Enterprise Duty To Serve Underserved Markets-Colonia Census Tract Amendments, 23559-23564 [2023-08005]

Download as PDF 23559 Rules and Regulations Federal Register Vol. 88, No. 74 Tuesday, April 18, 2023 This section of the FEDERAL REGISTER contains regulatory documents having general applicability and legal effect, most of which are keyed to and codified in the Code of Federal Regulations, which is published under 50 titles pursuant to 44 U.S.C. 1510. The Code of Federal Regulations is sold by the Superintendent of Documents. DEPARTMENT OF AGRICULTURE Food and Nutrition Service 7 CFR Part 275 [FNS–2018–0043] RIN 0584–AE64 Supplemental Nutrition Assistance Program: Non-Discretionary Quality Control Provisions of Title IV of the Agricultural Improvement Act of 2018 Food and Nutrition Service (FNS), USDA. ACTION: Final rule. AGENCY: The Department of Agriculture (USDA) is adopting the interim final rule on non-discretionary quality control provisions of Title IV of the Agricultural Improvement Act of 2018, and its correction, as final. In this final rule, USDA is also removing one obsolete paragraph from the interim final rule due to the Office of Management and Budget’s (OMB) subsequent approval of information collection activities associated with the rule. DATES: Effective April 18, 2023. FOR FURTHER INFORMATION CONTACT: John McCleskey, 703–457–7747, Food and Nutrition Service, 1320 Braddock Place, 5th Floor; Alexandria, Virginia 22314, SNAPQCReform@usda.gov. SUPPLEMENTARY INFORMATION: SUMMARY: ddrumheller on DSK120RN23PROD with RULES1 Background The Department published an interim final rule on August 13, 2021, which addressed non-discretionary quality control (QC) provisions of Title IV of the Agricultural Improvement Act of 2018 (86 FR 44575). This rule became effective August 13, 2021. USDA also published a correction to that interim final rule on September 2, 2021 (86 FR 49229). The interim final rule established requirements on the use and Federal oversight of third-party contractors for the Supplemental VerDate Sep<11>2014 16:25 Apr 17, 2023 Jkt 259001 Nutrition Assistance Program’s (SNAP) QC system in State agencies; Federal QC reviewer access to State eligibility computer systems containing SNAP household information; the use of FNS’ existing management evaluation process to annually review at least two State agency QC systems for integrity purposes; and inclusion of SNAP cases originally processed by the Social Security Administration in the annual review of QC cases. The rule also clarified which QC records must be kept for QC recordkeeping purposes, that QC cases must be final when submitted to FNS for Federal review, and that the OMB-approved FNS 380 QC form and all of its supporting documentation must be submitted to FNS upon completion of the State’s case review. The interim final rule also included 7 CFR 275.2(c)(4) because the rule included information-collection activities that required revision of existing OMB-approved collections. Per the interim final rulemaking, paragraph (c)(4) states that compliance with paragraph (c)(1) will not be required until paragraph (c)(4) is removed or contains a compliance date, after review of such requirements by OMB pursuant to the Paperwork Reduction Act (PRA). On July 29, 2022, OMB concluded its review of and approved the PRA requirements for the two affected collections requiring revision, OMB 0584–0074—Worksheet for the Supplemental Nutrition Assistance Program’s Quality Control Reviews and OMB 0584–0303—Supplemental Nutrition Assistance Program Regulations, Part 275—Quality Control. One comment on the interim final rule was received, sharing the commenter’s general thoughts about SNAP’s integrity; however, the comment was not germane to the interim final rule. No other comments were received by the November 1, 2021, comment date. As such, USDA is adopting the interim final rule and its correction as final. In doing so, USDA is also removing 7 CFR 275.2(c)(4) from the rule due to OMB’s approval of information collection activities included in 7 CFR 275.2(c)(1). This action also affirms the information contained in the interim final rule concerning Executive Orders 12866 and the Regulatory Flexibility PO 00000 Frm 00001 Fmt 4700 Sfmt 4700 Act, Executive Orders 13563, 13175, and 12988. List of Subjects in 7 CFR Part 275 Grant programs—social programs, Reporting and recordkeeping requirements. Accordingly, the interim rule amending 7 CFR part 275, published August 13, 2021, at 86 FR 44575, and corrected September 2, 2021, at 86 FR 49229, is adopted as final with the following changes: PART 275—PERFORMANCE REPORTING SYSTEM 1. The authority citation for part 275 continues to read as follows: ■ Authority: 7 U.S.C. 2011–2036. § 275.2 [Amended] 2. Amend § 275.2 by removing paragraph (c)(4). ■ Cynthia Long, Administrator, Food and Nutrition Service. [FR Doc. 2023–08122 Filed 4–17–23; 8:45 am] BILLING CODE 3410–30–P FEDERAL HOUSING FINANCE AGENCY 12 CFR Part 1282 RIN 2590–AB22 Enterprise Duty To Serve Underserved Markets—Colonia Census Tract Amendments Federal Housing Finance Agency. ACTION: Final rule. AGENCY: The Federal Housing Finance Agency (FHFA) is adopting as final, without change, a proposed rule that amends its Enterprise Duty to Serve Underserved Markets regulation to add a definition of ‘‘colonia census tract,’’ to serve as a census tract-based proxy for a ‘‘colonia.’’ The final rule also amends the definition of ‘‘high-needs rural region’’ in the regulation by substituting ‘‘colonia census tract’’ for ‘‘colonia.’’ In addition, the final rule revises the definition of ‘‘rural area’’ in the regulation to include all colonia census tracts regardless of their location. These changes will make certain activities by the Federal National Mortgage Association (Fannie Mae) and the SUMMARY: E:\FR\FM\18APR1.SGM 18APR1 23560 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Rules and Regulations ddrumheller on DSK120RN23PROD with RULES1 Federal Home Loan Mortgage Corporation (Freddie Mac) (collectively, the Enterprises) in all colonia census tracts eligible for Duty to Serve credit. The intent of the changes is to facilitate the Enterprises’ ability to operationalize their Duty to Serve activities in colonia census tracts and thereby help increase liquidity in these underserved communities. DATES: The final rule is effective July 1, 2023. FOR FURTHER INFORMATION CONTACT: Ted Wartell, Associate Director, Office of Housing and Community Investment, 202–649–3157, ted.wartell@fhfa.gov; Marcea Barringer, Supervisory Policy Analyst, Office of Housing and Community Investment, 202–649–3275, marcea.barringer@fhfa.gov; or Dinah Knight, Assistant General Counsel, Office of General Counsel, (202) 748– 7801, dinah.knight@fhfa.gov, Federal Housing Finance Agency, 400 Seventh Street SW, Washington, DC 20219. These are not toll-free numbers. For TTY/TRS users with hearing and speech disabilities, dial 711 and ask to be connected to any of the contact numbers above. SUPPLEMENTARY INFORMATION: I. Statutory and Regulatory Background The Federal Housing Enterprises Financial Safety and Soundness Act of 1992 (Safety and Soundness Act) provides generally that the Enterprises ‘‘have an affirmative obligation to facilitate the financing of affordable housing for low- and moderate-income families.’’ 1 Section 1129 of the Housing and Economic Recovery Act of 2008 (HERA) amended section 1335 of the Safety and Soundness Act to establish a duty for the Enterprises to serve three specified underserved markets in order to increase the liquidity of mortgage investments and improve the distribution of investment capital available for mortgage financing for certain categories of borrowers in those markets.2 Specifically, the Enterprises are required to provide leadership in developing loan products and flexible underwriting guidelines to facilitate a secondary market for mortgages on housing for very low-, low-, and moderate-income families for the manufactured housing, affordable housing preservation, and rural housing markets.3 In addition, section 1335(d)(1) of the Safety and Soundness Act requires FHFA to establish, by regulation, a method for evaluating and rating the Enterprises’ compliance with the Duty to Serve underserved markets.4 FHFA’s current Duty to Serve regulation implements these statutory requirements.5 Specifically, the regulation requires each Enterprise to adopt a three-year Underserved Markets Plan (Plan) containing the specific objectives and activities the Enterprise will undertake during that time period in each of the three underserved markets.6 The regulation sets forth specific ‘‘Regulatory Activities’’ under each of the three underserved markets that are eligible for Duty to Serve credit and that an Enterprise may choose to include in its Plan. One such Regulatory Activity in the rural housing market is Enterprise activity in ‘‘high-needs rural regions,’’ which are defined to include colonias.7 The regulation defines a ‘‘colonia’’ as an identifiable community that meets the definition of a colonia under a federal, State, tribal, or local program.8 The regulation defines a ‘‘rural area’’ as (i) a census tract outside of a metropolitan statistical area (MSA) as designated by the Office of Management and Budget (OMB); or (ii) a census tract in an MSA but outside of the MSA’s Urbanized Areas as designated by the U.S. Department of Agriculture’s (USDA) Rural-Urban Commuting Area (RUCA) Code #1 and outside of tracts with a housing density of more than 64 housing units per square mile in USDA’s RUCA Code #2.9 II. Implementation Challenges FHFA has identified two main challenges that have hindered the Enterprises’ Duty to Serve activities in colonias. The first challenge is an operational one that has prevented the Enterprises from easily identifying and verifying Duty to Serve-eligible loan purchases and outreach activities in colonias. The identification of a colonia under the existing Duty to Service regulation’s definition relies on the identification of the community as a colonia using federal, State, tribal, or local definitions. These definitions are based on varied criteria and boundaries. Some rely on descriptive terms that may be meaningful only at the local level, such as neighborhood names, and are generally not tied to any standard geographic identifiers used by lenders such as census tracts. There is no specific, uniform definition of ‘‘colonia’’ 4 See 1 See 12 U.S.C. 4501(7). 2 See 12 U.S.C. 4565. 