Battle Brews Over Housing goals


HUD Secretary Andrew Cuomo is said to favor raising the bar for affordable-housing goals for Fannie Mae and Freddie Mac, and a battle over these initiatives appears to be brewing.

So far these goals, in place since 1992, have contributed to increased efforts in such areas as multifamily securitization, in Community Reinvestment Act securitization, in high loan-to-value lending as well as an increased interest in the subprime market.

The Department of Housing and Urban Development is planning to unveil a proposed rule on Freddie Mac and Fannie Mae's affordable-lending goals within the next few months. Under the current goals, Fannie Mae and Freddie Mae are required to have 42% of the units they finance serve families at or below the area median income. The figure could go up to as much as 50%, according to one report.

Sources on Capitol Hill noted that two weeks ago the U.S. Conference of Mayors, meeting in New Orleans, passed a resolution calling for increased low-, moderate- and middle-income lending by Fannie Mae and Freddie Mac. HUD interprets this as reinforcing its desire to raise the bar for the Fannie-Freddie affordable-lending goals, the sources said.

FM Watch, a newly organized critic of Fannie Mae and Freddie Mac favors higher goals and said Fannie Mae and Freddie Mac are already lobbying against them. Michael House, acting director of the group, said the two government-sponsored agencies have been talking to Congress and to the Clinton administration to keep their affordable-housing goals from being raised.

Fannie Mae is at the beginning of discussions with HUD, according to a company spokesman.

A spokeswoman at Freddie Mac said the company has not yet talked to HUD about the goals.

Freddie Mac argues that FM Watch mainly represents the interests of the mortgage-insurance industry (MBSL 6/21/99). The Fannie Mae spokesman said the reason FM Watch favors increasing the affordable-housing goals is that the mortgage insurers would benefit since the goals result in more high-LTV loans, which typically require mortgage insurance.

The Fannie Mae spokesman added that if the goals are raised, they could exceed the number of affordable loans that the primary markets can deliver to the two secondary-market companies. He said unrealistic goals would result in credit allocation, which Congress opposes.

The Freddie Mac spokeswoman said the goals are already extremely stringent and have never been tested in difficult economic times. She said before fiddling around with the goals, more information is needed to get a sense of how accurately they measure the market's ability to serve this segment. - ES