Report criticizes federal lenders

Associated Press

WASHINGTON – Government-sponsored mortgage companies Fannie Mae and Freddie Mac lag behind private lenders in nearly every large city in making home loan financing available to black and Hispanic borrowers, a private analysis of lending data says.

The report, commissioned by financial institutions long critical of Fannie Mae and Freddie Mac, comes as the Bush administration is putting a premium on increasing minority homeownership, which is rising to record levels but remains much lower than the national average.

Market-by-market conclusions of the study, obtained by The Associated Press and set for release Tuesday, mirror national data compiled by federal regulators.

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 mortgage purchases by Fannie Mae and Freddie Mac, called government-sponsored enterprises, be in minority and low- and moderate-income communities. They have met or exceeded the goals for several consecutive years.

The study by the organization FM Watch found, however, that in 97 of the 100 metropolitan areas with the largest black populations, mortgages to blacks in 2000 made up a smaller share of the two companies’ business than of conventional lenders’ portfolios.

Fannie Mae and Freddie Mac also trailed private industry in 89 of the 100 largest Hispanic markets, the study found.

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 examined only loans for the purchase of single-family homes and excluded refinancing and home equity loans.

The difference between private lenders and the government-sponsored enterprises 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.

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, 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.”

President Bush’s 2003 budget request submitted Monday noted the government-sponsored enterprises “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 Fannie and Freddie will do more to serve minority borrowers.