3 See 12 U.S.C. 4565(a). The terms ‘‘very lowincome,’’ ‘‘low-income,’’ and ‘‘moderate-income’’ are defined in 12 U.S.C. 4502. VerDate Sep<11>2014 16:25 Apr 17, 2023 Jkt 259001 12 U.S.C. 4565(d)(1). CFR part 1282, subpart C. 6 12 CFR 1282.32. 7 12 CFR 1282.1, 1282.35(c)(1). 8 12 CFR 1282.1. 9 12 CFR 1282.1. 5 12 PO 00000 Frm 00002 Fmt 4700 Sfmt 4700 that can be easily operationalized and included in a public database that the Enterprises and lenders can check to determine if a particular loan is located in an eligible colonia. As a result, the Enterprises and lenders must engage in a time-consuming and labor-intensive process that is susceptible to error to determine whether a particular loan falls within the specified boundary of a colonia that meets the definition. In light of these challenges, Fannie Mae engaged a nonprofit organization with research capacities, the Housing Assistance Council (HAC), to conduct research and analysis in an effort to develop a nationwide, usable and programmatic methodology that would enable accurate targeting and tracking of loans in these communities. As part of this research, HAC mapped federal, State, tribal, and local definitions of colonia to census tracts. The second challenge is related to the ability of the Duty to Serve program to effectively target eligible households in colonias due to the under-inclusion of colonias in the Duty to Serve regulation’s existing ‘‘rural area’’ definition. Under the Duty to Serve regulation, an Enterprise is eligible to receive Duty to Serve credit for activities supporting colonias if the activities (e.g., loan purchases) are located in a ‘‘colonia,’’ as defined in the regulation, and the colonia is located in a ‘‘rural area,’’ as defined in the regulation. FHFA has learned that its definition of ‘‘rural area’’ has unintentionally excluded a large share of colonias from eligibility for Duty to Serve credit. To address these challenges, FHFA published a Notice of Proposed Rulemaking (NPRM or proposed rule) in the Federal Register on October 5, 2022 at 87 FR 60331, that proposed to amend the Duty to Serve regulation to: (1) add a definition of ‘‘colonia census tract,’’ meaning a colonia located in a census tract, to serve as a census tract-based proxy for a ‘‘colonia’’; (2) amend the definition of ‘‘high-needs rural region’’ by substituting ‘‘colonia census tract’’ for ‘‘colonia’’; and (3) revise the definition of ‘‘rural area’’ to include all colonia census tracts regardless of their location within or outside an MSA. FHFA also specifically requested comments in the proposed rule preamble on the following three questions about the identification and verification of Duty to Serve-eligible activities in colonias: • Question 1—What are the advantages and disadvantages, if any, to using colonia census tracts instead of colonias, for purposes of identifying and E:\FR\FM\18APR1.SGM 18APR1 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Rules and Regulations verifying Duty to Serve-eligible activities? • Question 2—Are there other ways to identify the geographic areas in which the Enterprises should receive Duty to Serve credit for eligible activities addressing colonias? If so, describe the alternative approach(es) and any advantages and disadvantages over the proposed census tract-based methodology. • Question 3—What are the advantages and disadvantages, if any, to revising the Duty to Serve ‘‘rural area’’ definition to incorporate all census tracts that contain a colonia regardless of their location? The public comment period on the proposed rule ended on December 5, 2022.10 ddrumheller on DSK120RN23PROD with RULES1 III. Public Comments Received on the Proposed Rule FHFA received 10 comments in response to the proposed rule. Comments were submitted by Fannie Mae, Freddie Mac, four nonprofit organizations, two policy advocacy organizations, and two individuals. FHFA has reviewed and considered all of the comments. The comments received and FHFA’s responses are summarized by topic in the sections below. A. Definition Added for Use of Colonia Census Tracts A majority of the commenters supported the proposal to add a definition of ‘‘colonia census tract’’ to mean a census tract containing a colonia, which will serve as a proxy for the colonia. Both Enterprises, the four nonprofit organizations, and the two policy advocacy organizations stated that the proposal would improve and enhance the ability of the Enterprises to meet the credit needs of these highpoverty areas. Several of the commenters stated that the current regulation’s definition of ‘‘colonia’’ does not fully reflect or encompass the evolving geographies and characteristics of colonias. Commenters stated that the proposed use of ‘‘colonia census tracts’’ as a proxy for colonias would result in a clear, functional, usable, and flexible methodology for identifying and verifying Duty to Serve-eligibility criteria, which would enhance stakeholder certainty with respect to targeting loan purchases and outreach to colonia census tracts. Commenters stated that the proposed amendments would structurally incentivize the Enterprises to do more for hundreds of communities along the 10 87 FR 60331 (Oct. 5, 2022). VerDate Sep<11>2014 16:25 Apr 17, 2023 Jkt 259001 United States-Mexico border and greater southwest, and thereby help to increase liquidity in these underserved communities. Many of the commenters also suggested that the proposed use of colonia census tracts could ‘‘create a beneficial ripple effect’’ if replicated by other federal agencies that have coloniafocused programs. For example, three of the nonprofit organizations projected that widespread implementation of the proposal ‘‘would result in the real possibility of economically integrating colonia communities to their surrounding economies, supercharging efforts to address decades of disparities.’’ One of the policy advocacy organizations also predicted that adoption of the proposal by other federal agencies ‘‘could further comprehensive community development efforts to the benefit of all in those communities.’’ In response to FHFA’s Question 1 about the advantages and disadvantages of using colonia census tracts instead of colonias for purposes of identifying and verifying Duty to Serve-eligible activities, three nonprofits and the two policy advocacy organizations highlighted the advantages of, as well as their own experiences with, using colonia census tracts. The three nonprofit organizations stressed that the main advantage in using colonia census tracts is that it achieves stability in the methodology while maintaining flexibility to adapt to evolving geographies. Some commenters also stated that federal efforts to define colonias geographically have historically failed due to the evolving nature and characteristics of colonias, especially since the passage of the North American Free Trade Agreement (NAFTA) in 1994. The commenters noted that shifting geographic footprints, a lack of understanding as to what constitutes a colonia, and deference to contradictory parameters at the state level have all contributed to the failures to define colonias. As a result, the commenters stated that the Enterprises have lacked clear guidance on what counts as Duty to Serve-eligible activities in colonias, rendering any potential efforts to hone best practices in serving these unique communities unworkable. These commenters also emphasized the ease of obtaining, as well as the accuracy of using, colonia census tracts as opposed to the existing Duty to Serve definition of colonia. The commenters also provided examples of how they have successfully used colonia census tracts to target and direct resources to colonias, even when those PO 00000 Frm 00003 Fmt 4700 Sfmt 4700 23561 colonias are surrounded by mixedincome non-colonia communities. In response to FHFA’s Question 2 on whether there are other ways to identify the geographic areas in which the Enterprises should receive Duty to Serve credit for eligible activities addressing colonias, one policy advocacy organization, HAC, noted that it had conducted extensive research and analysis in an effort to develop a nationwide, usable and programmatic methodology that would enable accurate targeting and tracking of loans in colonias. The commenter stated that it found that other approaches have serious disadvantages when compared to the use of a census tract-based methodology. As a result, the commenter stated that its research, which it described as carefully considered, rigorous, and thoroughly reviewed by experts, concluded that the use of a census tract-based methodology would best enable mortgage lenders and other financial service providers to target and serve colonia communities more efficiently and effectively. An individual commenter stated that while the proposed amendments would require that the Enterprises serve colonia census tracts, they would not hold the Enterprises accountable for serving colonias themselves, which the commenter further stated could undermine FHFA’s rationale for proposing the amendments. Another individual commenter stated that the matters covered by the proposed rule reside with the Department of Housing and Urban Development, not FHFA and the Enterprises, and that the goal for FHFA should be conserving and preserving to put the Enterprises on stronger footing, not mandating more risk or serving the interests of specific administrations or FHFA Directors. FHFA has considered the comments received on the use of colonia census tracts and continues to be persuaded that adding a definition of ‘‘colonia census tract’’ to serve as a census tractbased proxy for a ‘‘colonia’’ will enhance the ability of the Enterprises to meet the credit needs of these highpoverty areas. A census tract-based approach will also align FHFA’s treatment of colonias under the Duty to Serve regulation with other census tractbased standards for Enterprise reporting to FHFA. For example, FHFA collects data at the census tract level to assess compliance with other Duty to Serve requirements and the Enterprise Housing Goals. Specifically, census tracts serve as the basis for identifying other geographically based underserved areas, including low-income areas and area median income to determine E:\FR\FM\18APR1.SGM 18APR1 23562 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Rules and Regulations affordability and compliance with Duty to Serve and Enterprise Housing Goals objectives. Regarding the commenter’s concern about holding the Enterprises accountable for serving colonias themselves, FHFA