March 12 (Bloomberg) -- Freddie Mac Chief Executive Office Richard Syron said he's urging changes in federal rules that enabled too many low- and moderate-income Americans to buy houses they can't afford.

It's ``perverse'' that Freddie Mac and Fannie Mae, the two biggest providers of money for U.S. home loans, have been encouraged ``to put people into homes that they end up losing,'' Syron said at a meeting with analysts and investors in New York.

Syron said in an interview that officials at the Department of Housing and Urban Development seem receptive to his suggestions that they change the affordable-housing goals for his McLean, Virginia-based company and Washington-based Fannie Mae.

The goals, which were last updated in 2005, require that a certain amount of the housing units that Fannie Mae and Freddie Mac finance through their overall business and certain sub- segments meet affordable-housing needs.

For example, 47 percent of home purchases that the companies finance this year are supposed to be made by families with incomes at or below the median for their area, while 39 percent of their overall business should be done in ``underserved areas.'' Penalties begin with the amount missed being rolled into goals for the next year.

Government-chartered Fannie Mae and Freddie Mac finance lending through bond guarantees and purchases of mortgages and securities backed by them.

Current Rules

The current guidelines, which last through this year, lifted the percentages each year. The underserved-area goal -- targeting low-income areas or moderate-income areas with high minority populations -- rose from 37 percent in 2005, compared to 31 percent from 2001 through 2004. Growth in the requirements can't continue ``ad infinitum,'' Syron said.

Lemar Wooley, a HUD spokesman, and Amy Bonitatibus, a Fannie Mae spokeswoman, declined to comment.

Freddie Mac's holdings of about $100 billion of originally AAA rated securities backed by subprime home loans were purchased in large part because of the goals, Syron and other executives including Freddie Mac Executive Vice President Patricia Cook, said during the meeting. The company doesn't expect to realize losses on the securities, they said. The company also seeks to meet the goals with apartment-building loans, they said.

Freddie Mac is also exploring turning foreclosed property that the company owns into rental units, Syron said.

Young Syron

``We lived in rental housing for the first three years of our marriage,'' Syron said in the interview, talking about his wife of more than 35 years, Peggy. ``You can have too much of a good thing,'' referring to homeownership. Syron's compensation from Freddie Mac in 2006 was $14.7 million, according to data compiled by Bloomberg.

Since November, Freddie Mac has announced four rounds of changes to its pricing and standards to reflect rising foreclosures and tumbling home prices. Syron said the company may announce more changes in the future.

``When you get into very uncertain periods, you can't make any categorical statements,'' he said.

In February, Congress boosted the size of loans the company and Fannie Mae can finance as a way to expand ``jumbo'' mortgage demand, temporarily raising the limit for single-family loans from $417,000 to as much as $729,750 in higher-cost areas.

Jumbo Loans

Freddie Mac today announced the details of the types of larger loans the company will generally accept. The company is accepting a ``wider'' range of those loans than Fannie Mae, which announced its programs last week, Chief Financial Officer Anthony Piszel told reporters.

Fannie Mae said it would generally require down payments of at least 20 percent on such adjustable-rate mortgages for home purchases by borrowers with credit scores above 700, out of a possible 850. Freddie Mac said that it would allow such ARMs with 10 percent down. Freddie Mac will require at least 25 percent down payments of borrowers with credit scores between 660 and 700, while Fannie Mae is requiring only 20 percent down. Freddie Mac is allowing certain cash-out refinancings, while Fannie Mae is accepting none, even to pay off second mortgages.

``The reason you have two of us is so you get competition,'' Syron said.

To contact the reporters for this story: Jody Shenn in New York at jshenn@bloomberg.net

Last Updated: March 12, 2008 18:57 EDT