April 5, 2004
HUD SENDS GSE HOUSING GOALS TO CONGRESS
Recommendations for Fannie Mae and Freddie Mac Mortgage Purchase Requirements
WASHINGTON - The U. S. Department of Housing and Urban Development today sent Congress its recommendations for new housing goals for Fannie Mae and Freddie Mac.
The proposed rule was sent to the Chairs and Ranking members of the Senate Banking and House Financial Services Committees. Congress will review the proposed rule for 15 days before it is published in the Federal Register. Following a 60-day public comment period and after consideration of comments received, HUD will publish a Final Rule before it takes effect in 2005.
Fannie Mae and Freddie Mac, also known as Government Sponsored Enterprises (GSEs), were created by Congress to provide targeted mortgage lending. Their affordable housing goals require the GSEs to focus their mortgage financing toward low- and moderate-income families, very low-income families, low-income families in low-income areas, and residents of communities underserved by mortgage credit. Families are considered as having low or moderate incomes if they make no more than the area median income, which varies by community.
HUD's responsibility to revise and regulate the GSEs' affordable housing goals was mandated by Congress through the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 (FHEFSSA). HUD last revised the GSEs' affordable housing goals in 2000
Fannie Mae and Freddie Mac buy mortgages for both individual homes and apartment buildings. They buy mortgages from banks, thrift institutions and other mortgage lenders, and then either package and sell them to investors as mortgage-backed securities or hold them in their own mortgage portfolios. When Fannie Mae and Freddie Mac buy mortgages from lenders, they provide lenders with cash needed to make new mortgage loans.
Congress has given the GSEs special advantages - such an exemption from all state and local taxes except property taxes and a conditional line of credit with the U.S. Treasury. In addition, their GSE status has helped them obtain the highest credit rating to reduce their borrowing costs, and has boosted investor confidence in the two companies, thereby helping to increase their earnings.
HUD is the nation's housing agency committed to increasing homeownership, particularly among minorities; creating affordable housing opportunities for low-income Americans; and supporting the homeless, elderly, people with disabilities and people living with AIDS. The Department also promotes economic and community development as well as enforces the nation's fair housing laws. More information about HUD and its programs is available on the Internet and espanol.hud.gov