will encourage the Enterprises to work with local entities that specifically serve colonias to increase access to credit in these areas. Regarding the comment on FHFA’s and the Enterprises’ role in this area, FHFA clearly identified and described in the NPRM its statutory authority for regulating the Enterprises’ Duty to Serve responsibilities and activities. These Duty to Serve responsibilities of each Enterprise include developing and executing a Plan describing the specific activities and objectives it will undertake to fulfill its Duty to Serve in each underserved market over a threeyear period. In addition, FHFA issues Evaluation Guidance that describes procedures for preparing the Plans and the standards FHFA has established for evaluating and rating Enterprise compliance with the Plans, as well as the impact on each of the underserved markets.11 Together, these measures establish and communicate a framework and expectations for holding the Enterprises accountable for fulfilling their Duty to Serve responsibilities. FHFA will monitor and evaluate the impact of implementation of this final rule on Enterprise activities in colonia census tracts, and may modify its Evaluation Guidance to address any Enterprise underperformance in this underserved market. ddrumheller on DSK120RN23PROD with RULES1 B. Revising the Definitions of ‘‘HighNeeds Rural Region’’ and ‘‘Rural Area’’ To Include All Colonia Census Tracts A majority of the commenters also supported the proposal to revise the Duty to Serve regulation’s definition of ‘‘high-needs rural region’’ to include colonia census tracts, and to revise the Duty to Serve regulation’s definition of ‘‘rural area’’ to include all colonia census tracts, regardless of their location within or outside an MSA, due to the inherently rural nature and characteristics of all colonia census tracts. In response to FHFA’s Question 3 about any advantages and disadvantages associated with revising the Duty to Serve ‘‘rural area’’ definition to incorporate all census tracts that contain a colonia regardless of their location, the nonprofit organizations and the policy advocacy organizations 11 The current Duty to Serve Evaluation Guidance is available at: https://www.fhfa.gov/ PolicyProgramsResearch/Programs/Documents/ Evaluation-Guidance_2022-5.pdf. VerDate Sep<11>2014 16:25 Apr 17, 2023 Jkt 259001 pointed out that a colonia’s proximity to an MSA does not guarantee that it has access to public utilities and transportation infrastructure. The commenters stated that colonias embody a rural existence because they are often cut off from municipal services and denied integration into the surrounding economy as local governments have chosen not to incorporate them. For these reasons, the commenters described the proposal to include all colonia census tracts, regardless of their location, in the definition of ‘‘rural area’’ as a ‘‘commonsense measure’’ capable of further incentivizing the Enterprises to meet their Duty to Serve obligations. The commenters also highlighted as another benefit associated with revising the ‘‘rural area’’ definition that it would streamline the process of identifying Duty to Serve-eligible loans. An individual commenter, while acknowledging that colonias are vastly underserved regions with similar characteristics to rural areas regardless of their location, stated that treating all colonia census tracts as rural, regardless of whether they are located within or outside an MSA, would differ from the regulation’s use of an MSA-based standard for the other high-needs rural regions, which could lead to confusion and difficulty in implementing the proposed amendments. A policy advocacy organization recommended that the regulation provide greater, or weighted, Duty to Serve credit for Enterprise activities in colonia census tracts located in rural areas as the latter term is defined in the current regulation, on the basis that the needs in such rural colonia census tracts are even greater than those in urban colonia census tracts. As an alternative, the commenter suggested that FHFA base the weighting differential on poverty rates rather than location, with greater Duty to Serve credit given to Enterprise activities in the highest poverty tracts. After considering the comments, FHFA remains persuaded that the proposed amendments to revise the definitions of ‘‘high-needs rural region’’ and ‘‘rural area’’ to include all colonia census tracts, regardless of their location, is appropriate. While FHFA appreciates the recommendation that greater weight be given to Enterprise activities in colonia census tracts located in rural areas as currently defined in the regulation, the final rule does not adopt this suggestion. The NPRM described a number of challenges the Enterprises have encountered over the years in targeting colonias, including operational challenges that PO 00000 Frm 00004 Fmt 4700 Sfmt 4700 have prevented them from easily identifying and verifying Duty to Serveeligible loan purchases and outreach activities in colonias. Another challenge the Enterprises have faced is their inability to effectively target eligible households in colonias due to the under-inclusion of colonias in the current Duty to Serve regulation’s ‘‘rural area’’ definition. Placing greater weight on Enterprise activities in certain colonia census tracts would introduce a layer of complexity that may detract from the stated objective of the proposed amendments—to facilitate the Enterprises’ ability to operationalize their Duty to Serve activities and thereby help increase liquidity in these underserved communities. Regarding the comment about the proposal not relying on an MSA-based standard for colonia census tracts as is used for the other high-needs rural regions, FHFA notes that the rationale for departing from this standard was addressed in the NPRM. The NPRM stated that an analysis of 2020 census data found that only 260 of the 577 census tracts that contain colonias meet the current Duty to Serve ‘‘rural area’’ definition.12 The remaining 317 colonia census tracts, which are located within an MSA, do not qualify for Duty to Serve credit under the current ‘‘rural area’’ definition.13 The NPRM also noted that all colonia census tracts have high poverty rates and low housing density, which contribute to limited access to credit for the households in those communities.14 Based on this analysis, FHFA determined that Enterprise activities in all colonia census tracts—regardless of whether they are located within or outside an MSA—should qualify for Duty to Serve credit. As a result, FHFA is confident that implementation of the amendments will reduce the challenges and difficulties the Enterprises have encountered implementing the current definitions. Therefore, FHFA believes that it is appropriate to amend the definitions of ‘‘high-needs rural region’’ and ‘‘rural area’’ in § 1282.1(b) to include all colonia census tracts regardless of their location. Accordingly, the final rule amends the definition of ‘‘high-needs rural region’’ by substituting ‘‘colonia census tract’’ for ‘‘colonia,’’ and revises the second component of the ‘‘rural area’’ definition (par. (ii)) to include colonia census tracts that would not otherwise satisfy the ‘‘rural area’’ definition. 12 See 87 FR 60335. 13 Id. 14 See E:\FR\FM\18APR1.SGM 87 FR 60336. 18APR1 ddrumheller on DSK120RN23PROD with RULES1 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Rules and Regulations C. Updating Colonia Census Tract Data The NPRM discusses how FHFA currently publishes and regularly updates on its website a Rural Areas Data file that specifies the census tracts in the other high-needs rural regions where Enterprise activities are eligible for Duty to Serve credit.15 FHFA stated in the NPRM that it has not been able to include colonia census tracts in the Rural Areas Data file due to the absence of a comprehensive list of census tracts containing colonias. The Rural Areas Data file will be expanded to include colonia census tracts now that the federal, State, tribal, and local definitions of colonia have been mapped to census tracts. The availability of this information in the Rural Areas Data file will make it easier for the Enterprises and lenders to target outreach and loan purchases in these locations, and to assess the impact of efforts to improve housing conditions in these areas. In the NPRM, FHFA stated that it would periodically update the colonia census tracts included in FHFA’s Rural Areas Data file, for use by the Enterprises and other interested parties.16 A nonprofit organization and a policy advocacy organization supported FHFA’s intent to periodically update the colonia census tracts included in the file. The commenters appeared to interpret the word ‘‘periodically’’ to mean once every 10 years, when census tract boundaries are updated in the decennial Census and stated that that cadence may not be sufficient. The commenters noted that more frequent updates by FHFA may be necessary as federal, State, tribal, or local governments may update their definitions of ‘‘colonias’’ more frequently than every 10 years. Both commenters recommended that FHFA provide updates if a significant development or change occurs during the 10-year period after census tract boundaries are updated, such as if new data is developed by a public entity, a major study is issued, or a new investment initiative is introduced. FHFA agrees that more frequent updates to the colonia census tracts included in the Rural Areas Data file may be necessary during the 10-year period after census tract boundaries are updated. The NPRM described FHFA’s plan to periodically update the colonia census tracts in the file, by which FHFA meant on an ‘‘as needed’’ basis.17 FHFA also agrees with the types of events the commenters identified as reasons for 15 See 16 See 87 FR 60335. 87 FR 60337. 