Fannie Mae 2010 Annual Report Download - page 49

discontinued stress test simulations under the existing rule. We continue to submit detailed profiles of our
books of business to FHFA to support FHFA’s monitoring of our business activity and their research into
future risk-based capital rules.
Critical Capital Requirement. The GSE Act also establishes a critical capital requirement, which is the
amount of core capital below which we would be classified as “critically undercapitalized.” Under the GSE
Act, such classification is a discretionary ground for appointing a conservator or receiver. Our critical capital
requirement is generally equal to the sum of 1.25% of on-balance sheet assets and 0.25% of off-balance sheet
obligations. FHFA has directed us, for purposes of critical capital, to continue reporting loans backing Fannie
Mae MBS held by third parties based on 0.25% of the unpaid principal balance, notwithstanding our
consolidation of substantially all of the loans backing these securities. FHFA has stated that it does not intend
to publish our critical capital level during the conservatorship.
Bank Capital Requirements. In the wake of the financial crisis and as a result of the Dodd-Frank Act and of
actions by international bank regulators, the capital regime for the banking industry is undergoing major
changes. The Basel Committee on Banking Supervision finalized a set of revisions (known as Basel III) to the
international capital requirements in December 2010. Basel III generally narrows the definition of capital that
can be used to meet risk-based standards and raises the amount of capital that must be held. U.S. bank
regulators are expected to issue detailed implementing regulations for U.S. banks in the coming months.
Although the GSEs are not currently subject to bank capital requirements, any revised framework for GSE
capital standards may be based on bank requirements, particularly if the GSEs are deemed to be systemically
important financial companies subject to Federal Reserve oversight.
Housing Goals and Duty to Serve Underserved Markets
Since 1993, we have been subject to housing goals. For 2010, the structure of our housing goals changed as a
result of the 2008 Reform Act. The 2008 Reform Act also created a new duty for us to serve three
underserved markets, which we discuss below.
Housing Goals
FHFA published a final rule establishing our 2010 and 2011 housing goals on September 14, 2010. FHFA’s
final rule and subsequent notices dated October 29, 2010 and January 28, 2011 established the following
single-family home purchase and refinance housing goal benchmarks for 2010 and 2011. A home purchase
mortgage may be counted toward more than one home purchase benchmark.
•Low-Income Families Home Purchase Benchmark: At least 27% of our acquisitions of single-family
owner-occupied mortgage loans financing home purchases must be affordable to low-income families
(defined as families with income no higher than 80% of area median income).
•Very Low-Income Families Home Purchase Benchmark: At least 8% of our acquisitions of single-family
owner-occupied mortgage loans financing home purchases must be affordable to very low-income families
(defined as families with income no higher than 50% of area median income).
•Low-Income Areas Home Purchase Benchmarks: At least 24% of our acquisitions of single-family owner-
occupied mortgage loans financing home purchases must be for families in low-income census tracts, for
moderate-income families (defined as families with income no higher than 100% of area median income) in
designated disaster areas or for moderate-income families in minority census tracts. In addition, at least 13%
of our acquisitions of single-family owner-occupied purchase money mortgage loans must be for families in
low-income census tracts or for moderate-income families in minority census tracts.
•Low-Income Families Refinancing Benchmark: At least 21% of our acquisitions of single-family owner-
occupied refinance mortgage loans must be affordable to low-income families, which may include
qualifying permanent modifications of mortgages under HAMP completed during the year.
If we do not meet these benchmarks, we may still meet our goals. The final rule specifies that our single-
family housing goals performance will be measured against these benchmarks and against goals-qualifying
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