Mortgage lending to low-income families would increase slightly under a plan by Federal Housing Finance Agency Director Mel Watt, though not enough to satisfy some consumer groups that want to boost homeownership.
Mortgage purchases by Fannie Mae and Freddie Mac for low-income, single-family homes will be targeted at 24 percent of the companies’ business through 2017, the FHFA said Wednesday. That’s one percentage point higher than last year’s level. Another goal, for the poorest families, was reduced to 6 percent, from 7 percent in 2014.
As the government overseer of Fannie and Freddie, the FHFA sets benchmarks that lay out the government’s vision for affordable housing. The single-family goals released Wednesday advance the mortgage giants’ objective to provide borrowers with access to credit and the U.S. housing market with liquidity, “while operating in a safe and sound manner,” Watt said in a statement.
The 24 percent figure should be closer to 30 percent to be effective, said John Taylor, chief executive officer of the National Community Reinvestment Coalition. David Sanchez, a policy analyst at the Center for American Progress, a group affiliated with Democrats, called FHFA’s decision a “pretty timid and disappointing move.”
The affordable housing goals are aimed at spurring mortgage lending in economically disadvantaged neighborhoods. The practice of requiring Fannie Mae and Freddie Mac to purchase an increasing percentage of loans in poor communities became a political flash point after the housing bubble burst. By 2007, loans to low- and moderate-income borrowers were 55 percent of the companies’ books.
Republicans and free-market advocates say the FHFA’s goals, which have been in place since 1992, helped create the bubble by encouraging Fannie Mae and Freddie Mac to buy risky mortgages. They say increasing the goal numbers will fuel a decline in lending standards.
“Instead of enacting more of the same policies that precipitated the government-driven housing bubble and the financial crisis, the FHFA should be acting to better protect taxpayers and make our economy stronger for all Americans,” Randy Neugebauer, a Texas Republican and chairman of a House Financial Services subcommittee, said in a statement. The FHFA rule “will only further entrench” Fannie Mae and Freddie Mac, he said.
The biggest change in the final rule released Wednesday was to increase lending in low-income areas to 14 percent of Fannie Mae and Freddie Mac’s book of business for 2015 through 2017 from 11 percent last year. That goal applies to mortgages made in areas where incomes are low as defined by the U.S. Census Bureau.
A preliminary rule released a year ago proposed a 23 percent target from 2015 to 2017 for low-income, single-family homes and 7 percent for the very poor, unchanged from 2014. Today’s revisions were made after the FHFA reviewed more than 140 comments submitted by the public.
Sanchez of the Center for American Progress said he’s more optimistic about the FHFA’s goals for low-income, multifamily housing units, which were increased to 300,000 each for the mortgage firms for the next three years from last year’s target of 250,000 for Fannie Mae and 200,000 for Freddie Mac.
Fannie Mae and Freddie Mac, which have operated under U.S. conservatorship since 2008, provide liquidity to the housing market by buying loans and packaging them into bonds on which payments of principal and interest have implied guarantees.