17 Id. VerDate Sep<11>2014 16:25 Apr 17, 2023 Jkt 259001 periodically updating the colonia census tracts in the file. FHFA plans to monitor for significant developments or changes that would necessitate the need to update the colonia census tract data and will include such updates in the file. D. Effective Date of the Final Rule Both Enterprises provided recommendations on when the final rule should take effect. Fannie Mae expressed concern that if the final rule were to become effective some time after January 1, 2023, the Enterprises would have administrative challenges with applying two different definitions of ‘‘high-needs rural region’’ and ‘‘rural area’’ in 2023, as the current regulation’s definitions would continue to apply until the final rule’s new definitions became effective. Accordingly, Fannie Mae recommended that the final rule be effective on January 1, 2023. Although Freddie Mac did not recommend a specific effective date for the final rule, it requested a three-month implementation period to update its reporting platform. FHFA has decided to make the final rule’s effective date July 1, 2023, the beginning of the third calendar quarter of 2023. FHFA acknowledges that the Enterprises may encounter administrative challenges associated with applying two different definitions of ‘‘high-needs rural region’’ and ‘‘rural area’’ in 2023. However, as Freddie Mac commented, FHFA recognizes that the Enterprises will need time to prepare for their implementation of the final rule. An effective date of July 1, 2023 will give the Enterprises time after publication of the final rule to notify lenders and other stakeholders of the rule’s amendments, adjust their marketing strategies and other outreach activities as necessary, and update their reporting platforms to be able to accurately report on loan purchases and other activities in colonia census tracts. In addition, because the Enterprises report to FHFA on their Duty to Serve performance on a quarterly basis, establishing the effective date as the beginning of the third calendar quarter will avoid their having to report based on two different definitions within the same calendar quarter. IV. Regulatory Flexibility Act The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) requires that a regulation that has a significant economic impact on a substantial number of small entities, small businesses, or small organizations must include an initial regulatory flexibility analysis describing the regulation’s PO 00000 Frm 00005 Fmt 4700 Sfmt 4700 23563 impact on small entities. FHFA need not undertake such an analysis if FHFA has certified that the regulation will not have a significant economic impact on a substantial number of small entities (5 U.S.C. 605(b)). FHFA has considered the impact of the final rule under the Regulatory Flexibility Act and FHFA certifies that the regulation will not have a significant economic impact on a substantial number of small entities because the regulation only applies to Fannie Mae and Freddie Mac, which are not small entities for purposes of the Regulatory Flexibility Act. V. Paperwork Reduction Act The Paperwork Reduction Act (PRA) (44 U.S.C. 3501 et seq.) requires that regulations involving the collection of information receive clearance from the Office of Management and Budget (OMB). The final rule contains no such collection of information requiring OMB approval under the PRA. Therefore, FHFA has not submitted the final rule to OMB for review under the PRA. VI. Congressional Review Act In accordance with the Congressional Review Act (5 U.S.C. 801 et seq.), FHFA has determined that this final rule is a major rule and has verified this determination with the Office of Information and Regulatory Affairs of OMB. List of Subjects in 12 CFR Part 1282 Mortgages; Reporting and recordkeeping requirements. For the reasons stated in the preamble, under the authority of 12 U.S.C. 4501, 4502, 4511, 4513, 4526, and 4561–4566, FHFA amends part 1282 of subchapter E of 12 CFR chapter XII, as follows: PART 1282—ENTERPRISE HOUSING GOALS AND MISSION 1. The authority citation for part 1282 continues to read as follows: ■ Authority: 12 U.S.C. 4501, 4502, 4511, 4513, 4526, 4561–4566. 2. Amend § 1282.1(b) by: a. Adding in alphabetical order the definition of ‘‘Colonia census tract’’; ■ b. In paragraph (iii) of the definition ‘‘High-needs rural region’’ adding the words ‘‘census tract’’ after the word ‘‘colonia’’; and ■ c. Revising the definition of ‘‘Rural area’’. The addition and revision read as follows: ■ ■ § 1282. 1 * E:\FR\FM\18APR1.SGM * Definitions. * 18APR1 * * 23564 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Rules and Regulations Colonia census tract, for purposes of subpart C of this part, means a census tract that contains a colonia. * * * * * Rural area, for purposes of subpart C of this part, means: (i) A census tract outside of a metropolitan statistical area as designated by the Office of Management and Budget; or (ii) A census tract in a metropolitan statistical area as designated by the Office of Management and Budget that is: (A) Outside of the metropolitan statistical area’s Urbanized Areas as designated by the U.S. Department of Agriculture’s (USDA) Rural-Urban Commuting Area (RUCA) Code #1, and outside of tracts with a housing density of over 64 housing units per square mile for USDA’s RUCA Code #2; or (B) A colonia census tract that does not satisfy paragraphs (i) or (ii)(A) of this definition. * * * * * Sandra L. Thompson, Director, Federal Housing Finance Agency. [FR Doc. 2023–08005 Filed 4–17–23; 8:45 am] BILLING CODE 8070–01–P DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 71 [Docket No. FAA–2023–0061; Airspace Docket No. 22–ASO–10] RIN 2120–AA66 Amendment and Revocation of Air Traffic Service (ATS) Routes in the Eastern United States Federal Aviation Administration (FAA), DOT. ACTION: Final rule. Paul Gallant, Rules and Regulations Group, Office of Policy, Federal Aviation Administration, 800 Independence Avenue SW, Washington, DC 20591; telephone: (202) 267–8783. FOR FURTHER INFORMATION CONTACT: SUPPLEMENTARY INFORMATION: Authority for This Rulemaking The FAA’s authority to issue rules regarding aviation safety is found in Title 49 of the United States Code. Subtitle I, Section 106 describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the agency’s authority. This rulemaking is promulgated under the authority described in Subtitle VII, Part A, Subpart I, Section 40103. Under that section, the FAA is charged with prescribing regulations to assign the use of the airspace necessary to ensure the safety of aircraft and the efficient use of airspace. This regulation is within the scope of that authority as it modifies the route structure as necessary to preserve the safe and efficient flow of air traffic within the National Airspace System (NAS). AGENCY: History This action amends Very High Frequency (VHF) Omnidirectional Range (VOR) Federal Airways V–51, V– 115, V–243, V–267, V–311, V–333, and V–415; and removes V–463 in support of the FAA’s VOR Minimum Operational Network (MON) Program. DATES: Effective date 0901 UTC, June 15, 2023. The Director of the Federal Register approves this incorporation by reference action under 1 CFR part 51, subject to the annual revision of FAA Order JO 7400.11 and publication of conforming amendments. ADDRESSES: A copy of the Notice of Proposed Rulemaking (NPRM), all comments received, this final rule, and all background material may be viewed The FAA published a notice of proposed rulemaking for Docket No. FAA–2023–0061 in the Federal Register (88 FR 7897; February 7, 2023), amending seven, and revoking one, VOR Federal airways in the eastern United States. Interested parties were invited to participate in this rulemaking effort by submitting written comments on the proposal. One comment was received. An anonymous commenter wrote expressing strong support of the push for satellite navigation, but stated they did not agree with the removal of victor airways in the Chicago area. The only airway in this rule that approaches the Chicago area is V–51 which ends at Chicago Heights, IL. That segment of V– 51 is not being removed, and it remains available for navigation. SUMMARY: ddrumheller on DSK120RN23PROD with RULES1 online at www.regulations.gov using the FAA Docket number. Electronic retrieval help and guidelines are available on the website. It is available 24 hours each day, 365 days each year. FAA Order JO 7400.11G, Airspace Designations and Reporting Points, and subsequent amendments can be viewed online at www.faa.gov/air_traffic/ publications/. You may also contact the Rules and Regulations Group, Federal Aviation Administration, 800 Independence Avenue SW, Washington, DC 20591; telephone: (202) 267–8783. VerDate Sep<11>2014 16:25 Apr 17, 2023 Jkt 259001 PO 00000 Frm 00006 Fmt 4700 Sfmt 4700 Incorporation by Reference Domestic VOR Federal airways are published in paragraph 6010(a) of FAA Order JO 7400.11, Airspace Designations and Reporting Points, which is incorporated by reference in 14 CFR 71.1 on an annual basis. This document amends the current version of that order, FAA Order JO 7400.11G, dated August 19, 2022 and effective September 15, 2022. FAA Order JO 7400.11G is publicly available as listed in the ADDRESSES section of this document. These amendments will be published in the next update to FAA Order JO 7400.11. FAA Order JO 7400.11G lists Class A, B, C, D, and E airspace areas, air traffic service routes, and reporting points. The Rule This action amends 14 CFR part 71 by modifying VOR Federal Airways V–51, V–115, V–243, V–267, V–311, V–333, and V–415; and revoking V–463 in support of the FAA’s VOR MON Program. This program aims to improve the efficiency of the NAS by transitioning from ground-based navigation systems to satellite based navigation. The changes are described as follows: V–51: V–51 consists of two parts: From Pahokee, FL to Louisville, KY; and from Shelbyville, IN, to Chicago Heights, IL. This action removes Alma, GA; Athens, GA; and Harris, GA, from the route. As a result, V–51 consists of three parts: From Pahokee, FL, to Craig, FL; From Hinch Mountain, TN, to Louisville, KY; and From Shelbyville, TN to Chicago Heights, IL. V–115: V–115 consists of two parts: From Crestview, FL, to Volunteer, TN; and from Charleston, WV, to Parkersburg, WV. This action removes the segment from the BOAZE, AL, Fix to the Choo Choo, TN (GQO), VOR with Tactical Air Navigational System (VORTAC), to the DUBBS, TN, Fix, which is dependent on the Choo Choo, TN, VORTAC. As amended, V–115 extends, in three parts: From Crestview, FL, to the intersection of the of the Vulcan, AL 048°(T)/046°(M) and the Gadsden, AL 333°(T)/331°(M) radials (the charted BOAZE, AL) Fix; From the Intersection of the Hinch Mountain, TN 160°(T)/162°(M) and the Volunteer, TN 228°(T)/231°(M) radials to Volunteer; and From Charleston, WV, to Parkersburg, WV. V–243: V–243 extends from Craig, FL, to Choo Choo, TN. This action removes the segment from the intersection of the LaGrange, GA 342° and the Choo Choo, TN 189° radials (the charted HEFIN, AL, Fix) to Choo Choo due to the planned E:\FR\FM\18APR1.SGM 18APR1

