New Affordable-Housing Bid Seen

The Bush administration may require Fannie Mae and Freddie Mac, the embattled mortgage finance enterprises, to devote more of their business to affordable housing, a source familiar with the proposal said this week.

The expanded goals for low- and moderate-income housing that are under consideration would add another ingredient to a discussion among policymakers about oversight of the companies’ and their roles in the U.S. housing system in the wake of an accounting scandal and management upheaval last year at Freddie Mac.

The Department of Housing and Urban Development is scheduled this month to complete a draft of regulations that would expand affordable-housing goals for Fannie Mae and Freddie Mac, according to the source. The administration is expected to open the plan for public comment in March.

The department’s options include basing new low- and moderate-income housing goals on 2000 census data, which reflect greater minority populations; and setting subgoals for home purchases as distinct from refinancing.

HUD spokesman Douglas Duvall declined to comment on progress on the new regulations.

“There is an ongoing analysis” from Fannie Mae and Freddie Mac, he said.

Freddie Mac spokeswoman Sharon McHale declined to comment on the administration’s affordable housing proposals. “We wouldn’t comment on a plan we haven’t seen yet,” she said.

Fannie Mae officials were not immediately available for comment.

The Bush administration is emphasizing its goal of increasing minority homeownership as the 2004 elections approach.

The housing department announced last week that it would eliminate next year some of the shortcuts Fannie Mae and Freddie Mac have been permitted to take in meeting existing affordable housing goals. The department let lapse a scoring system that gave the mortgage finance companies extra credit for financing low- and moderate-income apartment units.

The companies are required to make 50% of the loans they finance for such dwellings, 31% in underserved rural or urban areas -- which tend to have high concentrations of lower-income minority residents, and 20% for housing designated for residents with incomes below a certain level.

For Fannie Mae and Freddie Mac, devoting more funds to affordable housing is riskier and less profitable than buying middle-class families’ mortgages. They were able to finance loans of up to $322,700 in 2003, which experts estimate was a record year for home sales.

Fannie Mae and Freddie Mac are shareholder-owned companies chartered by Congress to promote U.S. homeownership. The government requires the companies to finance certain levels of affordable housing under regulations that are renewed every few years.

Assistant HUD Secretary John Weicher said in October the government would try to have new affordable-housing goals for the companies in effect at the beginning of 2005.

Regulations containing the last set of goals expired last month.

Administration officials said the broad goals would stay in place, but the extra-credit scoring system -- which gave the companies extra points for buying apartment buildings -- would not be renewed for 2004.