Who ?Leads The Market??
February 20, 2002
Industry Group Challenges Fannie Mae?s Achievement Of Affordable Housing Goals
By Bridget McCrea
Inman News Features
When Fannie Mae released its annual affordable housing numbers last month, FM Watch, a Washington, D.C.-based group backed by trade associations that represent financial and housing-related industries, promptly called those numbers a misrepresentation.
The group?s claim isn?t that the individual numbers are inaccurate, said FM Watch spokesperson Beneva Schulte, but that they don?t meet the expectations Congress established in 1996, when it created Fannie Mae as a government-sponsored enterprise.
Fannie Mae announced that more than 51.5 percent of its business last year served low- and moderate-income families, 32.5 percent served underserved areas and 21.6 percent served people with special affordable housing needs.
The company reportedly financed more than $87 billion in home loans for 676,000 minority families?86 percent more than the previous record set in 1998?and financed nearly $16.5 billion in home loans to 151,000 African American families?an 88 percent increase over the previous 1998 record.
In doing so, Fannie Mae exceeded its goals.
But that wasn?t good enough for FM Watch, which concerns itself with the roughly $10.6 billion in government benefits Fannie Mae receives annually. Congress mandated that those subsidies be used to "lead the market" in increasing the availability and affordability of housing finance for traditionally underserved groups.
But according to FM Watch, Fannie Mae lags the private sector in serving those home buyers.
Schulte cited a statement in President Bush?s fiscal year 2003 budget as evidence that FM Watch?s concerns are valid. The statement reads:
"Fannie Mae and Freddie Mac have met or exceeded the affordable housing goals since they were established in 1996. The GSE?s achievements, however, do not surpass the level of affordable lending in the conventional market. By the most recent estimate available, the conventional market?s loans to low- and moderate-income families and families in underserved areas exceed the purchases of such mortgages by Fannie Mae and Freddie Mac."
Schulte said Fannie Mae is suppose to lead the market in helping underserved communities in the United States, but that the company doesn?t do that as well as private lenders do.
But Fannie Mae spokesperson Robert McCarson said FM Watch?s charges are motivated by competitive self-interest.
Collectively, the group?s members and the companies they represent have an obvious interest in getting the GSEs out of the mortgage industry, said McCarson.
FM Watch?s members include the American Financial Services Association, Association of Financial Guaranty Insurers, Consumer Bankers Association, Consumer Mortgage Coalition, Financial Services Roundtable, Mortgage Insurance Companies of America and the National Home Equity Mortgage Association.
"(FM Watch) is a public relations and lobbyist smear campaign paid for by Fannie Mae?s competitors, including large mortgage insurers that charge people for mortgage insurance they don?t need and subprime lenders who think it?s okay to sometimes charge borrowers interest rates that exceed the risk they represent to the lender," McCarson said.
FM Watch?s data is flawed, said McCarson, and based more on advocacy than analysis.
For example, he said, Fannie Mae never asked the U.S. Department of Housing and Urban Development to lower the affordable housing goals, as FM Watch stated it did.
"We did no such thing," McCarson said. "HUD told us they were going to raise our goals and even expected us to protest, but we said we could do it."
McCarson also said FM Watch?s assertion that Fannie Mae fails to meet Congressional direction to "lead" the affordable housing market is inaccurate and based on faulty data collected under the Home Mortgage Disclosure Act.
"HMDA data misses 30 percent of our business and 40 percent of our financing of minority loans," he said. "It measures primary market activity, not purchases by the secondary market."
McCarson said FM Watch includes in their definitions subprime loans that lenders never offer Fannie Mae and very low down payment loans without mortgage insurance.
"They lump both of those categories in and say, ?This is the market Fannie Mae operates in. Look at this, Fannie Mae doesn?t do as well as we do,? " said McCarson.
Besides, asked McCarson, is it really fair to compare a single company against the aggregated performance of thousands of primary market lenders?
McCarson said at least one FM Watch backer lags Fannie Mae when it comes to serving minorities and individuals who are below the national mean income level, yet FM Watch insists on measuring Fannie Mae against all national lenders.
"If you compare Fannie Mae to any one other company, we?re by far the largest source of financing for minorities--we lead the market," said McCarson. "No one did more volume of business for minorities than Fannie Mae did in 2000 and 2001."
McCarson said the average loan in Fannie Mae?s portfolio is $110,000.
"That?s a loan for a family of four making about $35,000 a year," he said. "If that?s what (FM Watch) considers well-heeled, they?ve been in Washington too long."
Copyright: Inman News Service
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