accommodations ofrndisabilities;</li<liencouragernconsideration of diversity in nominating or soliciting nominees for positionsrnon boards of directors or for employment in the Office of Finance;</li<lirequirernthat each contract it enters contain a material clause committing therncontractor to adhere to principal of equal opportunity and to include the clausernin any subcontracts it lets;</li<liestablishrna program for outreach to ensure as much as possible the inclusion inrncontracting opportunities minorities, women, individuals with disabilities andrntheir owned businesses.</li</ul

FHLBank Goals</p

FHFA is required to set goals forrnthe Enterprises and FHLBank for 2011 and beyond.  There are similar goals for the three, but somerngoals apply only to FHLBanks.  Those arernaddressed in the final rules.  </p

A Bank that, in a calendar yearrnpurchased AMA-approved mortgages with a total unpaid principal balance greaterrnthan $2.5 billion will be subject to the housing goals for that year.  This threshold is currently equal to aboutrn0.25 percent of the overall single-family market.</p

Unlike goals for the Enterprises,rnFHFA will not establish benchmarks to measure housing goal’s performance.  Performance under the housing goals will bernmeasured relative to the actual goals-qualifying shares of the district-levelrnprimary mortgage market during the year in each district.  FHFA will calculate the actualrngoals-qualifying shares of the market using all mortgages originated in therndistrict by members and non-members.  ArnBank meets a housing goal if its annual performance meets or exceeds the actualrnshare of the market in that district that fits the criteria for a particularrnhousing goal.  All mortgages purchased byrna Bank that meet the final requirements will count toward the Bank’srnperformance regardless of where the property securing the loan is located.  </p

The final rule establishes fourrnsingle-family housing goals for any Bank that exceeds the volume threshold ofrn$2.5 billion in a calendar year.  Theserngoals will cover:</p<ul class="unIndentedList"<lipurchasernmoney mortgages for low income families;</li<lipurchasernmoney mortgages of families in low-income areas;</li<lipurchasernmoney mortgages for very low income families;</li<lirefinancingrnmortgages for low-income families.</li</ul

The final rule specificallyrnprohibits the counting of home equity loans, secondary liens, construction-to-permanentrnloans, and mortgages for second homes in achieving the housing goals.

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About the Author


Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, is a PASBA member accountant located in Londonderry, New Hampshire.

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