Agencies

[Federal Register Volume 88, Number 74 (Tuesday, April 18, 2023)]
[Rules and Regulations]
[Pages 23559-23564]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-08005]


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FEDERAL HOUSING FINANCE AGENCY

12 CFR Part 1282

RIN 2590-AB22


Enterprise Duty To Serve Underserved Markets--Colonia Census 
Tract Amendments

AGENCY: Federal Housing Finance Agency.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: The Federal Housing Finance Agency (FHFA) is adopting as 
final, without change, a proposed rule that amends its Enterprise Duty 
to Serve Underserved Markets regulation to add a definition of 
``colonia census tract,'' to serve as a census tract-based proxy for a 
``colonia.'' The final rule also amends the definition of ``high-needs 
rural region'' in the regulation by substituting ``colonia census 
tract'' for ``colonia.'' In addition, the final rule revises the 
definition of ``rural area'' in the regulation to include all colonia 
census tracts regardless of their location. These changes will make 
certain activities by the Federal National Mortgage Association (Fannie 
Mae) and the

[[Page 23560]]

Federal Home Loan Mortgage Corporation (Freddie Mac) (collectively, the 
Enterprises) in all colonia census tracts eligible for Duty to Serve 
credit. The intent of the changes is to facilitate the Enterprises' 
ability to operationalize their Duty to Serve activities in colonia 
census tracts and thereby help increase liquidity in these underserved 
communities.

DATES: The final rule is effective July 1, 2023.

FOR FURTHER INFORMATION CONTACT: Ted Wartell, Associate Director, 
Office of Housing and Community Investment, 202-649-3157, 
[email protected]; Marcea Barringer, Supervisory Policy Analyst, 
Office of Housing and Community Investment, 202-649-3275, 
[email protected]; or Dinah Knight, Assistant General Counsel, 
Office of General Counsel, (202) 748-7801, [email protected], 
Federal Housing Finance Agency, 400 Seventh Street SW, Washington, DC 
20219. These are not toll-free numbers. For TTY/TRS users with hearing 
and speech disabilities, dial 711 and ask to be connected to any of the 
contact numbers above.

SUPPLEMENTARY INFORMATION:

