Banking and Finance Law Daily Wrap Up, GOVERNMENT SPONSORED ENTERPRISES—NCRC opposes FHFA plan to lower affordable-housing goals for Fannie, Freddie, (Nov 3, 2025)

By Shashi Kant, BALLB, LLM

The organization challenged the FHFA’s justification for reducing GSE housing targets, citing statutory duties, lending data, and potential impact on low-income borrowers.

The National Community Reinvestment Coalition (NCRC) submitted a comment letter to the Federal Housing Finance Agency (FHFA) opposing the agency’s proposed rule that would lower affordable-housing benchmarks for Fannie Mae and Freddie Mac over the 2026–2028 period (see Banking and Finance Law Daily, Oct. 3, 2025). NCRC asserts that the FHFA proposal would reduce the number of loans purchased for low- and moderate-income (LMI) borrowers, contrary to the statutory obligations of the government-sponsored enterprises (GSEs) to support affordable housing.

Scope of proposed reductions. Under the FHFA’s proposed rule, the percentage of single-family home-purchase loans made to low-income borrowers, defined as those with incomes at or below 80 percent of area median income, would decline from 25 percent for 2025-2027 to 21 percent for 2026-2028. The “very low-income” home-purchase goal, covering borrowers with incomes at or below 50 percent of area median income, would fall from 6.7 percent to 3.5 percent. The “low-income areas” home-purchase goal, combining lending in low-income and minority census tracts, would drop from to 16 percent. NCRC stated that these reductions could result in fewer loans purchased by the government-sponsored enterprises (GSEs). Using FHFA data from 2021-2024, NCRC estimated that lowering the low-income goal to 21 percent could reduce GSE purchases by approximately 368,000 loans over three years. For the very-low-income goal, the estimated reduction is 174,000 loans; for the low-income areas goal, 286,000 loans.

Statutory framework. The NCRC letter cites the GSEs’ statutory obligation under the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 to “facilitate the financing of affordable housing for low- and moderate-income families.” It references FHFA’s legal requirement to consider national housing needs, demographic conditions, and the enterprises’ ability to lead the market in providing mortgage credit. NCRC states that lowering the goals would reduce the GSEs’ leadership role relative to the primary mortgage market, where lenders such as banks and credit unions originate loans. According to FHFA data cited in the letter, the primary market’s average share of loans to low-income borrowers was 26.8 percent between 2019 and 2023, compared with Fannie Mae’s 27.6 percent and Freddie Mac’s 27.9 percent during the same period.

FHFA’s economic rationale. The FHFA’s proposed rule describes a “crowding-out” theory in which higher GSE housing goals could cause excessive price competition in the secondary market, reducing fees and potentially affecting safety and soundness. FHFA stated that aggressive targets might shift market share away from private competitors without increasing total loan volume. The NCRC letter summarizes and responds to FHFA’s reasoning. It notes that FHFA attributes possible financial risk to declining revenues from price competition among secondary-market participants and states that FHFA believes GSEs’ extensive participation could displace other entities such as the Federal Housing Administration or private-label securities issuers. NCRC’s submission references FHFA’s own data showing that the GSEs’ market share of all mortgages declined from 67 percent in 2020 to 47 percent in 2024.

Market and performance data. The NCRC letter cites data from multiple federal sources referenced in the proposed rule. According to the Office of the Comptroller of the Currency, 97.5 percent of mortgages were current and performing at the end of the second quarter of 2025. The Consumer Financial Protection Bureau reported that the rate of seriously delinquent mortgages, those 90 days or more past due, has remained below 1 percent since 2020. FHFA’s proposed rule also referenced forecasts by the National Association of Realtors indicating potential improvement in housing affordability through 2028 and a 70 percent increase in active housing listings between spring 2023 and spring 2025.

Equity and borrower distribution. FHFA expressed concern that current housing-goal levels may disadvantage middle-income borrowers by incentivizing lenders to adjust prices upward for non-targeted loans. FHFA stated that it had received feedback suggesting that middle-income borrowers could face higher costs or limited access in pursuit of goal compliance. NCRC’s filing presents data showing that between 2022 and 2024 middle-income borrowers received 28 percent of all home-purchase loans, while the share for low- and moderate-income borrowers fell from 29 percent to 25 percent. Upper-income borrowers’ share increased from 44 percent to 47 percent. The letter cites these data to describe the overall lending distribution reported in recent years.

Proposed goal consolidation. The FHFA proposal would merge the existing “minority census tract” and “low-income census tract” subgoals into one “low-income areas” goal. FHFA stated that this change would simplify the framework and align the subgoals with borrower-based metrics. NCRC’s letter describes potential duplication between the current subgoals but notes that their combination could shift GSE lending activity toward middle-income minority tracts. NCRC proposes maintaining separate goals but adjusting the minority-tract goal to cover tracts with incomes between 81 and 100 percent of area median income to avoid overlap.

Multifamily and refinance goals. The FHFA proposal retains existing goals for multifamily and single-family refinance loans. NCRC’s filing notes that FHFA set the low-income multifamily goal at 61 percent and that GSE performance in prior years exceeded that level by five to fifteen percentage points. The organization stated that keeping multifamily and refinance goals at current levels maintains alignment between markets.

Companies: Fannie Mae; Freddie Mac; National Community Reinvestment Coalition

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