[Code of Federal Regulations] [Title 24, Volume 1] [Revised as of April 1, 2006] From the U.S. Government Printing Office via GPO Access [CITE: 24CFR81.15] [Page 442-447] TITLE 24--HOUSING AND URBAN DEVELOPMENT PART 81_THE SECRETARY OF HUD'S REGULATION OF THE FEDERAL NATIONAL MORTGAGE ASSOCIATION (FANNIE MAE) AND THE FEDERAL HOME LOAN MORTGAGE CORPORATION (FREDDIE MAC)--Table of Contents Subpart B_Housing Goals Sec. 81.15 General requirements. (a) Calculating the numerator and denominator. Performance under each of the housing goals shall be measured using a fraction that is converted into a percentage. (1) The numerator. The numerator of each fraction is the number of dwelling units financed by a GSE's mortgage purchases in a particular year that count toward achievement of the housing goal. (2) The denominator. The denominator of each fraction is, for all mortgages purchased, the number of dwelling units that could count toward achievement of the goal under appropriate circumstances. The denominator shall not include GSE transactions or activities that are not mortgages or mortgage purchases as defined by HUD or transactions that are specifically excluded as ineligible under Sec. 81.16(b). [[Page 443]] (3) Missing data or information. When a GSE lacks sufficient data or information to determine whether the purchase of a mortgage originated after 1992 counts toward achievement of a particular housing goal, that mortgage purchase shall be included in the denominator for that housing goal, except under the circumstances described in paragraphs (d) and (e)(6) of this section. (b) Properties with multiple dwelling units. For the purposes of counting toward the achievement of the goals, whenever the property securing a mortgage contains more than one dwelling unit, each such dwelling unit shall be counted as a separate dwelling unit financed by a mortgage purchase. (c) Credit toward multiple goals. A mortgage purchase (or dwelling unit financed by such purchase) by a GSE in a particular year shall count toward the achievement of each housing goal for which such purchase (or dwelling unit) qualifies in that year. (d) Counting owner-occupied units. (1) For purposes of counting owner-occupied units toward achievement of the Low- and Moderate-Income Housing Goal or the Special Affordable Housing Goal, mortgage purchases financing such units shall be evaluated based on the income of the mortgagors and the area median income at the time of origination of the mortgage. To determine whether mortgages may be counted under a particular family income level, i.e., especially low, very low, low or moderate income, the income of the mortgagors is compared to the median income for the area at the time of the mortgage application, using the appropriate percentage factor provided under Sec. 81.17. (2)(i) When the income of the mortgagor(s) is not available to determine whether an owner-occupied unit in a property securing a single-family mortgage originated after 1992 and purchased by a GSE counts toward achievement of the Low- and Moderate-Income Housing Goal or the Special Affordable Housing Goal, a GSE's performance with respect to such unit may be evaluated using estimated affordability information in accordance with one of the following methods: (A) Excluding from the denominator and the numerator single-family owner-occupied units located in census tracts with median incomes less than, or equal to, area median income based on the most recent decennial census, up to a maximum of one percent of the total number of single- family owner-occupied dwelling units eligible to be counted toward the respective housing goal in the current year. Mortgage purchases with missing data in excess of the maximum will be included in the denominator and excluded from the numerator; (B) For home purchase mortgages and for refinance mortgages separately, multiplying the number of owner-occupied units with missing borrower income information in properties securing mortgages purchased by the GSE in each census tract by the percentage of all single-family owner-occupied mortgage originations in the respective tracts that would count toward achievement of each goal, as determined by HUD based on the most recent HMDA data available; or (C) Such other data source and methodology as may be approved by HUD. (ii) In any calendar year, a GSE may use only one of the methods specified in paragraph (d)(2)(i) of this section to estimate affordability information for single-family owner-occupied units. (iii) If a GSE chooses to use an estimation methodology under paragraph (d)(2)(i)(B) or (d)(2)(i)(C) of this section to determine affordability for owner-occupied units in properties securing single- family mortgage purchases eligible to be counted toward the respective housing goal, then that methodology may be used up to nationwide maximums for home purchase mortgages and for refinance mortgages that shall be calculated by multiplying, for each census tract, the percentage of all single-family owner-occupied mortgage originations with missing borrower incomes (as determined by HUD based on the most recent HMDA data available for home purchase and refinance mortgages, respectively) by the number of single-family owner-occupied units in properties securing mortgages purchased by the GSE for each census tract, summed up over all census tracts. If this nationwide maximum is [[Page 444]] exceeded, then the estimated number of goal-qualifying units will be adjusted by the ratio of the applicable nationwide maximum number of units for which income information may be estimated to the total number of single-family owner-occupied units with missing income information in properties securing mortgages purchased by the GSE. Owner-occupied units in excess of the nationwide maximum, and any units for which estimation information is not available, shall remain in the denominator of the respective goal calculation. (e) Counting rental