I. Statutory and Regulatory Background

    The Federal Housing Enterprises Financial Safety and Soundness Act 
of 1992 (Safety and Soundness Act) provides generally that the 
Enterprises ``have an affirmative obligation to facilitate the 
financing of affordable housing for low- and moderate-income 
families.'' \1\ Section 1129 of the Housing and Economic Recovery Act 
of 2008 (HERA) amended section 1335 of the Safety and Soundness Act to 
establish a duty for the Enterprises to serve three specified 
underserved markets in order to increase the liquidity of mortgage 
investments and improve the distribution of investment capital 
available for mortgage financing for certain categories of borrowers in 
those markets.\2\ Specifically, the Enterprises are required to provide 
leadership in developing loan products and flexible underwriting 
guidelines to facilitate a secondary market for mortgages on housing 
for very low-, low-, and moderate-income families for the manufactured 
housing, affordable housing preservation, and rural housing markets.\3\ 
In addition, section 1335(d)(1) of the Safety and Soundness Act 
requires FHFA to establish, by regulation, a method for evaluating and 
rating the Enterprises' compliance with the Duty to Serve underserved 
markets.\4\
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    \1\ See 12 U.S.C. 4501(7).
    \2\ See 12 U.S.C. 4565.
    \3\ See 12 U.S.C. 4565(a). The terms ``very low-income,'' ``low-
income,'' and ``moderate-income'' are defined in 12 U.S.C. 4502.
    \4\ See 12 U.S.C. 4565(d)(1).
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    FHFA's current Duty to Serve regulation implements these statutory 
requirements.\5\ Specifically, the regulation requires each Enterprise 
to adopt a three-year Underserved Markets Plan (Plan) containing the 
specific objectives and activities the Enterprise will undertake during 
that time period in each of the three underserved markets.\6\ The 
regulation sets forth specific ``Regulatory Activities'' under each of 
the three underserved markets that are eligible for Duty to Serve 
credit and that an Enterprise may choose to include in its Plan. One 
such Regulatory Activity in the rural housing market is Enterprise 
activity in ``high-needs rural regions,'' which are defined to include 
colonias.\7\ The regulation defines a ``colonia'' as an identifiable 
community that meets the definition of a colonia under a federal, 
State, tribal, or local program.\8\ The regulation defines a ``rural 
area'' as (i) a census tract outside of a metropolitan statistical area 
(MSA) as designated by the Office of Management and Budget (OMB); or 
(ii) a census tract in an MSA but outside of the MSA's Urbanized Areas 
as designated by the U.S. Department of Agriculture's (USDA) Rural-
Urban Commuting Area (RUCA) Code #1 and outside of tracts with a 
housing density of more than 64 housing units per square mile in USDA's 
RUCA Code #2.\9\
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    \5\ 12 CFR part 1282, subpart C.
    \6\ 12 CFR 1282.32.
    \7\ 12 CFR 1282.1, 1282.35(c)(1).
    \8\ 12 CFR 1282.1.
    \9\ 12 CFR 1282.1.
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II. Implementation Challenges

    FHFA has identified two main challenges that have hindered the 
Enterprises' Duty to Serve activities in colonias. The first challenge 
is an operational one that has prevented the Enterprises from easily 
identifying and verifying Duty to Serve-eligible loan purchases and 
outreach activities in colonias. The identification of a colonia under 
the existing Duty to Service regulation's definition relies on the 
identification of the community as a colonia using federal, State, 
tribal, or local definitions. These definitions are based on varied 
criteria and boundaries. Some rely on descriptive terms that may be 
meaningful only at the local level, such as neighborhood names, and are 
generally not tied to any standard geographic identifiers used by 
lenders such as census tracts. There is no specific, uniform definition 
of ``colonia'' that can be easily operationalized and included in a 
public database that the Enterprises and lenders can check to determine 
if a particular loan is located in an eligible colonia. As a result, 
the Enterprises and lenders must engage in a time-consuming and labor-
intensive process that is susceptible to error to determine whether a 
particular loan falls within the specified boundary of a colonia that 
meets the definition.
    In light of these challenges, Fannie Mae engaged a nonprofit 
organization with research capacities, the Housing Assistance Council 
(HAC), to conduct research and analysis in an effort to develop a 
nationwide, usable and programmatic methodology that would enable 
accurate targeting and tracking of loans in these communities. As part 
of this research, HAC mapped federal, State, tribal, and local 
definitions of colonia to census tracts.
    The second challenge is related to the ability of the Duty to Serve 
program to effectively target eligible households in colonias due to 
the under-inclusion of colonias in the Duty to Serve regulation's 
existing ``rural area'' definition. Under the Duty to Serve regulation, 
an Enterprise is eligible to receive Duty to Serve credit for 
activities supporting colonias if the activities (e.g., loan purchases) 
are located in a ``colonia,'' as defined in the regulation, and the 
colonia is located in a ``rural area,'' as defined in the regulation. 
FHFA has learned that its definition of ``rural area'' has 
unintentionally excluded a large share of colonias from eligibility for 
Duty to Serve credit.
    To address these challenges, FHFA published a Notice of Proposed 
Rulemaking (NPRM or proposed rule) in the Federal Register on October 
5, 2022 at 87 FR 60331, that proposed to amend the Duty to Serve 
regulation to: (1) add a definition of ``colonia census tract,'' 
meaning a colonia located in a census tract, to serve as a census 
tract-based proxy for a ``colonia''; (2) amend the definition of 
``high-needs rural region'' by substituting ``colonia census tract'' 
for ``colonia''; and (3) revise the definition of ``rural area'' to 
include all colonia census tracts regardless of their location within 
or outside an MSA. FHFA also specifically requested comments in the 
proposed rule preamble on the following three questions about the 
identification and verification of Duty to Serve-eligible activities in 
colonias:
     Question 1--What are the advantages and disadvantages, if 
any, to using colonia census tracts instead of colonias, for purposes 
of identifying and

[[Page 23561]]

verifying Duty to Serve-eligible activities?
     Question 2--Are there other ways to identify the 
geographic areas in which the Enterprises should receive Duty to Serve 
credit for eligible activities addressing colonias? If so, describe the 
alternative approach(es) and any advantages and disadvantages over the 
proposed census tract-based methodology.
     Question 3--What are the advantages and disadvantages, if 
any, to revising the Duty to Serve ``rural area'' definition to 
incorporate all census tracts that contain a colonia regardless of 
their location?
    The public comment period on the proposed rule ended on December 5, 
2022.\10\
---------------------------------------------------------------------------

    \10\ 87 FR 60331 (Oct. 5, 2022).
---------------------------------------------------------------------------

III. Public Comments Received on the Proposed Rule

    FHFA received 10 comments in response to the proposed rule. 
Comments were submitted by Fannie Mae, Freddie Mac, four nonprofit 
organizations, two policy advocacy organizations, and two individuals. 
FHFA has reviewed and considered all of the comments. The comments 
received and FHFA's responses are summarized by topic in the sections 
below.

A. Definition Added for Use of Colonia Census Tracts

    A majority of the commenters supported the proposal to add a 
definition of ``colonia census tract'' to mean a census tract 
containing a colonia, which will serve as a proxy for the colonia. Both 
Enterprises, the four nonprofit organizations, and the two policy 
advocacy organizations stated that the proposal would improve and 
enhance the ability of the Enterprises to meet the credit needs of 
these high-poverty areas. Several of the commenters stated that the 
current regulation's definition of ``colonia'' does not fully reflect 
or encompass the evolving geographies and characteristics of colonias. 
Commenters stated that the proposed use of ``colonia census tracts'' as 
a proxy for colonias would result in a clear, functional, usable, and 
flexible methodology for identifying and verifying Duty to Serve-
eligibility criteria, which would enhance stakeholder certainty with 
respect to targeting loan purchases and outreach to colonia census 
tracts.
    Commenters stated that the proposed amendments would structurally 
incentivize the Enterprises to do more for hundreds of communities 
along the United States-Mexico border and greater southwest, and 
thereby help to increase liquidity in these underserved communities. 
Many of the commenters also suggested that the proposed use of colonia 
census tracts could ``create a beneficial ripple effect'' if replicated 
by other federal agencies that have colonia-focused programs. For 
example, three of the nonprofit organizations projected that widespread 
implementation of the proposal ``would result in the real possibility 
of economically integrating colonia communities to their surrounding 
economies, supercharging efforts to address decades of disparities.'' 
One of the policy advocacy organizations also predicted that adoption 
of the proposal by other federal agencies ``could further comprehensive 
community development efforts to the benefit of all in those 
communities.''
    In response to FHFA's Question 1 about the advantages and 
disadvantages of using colonia census tracts instead of colonias for 
purposes of identifying and verifying Duty to Serve-eligible 
activities, three nonprofits and the two policy advocacy organizations 
highlighted the advantages of, as well as their own experiences with, 
using colonia census tracts. The three nonprofit organizations stressed 
that the main advantage in using colonia census tracts is that it 
achieves stability in the methodology while maintaining flexibility to 
adapt to evolving geographies. Some commenters also stated that federal 
efforts to define colonias geographically have historically failed due 
to the evolving nature and characteristics of colonias, especially 
since the passage of the North American Free Trade Agreement (NAFTA) in 
1994. The commenters noted that shifting geographic footprints, a lack 
of understanding as to what constitutes a colonia, and deference to 
contradictory parameters at the state level have all contributed to the 
failures to define colonias. As a result, the commenters stated that 
the Enterprises have lacked clear guidance on what counts as Duty to 
Serve-eligible activities in colonias, rendering any potential efforts 
to hone best practices in serving these unique communities unworkable. 
These commenters also emphasized the ease of obtaining, as well as the 
accuracy of using, colonia census tracts as opposed to the existing 
Duty to Serve definition of colonia. The commenters also provided 
examples of how they have successfully used colonia census tracts to 
target and direct resources to colonias, even when those colonias are 
surrounded by mixed-income non-colonia communities.
    In response to FHFA's Question 2 on whether there are other ways to 
identify the geographic areas in which the Enterprises should receive 
Duty to Serve credit for eligible activities addressing colonias, one 
policy advocacy organization, HAC, noted that it had conducted 
extensive research and analysis in an effort to develop a nation-wide, 
usable and programmatic methodology that would enable accurate 
targeting and tracking of loans in colonias. The commenter stated that 
it found that other approaches have serious disadvantages when compared 
to the use of a census tract-based methodology. As a result, the 
commenter stated that its research, which it described as carefully 
considered, rigorous, and thoroughly reviewed by experts, concluded 
that the use of a census tract-based methodology would best enable 
mortgage lenders and other financial service providers to target and 
serve colonia communities more efficiently and effectively.
    An individual commenter stated that while the proposed amendments 
would require that the Enterprises serve colonia census tracts, they 
would not hold the Enterprises accountable for serving colonias 
themselves, which the commenter further stated could undermine FHFA's 
rationale for proposing the amendments. Another individual commenter 
stated that the matters covered by the proposed rule reside with the 
Department of Housing and Urban Development, not FHFA and the 
Enterprises, and that the goal for FHFA should be conserving and 
preserving to put the Enterprises on stronger footing, not mandating 
more risk or serving the interests of specific administrations or FHFA 
Directors.
    FHFA has considered the comments received on the use of colonia 
census tracts and continues to be persuaded that adding a definition of 
``colonia census tract'' to serve as a census tract-based proxy for a 
``colonia'' will enhance the ability of the Enterprises to meet the 
credit needs of these high-poverty areas. A census tract-based approach 
will also align FHFA's treatment of colonias under the Duty to Serve 
regulation with other census tract-based standards for Enterprise 
reporting to FHFA. For example, FHFA collects data at the census tract 
level to assess compliance with other Duty to Serve requirements and 
the Enterprise Housing Goals. Specifically, census tracts serve as the 
basis for identifying other geographically based underserved areas, 
including low-income areas and area median income to determine

