Federal Housing Finance Agency December 2010 – Federal Register Recent Federal Regulation Documents

The Federal Housing Finance Agency (FHFA) is issuing a final regulation that will govern the portfolio holdings of Fannie Mae and Freddie Mac (collectively, the Enterprises) during the pendency of the conservatorships. The final regulation adopts FHFA's interim final rule on portfolio holdings, without change. See 74 FR 5609, January 30, 2009. That interim rule adopted the portfolio limits specified in each Enterprise's Senior Preferred Stock Purchase Agreement (PSPA) with the Department of the Treasury (Treasury) as the regulation limits. Specifically, it provides that each Enterprise comply with the portfolio limits contained in the respective PSPAs, as they may be amended from time to time. The interim regulation also stipulated that the regulation is to be in effect until amended or the Enterprises are no longer subject to the PSPAs.

Section 1205 of the Housing and Economic Recovery Act of 2008 (HERA) amended the Federal Home Loan Bank Act (Bank Act) by adding a new section 10C(a) that requires the Director of the Federal Housing Finance Agency (FHFA) to establish housing goals with respect to the Federal Home Loan Banks' (Banks) purchase of mortgages, if any. Section 10C(b) provides that the Banks' housing goals are to be consistent with the housing goals established by FHFA for the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) (collectively, the Enterprises) under sections 1331 through 1334 of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 (Safety and Soundness Act), as amended by HERA, taking into consideration the unique mission and ownership structure of the Banks. To implement section 10C, FHFA is adopting a final rule that is substantially the same as the proposed rule published by FHFA for notice and comment. The final rule establishes three single-family owner-occupied purchase money mortgage goals and one single-family refinancing mortgage goal applicable to the Banks' purchases of single- family owner-occupied mortgages, if any, under their Acquired Member Assets (AMA) programs, consistent with the single-family housing goals for the Enterprises. A Bank will be subject to the housing goals if its AMA-approved mortgage purchases in a given year exceed a volume threshold of $2.5 billion.

Section 1211 of the Housing and Economic Recovery Act of 2008 (HERA) amended the Federal Home Loan Bank Act (Bank Act) to expand the types of eligible collateral that community financial institution (CFI) members may pledge to secure Federal Home Loan Bank (Bank) advances to include secured loans for community development activities and to allow Banks to make long term advances to CFI members for purposes of financing community development activities. Section 1211 further provides that the Federal Housing Finance Agency (FHFA) shall define the term ``community development activities'' by regulation. To implement these provisions, FHFA is amending the advances regulation to allow CFI members to pledge community development loans as collateral for advances and is adopting a definition of ``community development'' as proposed. The final rule also will transfer the advances and new business activities rules from parts 950 and 980 of the Federal Housing Finance Board (FHFB) regulations, to new parts 1266 and 1272 of the FHFA regulations, respectively, and make other conforming amendments. Finally, the final rule will make a change to the advances regulation to incorporate a long-standing policy previously established by the FHFB that secured lending to a member of any Bank is an advance that must meet the requirements of the advances regulation. The final rule language has been clarified to assure that certain types of transactions, such as derivatives, will not be considered secured lending for the purposes of this provision. The new provision addressing secured lending does not include a prohibition on secured transactions with affiliates of members, as was initially proposed.