units--(1) Use of income, rent--(i) Generally. For purposes of counting rental units toward achievement of the Low- and Moderate-Income Housing Goal or the Special Affordable Housing Goal, mortgage purchases financing such units shall be evaluated based on the income of actual or prospective tenants where such data is available, i.e., known to a lender. (ii) Availability of income information. (A) Each GSE shall require lenders to provide to the GSE tenant income information under paragraphs (e)(3) and (4) of this section, but only when such information is known to the lender. (B) When such tenant income information is available for all occupied units, the GSE's performance shall be based on the income of the tenants in the occupied units. For unoccupied units that are vacant and available for rent and for unoccupied units that are under repair or renovation and not available for rent, the GSE shall use the income of prospective tenants, if paragraph (e)(4) of this section is applicable. If paragraph (e)(4) of this section is not applicable, the GSE shall use rent levels for comparable units in the property to determine affordability. (2) Model units and rental offices. A model unit or rental office in a multifamily property may count toward achievement of the housing goals only if a GSE determines that: (i) It is reasonably expected that the units will be occupied by a family within one year; (ii) The number of such units is reasonable and minimal considering the size of the multifamily property; and (iii) Such unit otherwise meets the requirements for the goal. (3) Income of actual tenants. When the income of actual tenants is available, to determine whether a tenant is very-low-, low-, or moderate-income, the income of the tenant shall be compared to the median income for the area, adjusted for family size as provided in Sec. 81.17. (4) Income of prospective tenants. When income for tenants is available to a lender because a project is subject to a Federal housing program that establishes the maximum income for a tenant or a prospective tenant in rental units, the income of prospective tenants may be counted at the maximum income level established under such housing program for that unit. In determining the income of prospective tenants, the income shall be projected based on the types of units and market area involved. Where the income of prospective tenants is projected, each GSE must determine that the income figures are reasonable considering the rents (if any) on the same units in the past and considering current rents on comparable units in the same market area. (5) Use of rent. When the income of the prospective or actual tenants of a dwelling unit is not available, performance under these goals will be evaluated based on rent and whether the rent is affordable to the income group targeted by the housing goal. A rent is affordable if the rent does not exceed 30 percent of the maximum income level of very-low-, low-, or moderate-income families as provided in Sec. 81.19. In determining contract rent for a dwelling unit, the actual rent or average rent by unit type shall be used. (6) Affordability data unavailable. (i) Multifamily. (A) When a GSE lacks sufficient information to determine whether a rental unit in a property securing a multifamily mortgage purchased by a GSE counts toward achievement of the Low- and Moderate-Income Housing Goal or the Special Affordable Housing Goal because neither the income of prospective or actual tenants, nor the actual or average rental data, are available, a GSE's performance with respect to such unit [[Page 445]] may be evaluated using estimated affordability information in accordance with one of the following methods: (1) Multiplying the number of rental units with missing affordability information in properties securing multifamily mortgages purchased by the GSE in each census tract by the percentage of all rental dwelling units in the respective tracts that would count toward achievement of each goal, as determined by HUD based on the most recent decennial census. For units with missing affordability information in tracts for which such methodology is not possible, such units will be excluded from the denominator as well as the numerator in calculating performance under the respective housing goal(s); or (2) Such other data source and methodology as may be approved by HUD. (B) In any calendar year, a GSE may use only one of the methods specified in paragraph (e)(6)(i)(A) of this section to estimate affordability information for multifamily rental units. (C) If a GSE chooses to use an estimation methodology under paragraph (e)(6)(i)(A) of this section to determine affordability for rental units in properties securing multifamily mortgage purchases eligible to be counted toward the respective housing goal, then that methodology may be used up to a nationwide maximum of ten percent of the total number of rental units in properties securing multifamily mortgages purchased by the GSE in the current year. If this maximum is exceeded, the estimated number of goal-qualifying units will be adjusted by the ratio of the nationwide maximum number of units for which affordability information may be estimated to the total number of multifamily rental units with missing affordability information in properties securing mortgages purchased by the GSE. Multifamily rental units in excess of the maximum set forth in this paragraph (e)(6)(i)(C), and any units for which estimation information is not available, shall be removed from the denominator of the respective goal calculation. (ii) Rental units in 1-4 unit single-family properties. (A) When a GSE lacks sufficient information to determine whether a rental unit in a property securing a single-family mortgage purchased by a GSE counts toward achievement of the Low- and Moderate-Income Housing Goal or the Special Affordable Housing Goal because neither the income of prospective or actual