[[Page 23562]]

affordability and compliance with Duty to Serve and Enterprise Housing 
Goals objectives.
    Regarding the commenter's concern about holding the Enterprises 
accountable for serving colonias themselves, FHFA will encourage the 
Enterprises to work with local entities that specifically serve 
colonias to increase access to credit in these areas. Regarding the 
comment on FHFA's and the Enterprises' role in this area, FHFA clearly 
identified and described in the NPRM its statutory authority for 
regulating the Enterprises' Duty to Serve responsibilities and 
activities. These Duty to Serve responsibilities of each Enterprise 
include developing and executing a Plan describing the specific 
activities and objectives it will undertake to fulfill its Duty to 
Serve in each underserved market over a three-year period. In addition, 
FHFA issues Evaluation Guidance that describes procedures for preparing 
the Plans and the standards FHFA has established for evaluating and 
rating Enterprise compliance with the Plans, as well as the impact on 
each of the underserved markets.\11\ Together, these measures establish 
and communicate a framework and expectations for holding the 
Enterprises accountable for fulfilling their Duty to Serve 
responsibilities. FHFA will monitor and evaluate the impact of 
implementation of this final rule on Enterprise activities in colonia 
census tracts, and may modify its Evaluation Guidance to address any 
Enterprise underperformance in this underserved market.
---------------------------------------------------------------------------

    \11\ The current Duty to Serve Evaluation Guidance is available 
at: https://www.fhfa.gov/PolicyProgramsResearch/Programs/Documents/Evaluation-Guidance_2022-5.pdf.
---------------------------------------------------------------------------

B. Revising the Definitions of ``High-Needs Rural Region'' and ``Rural 
Area'' To Include All Colonia Census Tracts

    A majority of the commenters also supported the proposal to revise 
the Duty to Serve regulation's definition of ``high-needs rural 
region'' to include colonia census tracts, and to revise the Duty to 
Serve regulation's definition of ``rural area'' to include all colonia 
census tracts, regardless of their location within or outside an MSA, 
due to the inherently rural nature and characteristics of all colonia 
census tracts. In response to FHFA's Question 3 about any advantages 
and disadvantages associated with revising the Duty to Serve ``rural 
area'' definition to incorporate all census tracts that contain a 
colonia regardless of their location, the nonprofit organizations and 
the policy advocacy organizations pointed out that a colonia's 
proximity to an MSA does not guarantee that it has access to public 
utilities and transportation infrastructure. The commenters stated that 
colonias embody a rural existence because they are often cut off from 
municipal services and denied integration into the surrounding economy 
as local governments have chosen not to incorporate them. For these 
reasons, the commenters described the proposal to include all colonia 
census tracts, regardless of their location, in the definition of 
``rural area'' as a ``commonsense measure'' capable of further 
incentivizing the Enterprises to meet their Duty to Serve obligations. 
The commenters also highlighted as another benefit associated with 
revising the ``rural area'' definition that it would streamline the 
process of identifying Duty to Serve-eligible loans.
    An individual commenter, while acknowledging that colonias are 
vastly underserved regions with similar characteristics to rural areas 
regardless of their location, stated that treating all colonia census 
tracts as rural, regardless of whether they are located within or 
outside an MSA, would differ from the regulation's use of an MSA-based 
standard for the other high-needs rural regions, which could lead to 
confusion and difficulty in implementing the proposed amendments.
    A policy advocacy organization recommended that the regulation 
provide greater, or weighted, Duty to Serve credit for Enterprise 
activities in colonia census tracts located in rural areas as the 
latter term is defined in the current regulation, on the basis that the 
needs in such rural colonia census tracts are even greater than those 
in urban colonia census tracts. As an alternative, the commenter 
suggested that FHFA base the weighting differential on poverty rates 
rather than location, with greater Duty to Serve credit given to 
Enterprise activities in the highest poverty tracts.
    After considering the comments, FHFA remains persuaded that the 
proposed amendments to revise the definitions of ``high-needs rural 
region'' and ``rural area'' to include all colonia census tracts, 
regardless of their location, is appropriate. While FHFA appreciates 
the recommendation that greater weight be given to Enterprise 
activities in colonia census tracts located in rural areas as currently 
defined in the regulation, the final rule does not adopt this 
suggestion. The NPRM described a number of challenges the Enterprises 
have encountered over the years in targeting colonias, including 
operational challenges that have prevented them from easily identifying 
and verifying Duty to Serve-eligible loan purchases and outreach 
activities in colonias. Another challenge the Enterprises have faced is 
their inability to effectively target eligible households in colonias 
due to the under-inclusion of colonias in the current Duty to Serve 
regulation's ``rural area'' definition. Placing greater weight on 
Enterprise activities in certain colonia census tracts would introduce 
a layer of complexity that may detract from the stated objective of the 
proposed amendments--to facilitate the Enterprises' ability to 
operationalize their Duty to Serve activities and thereby help increase 
liquidity in these underserved communities.
    Regarding the comment about the proposal not relying on an MSA-
based standard for colonia census tracts as is used for the other high-
needs rural regions, FHFA notes that the rationale for departing from 
this standard was addressed in the NPRM. The NPRM stated that an 
analysis of 2020 census data found that only 260 of the 577 census 
tracts that contain colonias meet the current Duty to Serve ``rural 
area'' definition.\12\ The remaining 317 colonia census tracts, which 
are located within an MSA, do not qualify for Duty to Serve credit 
under the current ``rural area'' definition.\13\ The NPRM also noted 
that all colonia census tracts have high poverty rates and low housing 
density, which contribute to limited access to credit for the 
households in those communities.\14\ Based on this analysis, FHFA 
determined that Enterprise activities in all colonia census tracts--
regardless of whether they are located within or outside an MSA--should 
qualify for Duty to Serve credit. As a result, FHFA is confident that 
implementation of the amendments will reduce the challenges and 
difficulties the Enterprises have encountered implementing the current 
definitions.
---------------------------------------------------------------------------

    \12\ See 87 FR 60335.
    \13\ Id.
    \14\ See 87 FR 60336.
---------------------------------------------------------------------------

    Therefore, FHFA believes that it is appropriate to amend the 
definitions of ``high-needs rural region'' and ``rural area'' in Sec.  
1282.1(b) to include all colonia census tracts regardless of their 
location. Accordingly, the final rule amends the definition of ``high-
needs rural region'' by substituting ``colonia census tract'' for 
``colonia,'' and revises the second component of the ``rural area'' 
definition (par. (ii)) to include colonia census tracts that would not 
otherwise satisfy the ``rural area'' definition.

