Private lenders criticize Fannie Mae, Freddie Mac over diversity lending practices

Posted 7:20AM on Wednesday 6th February 2002 ( 22 years ago )

WASHINGTON - Blacks got 14 percent of Atlanta primary mortgage lenders' business in 2000, but represented just 11 percent of the portfolios of the giant government-sponsored mortgage companies Fannie Mae and Freddie Mac, a private analysis of lending data says. In San Antonio, just 19 percent of the home loans purchased by Fannie Mae and Freddie Mac that year had been made to Hispanics, compared to 24 percent of mortgages made by primary lenders there. In all, Fannie Mae and Freddie Mac trailed private lenders in making home loan financing available to black borrowers in 97 of the 100 metropolitan areas with the largest black populations and in 89 of the top 100 Hispanic markets, the study by FM Watch concluded. The report, which was obtained ahead of its Wednesday release by The Associated Press, was commissioned by financial institutions long critical of Fannie Mae and Freddie Mac. Created by Congress but owned by shareholders, Fannie Mae and Freddie Mac are the nation's largest sources of financing for home loans. They pour money into the multibillion dollar market by buying most of the nation's single-family home loans from primary lenders and reselling them to investors as securities. The Congressional Budget Office calculated the benefit of their government charters, which includes lower debt costs, tax and regulatory exemptions, at $10.7 billion in 2000. Federal rules require a certain percentage of mortgages purchased by Fannie Mae and Freddie Mac, called government-sponsored enterprises, to be in minority and low- and moderate-income communities. They have met or exceeded the goals for several consecutive years. The study examined only the loans for single-family homes that Fannie and Freddie are allowed to buy which until this year was under $275,000 and excluded refinancing and home equity loans. The difference between private lenders and the GSEs was not always large, the study showed. And there remained a very big gap between the share of loans to blacks and Hispanics in either side's portfolio and the minority groups' representation in the population. FM Watch is a coalition of large mortgage companies, including GE Capital Services Inc., Wells Fargo & Co. and American International Group, that often partner with Fannie Mae and Freddie Mac. They oppose expansion of the two and want their low-income lending requirements brought in line with the more stringent ones that banks face. The study's conclusions mirror data compiled by federal regulators. President Bush's 2003 budget request submitted Monday noted Fannie and Freddie ``do not surpass the level of affordable lending in the conventional market.'' John Weicher, assistant secretary for housing at the Department of Housing and Urban Development, said he hopes to see Fannie and Freddie do more to serve minority borrowers. Minority homeownership is rising to record levels but remains much lower than the national average. Douglas Robinson, a spokesman for Freddie Mac, refused comment, because he had not seen the report. Fannie Mae spokeswoman Janice Daue noted that Fannie Mae and Freddie Mac are together the largest providers of capital to lower-income and minority families. The enterprises contend the FM Watch analysis is flawed because the universe of loans examined includes mortgages the companies have deemed largely too risky to buy. Daue said Fannie Mae has committed to increasing the share of its business that serves minorities but also needs to study more closely the risky subprime market, in which minorities are disproportionately represented and largely makes up for the difference between their portfolio and private lenders', she said. ``We want to approach this market prudently and responsibly,'' she said. ``Our role is to expand minority homeownership, and we're going to continue to do that.''

http://accesswdun.com/article/2002/2/199135