tenants, nor the actual or average rental data, are available, a GSE's performance with respect to such unit may be evaluated using estimated affordability information in accordance with one of the following methods: (1) Excluding rental units in 1-to 4-unit properties with missing affordability information from the denominator as well as the numerator in calculating performance under those goals; (2) Multiplying the number of rental units with missing affordability information in properties securing single family mortgages purchased by the GSE in each census tract by the percentage of all rental dwelling units in the respective tracts that would count toward achievement of each goal, as determined by HUD based on the most recent decennial census. For units with missing affordability information in tracts for which such methodology is not possible, such units will be excluded from the denominator as well as the numerator in calculating performance under the respective housing goal(s); or (3) Such other data source and methodology as may be approved by HUD. (B) In any calendar year, a GSE may use only one of the methods specified in paragraph (e)(6)(ii)(A) of this section to estimate affordability information for single-family rental units. (C) If a GSE chooses to use an estimation methodology under paragraph (e)(6)(ii)(A)(2) or (e)(6)(ii)(A)(3) of this section to determine affordability for rental units in properties securing single- family mortgage purchases eligible to be counted toward the respective housing goal, then that methodology may be used up to nationwide maximums of five percent of the total number of rental units in properties securing non-seasoned single-family mortgage purchases by the GSE in the current year and 20 percent of the total [[Page 446]] number of rental units in properties securing seasoned single-family mortgage purchases by the GSE in the current year. If either or both of these maximums are exceeded, the estimated number of goal-qualifying units will be adjusted by the ratio of the applicable nationwide maximum number of units for which affordability information may be estimated to the total number of single-family rental units with missing affordability information in properties securing seasoned or unseasoned mortgages purchased by the GSE, as applicable. Single-family rental units in excess of the maximums set forth in this paragraph (e)(6)(ii)(C), and any units for which estimation information is not available, shall be removed from the denominator of the respective goal calculation. (7) Timeliness of information. In determining performance under the housing goals, each GSE shall use tenant and rental information as of the time of mortgage: (i) Acquisition for mortgages on multifamily housing; and (ii) Origination for mortgages on single-family housing. (f) Application of Median income. (1) For purposes of determining an area's median income under Sec. Sec. 81.17 through 81.19 and for the definition of ``low-income area,'' the area is: (i) The metropolitan area, if the property which is the subject of the mortgage is in a metropolitan area; and (ii) In all other areas, the county in which the property is located, except that where the State nonmetropolitan median income is higher than the county's median income, the area is the State nonmetropolitan area. (2) When a GSE cannot precisely determine whether a mortgage is on dwelling unit(s) located in one area, the GSE shall determine the median income for the split area in the manner prescribed by the Federal Financial Institutions Examination Council for reporting under the Home Mortgage Disclosure Act, if the GSE can determine that the mortgage is on dwelling unit(s) located in: (i) A census tract; (ii) A census place code; (iii) A block-group enumeration district; (iv) A nine-digit zip code; or (v) Another appropriate geographic segment that is partially located in more than one area (``split area''). (g) Sampling not permitted. Performance under the housing goals for each year shall be based on a complete tabulation of mortgage purchases for that year; a sampling of such purchases is not acceptable. (h) Newly available data. When a GSE uses data to determine whether a mortgage purchase counts toward achievement of any goal and new data is released after the start of a calendar quarter, the GSE need not use the new data until the start of the following quarter. (i) Counting mortgages toward the Home Purchase Subgoals--(1) General. The requirements of this section, except for paragraphs (b) and (e) of this section, shall apply to counting mortgages toward the Home Purchase Subgoals at Sec. Sec. 81.12 through 81.14. However, performance under the subgoals shall be counted using a fraction that is converted into a percentage for each subgoal and the numerator of the fraction for each subgoal shall be the number of home purchase mortgages in metropolitan areas financed by each GSE's mortgage purchases in a particular year that count towards achievement of the applicable housing goal. The denominator of each fraction shall be the total number of home purchase mortgages in metropolitan areas financed by each GSE's mortgage purchases in a particular year. For purposes of each subgoal, the procedure for addressing missing data or information, as set forth in paragraph (d) of this section, shall be implemented using numbers of home purchase mortgages in metropolitan areas and not single-family owner-occupied dwelling units. (2) Special counting rule for mortgages with more than one owner- occupied unit. For purposes of counting mortgages toward the Home Purchase Subgoals, where a single home purchase mortgage finances the purchase of two or more owner-occupied units in a metropolitan area, the mortgage shall count [[Page 447]] once toward each subgoal that applies to the GSE's mortgage purchase. [60 FR 61888, Dec. 1, 1995, as amended at 65 FR 65087, Oct. 31, 2000; 69 FR 63641, Nov. 2, 2004]