[[Page 23563]]

C. Updating Colonia Census Tract Data

    The NPRM discusses how FHFA currently publishes and regularly 
updates on its website a Rural Areas Data file that specifies the 
census tracts in the other high-needs rural regions where Enterprise 
activities are eligible for Duty to Serve credit.\15\ FHFA stated in 
the NPRM that it has not been able to include colonia census tracts in 
the Rural Areas Data file due to the absence of a comprehensive list of 
census tracts containing colonias. The Rural Areas Data file will be 
expanded to include colonia census tracts now that the federal, State, 
tribal, and local definitions of colonia have been mapped to census 
tracts. The availability of this information in the Rural Areas Data 
file will make it easier for the Enterprises and lenders to target 
outreach and loan purchases in these locations, and to assess the 
impact of efforts to improve housing conditions in these areas.
---------------------------------------------------------------------------

    \15\ See 87 FR 60335.
---------------------------------------------------------------------------

    In the NPRM, FHFA stated that it would periodically update the 
colonia census tracts included in FHFA's Rural Areas Data file, for use 
by the Enterprises and other interested parties.\16\ A nonprofit 
organization and a policy advocacy organization supported FHFA's intent 
to periodically update the colonia census tracts included in the file. 
The commenters appeared to interpret the word ``periodically'' to mean 
once every 10 years, when census tract boundaries are updated in the 
decennial Census and stated that that cadence may not be sufficient. 
The commenters noted that more frequent updates by FHFA may be 
necessary as federal, State, tribal, or local governments may update 
their definitions of ``colonias'' more frequently than every 10 years. 
Both commenters recommended that FHFA provide updates if a significant 
development or change occurs during the 10-year period after census 
tract boundaries are updated, such as if new data is developed by a 
public entity, a major study is issued, or a new investment initiative 
is introduced.
---------------------------------------------------------------------------

    \16\ See 87 FR 60337.
---------------------------------------------------------------------------

    FHFA agrees that more frequent updates to the colonia census tracts 
included in the Rural Areas Data file may be necessary during the 10-
year period after census tract boundaries are updated. The NPRM 
described FHFA's plan to periodically update the colonia census tracts 
in the file, by which FHFA meant on an ``as needed'' basis.\17\ FHFA 
also agrees with the types of events the commenters identified as 
reasons for periodically updating the colonia census tracts in the 
file. FHFA plans to monitor for significant developments or changes 
that would necessitate the need to update the colonia census tract data 
and will include such updates in the file.
---------------------------------------------------------------------------

    \17\ Id.
---------------------------------------------------------------------------

D. Effective Date of the Final Rule

    Both Enterprises provided recommendations on when the final rule 
should take effect. Fannie Mae expressed concern that if the final rule 
were to become effective some time after January 1, 2023, the 
Enterprises would have administrative challenges with applying two 
different definitions of ``high-needs rural region'' and ``rural area'' 
in 2023, as the current regulation's definitions would continue to 
apply until the final rule's new definitions became effective. 
Accordingly, Fannie Mae recommended that the final rule be effective on 
January 1, 2023. Although Freddie Mac did not recommend a specific 
effective date for the final rule, it requested a three-month 
implementation period to update its reporting platform.
    FHFA has decided to make the final rule's effective date July 1, 
2023, the beginning of the third calendar quarter of 2023. FHFA 
acknowledges that the Enterprises may encounter administrative 
challenges associated with applying two different definitions of 
``high-needs rural region'' and ``rural area'' in 2023. However, as 
Freddie Mac commented, FHFA recognizes that the Enterprises will need 
time to prepare for their implementation of the final rule. An 
effective date of July 1, 2023 will give the Enterprises time after 
publication of the final rule to notify lenders and other stakeholders 
of the rule's amendments, adjust their marketing strategies and other 
outreach activities as necessary, and update their reporting platforms 
to be able to accurately report on loan purchases and other activities 
in colonia census tracts. In addition, because the Enterprises report 
to FHFA on their Duty to Serve performance on a quarterly basis, 
establishing the effective date as the beginning of the third calendar 
quarter will avoid their having to report based on two different 
definitions within the same calendar quarter.

IV. Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) requires that 
a regulation that has a significant economic impact on a substantial 
number of small entities, small businesses, or small organizations must 
include an initial regulatory flexibility analysis describing the 
regulation's impact on small entities. FHFA need not undertake such an 
analysis if FHFA has certified that the regulation will not have a 
significant economic impact on a substantial number of small entities 
(5 U.S.C. 605(b)). FHFA has considered the impact of the final rule 
under the Regulatory Flexibility Act and FHFA certifies that the 
regulation will not have a significant economic impact on a substantial 
number of small entities because the regulation only applies to Fannie 
Mae and Freddie Mac, which are not small entities for purposes of the 
Regulatory Flexibility Act.

V. Paperwork Reduction Act

    The Paperwork Reduction Act (PRA) (44 U.S.C. 3501 et seq.) requires 
that regulations involving the collection of information receive 
clearance from the Office of Management and Budget (OMB). The final 
rule contains no such collection of information requiring OMB approval 
under the PRA. Therefore, FHFA has not submitted the final rule to OMB 
for review under the PRA.

VI. Congressional Review Act

    In accordance with the Congressional Review Act (5 U.S.C. 801 et 
seq.), FHFA has determined that this final rule is a major rule and has 
verified this determination with the Office of Information and 
Regulatory Affairs of OMB.

List of Subjects in 12 CFR Part 1282

    Mortgages; Reporting and recordkeeping requirements.

    For the reasons stated in the preamble, under the authority of 12 
U.S.C. 4501, 4502, 4511, 4513, 4526, and 4561-4566, FHFA amends part 
1282 of subchapter E of 12 CFR chapter XII, as follows:

PART 1282--ENTERPRISE HOUSING GOALS AND MISSION

0
1. The authority citation for part 1282 continues to read as follows:

    Authority:  12 U.S.C. 4501, 4502, 4511, 4513, 4526, 4561-4566.


0
2. Amend Sec.  1282.1(b) by:
0
a. Adding in alphabetical order the definition of ``Colonia census 
tract'';
0
b. In paragraph (iii) of the definition ``High-needs rural region'' 
adding the words ``census tract'' after the word ``colonia''; and
0
c. Revising the definition of ``Rural area''.
    The addition and revision read as follows:


Sec.  1282. 1  Definitions.

* * * * *

[[Page 23564]]

    Colonia census tract, for purposes of subpart C of this part, means 
a census tract that contains a colonia.
* * * * *
    Rural area, for purposes of subpart C of this part, means:
    (i) A census tract outside of a metropolitan statistical area as 
designated by the Office of Management and Budget; or
    (ii) A census tract in a metropolitan statistical area as 
designated by the Office of Management and Budget that is:
    (A) Outside of the metropolitan statistical area's Urbanized Areas 
as designated by the U.S. Department of Agriculture's (USDA) Rural-
Urban Commuting Area (RUCA) Code #1, and outside of tracts with a 
housing density of over 64 housing units per square mile for USDA's 
RUCA Code #2; or
    (B) A colonia census tract that does not satisfy paragraphs (i) or 
(ii)(A) of this definition.
* * * * *

Sandra L. Thompson,
Director, Federal Housing Finance Agency.
[FR Doc. 2023-08005 Filed 4-17-23; 8:45 am]
BILLING CODE 8070-01-P
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