HUD to share risk with agencies on apartment houses.

WASHINGTON -- In what could serve as a blueprint for many low-income leanding efforts, the Department of Housing and Urban Development has teamed up with Fannie Mae and Freddie Mac to share the risk on some apartment-building mortgages.

Under the deal, the secondary-market agencies will purchase the loans and handle administrative chores, as they ordinarily do. But, if the loans default, HUD will step in and share the losses.

The deal, announced earlier this week, covers loans on buildings with a total of 12,500 units.

HUD Secretary Henry Cisneros said he expects future deals to "dwarf" this one. And the department has already asked Congress for authority to enter similar agreements for single-family lending.

For Fannie Mae and Freddie Mac -- formally the Federal National Mortgage Association and the Federal Home Loan Mortgage Corp. -- the approach presents clear benefits.

If the sharing practice becomes widespread, it would help them manage the risk of leanding to low-income borrowers, a risk agency executives and shareholders have been reluctant to assume beyond a point.

Asked if Fannie Mae expects to do most of its future lower-income lending through such arrangements, chairman James A. Johnson said that although there was much the agency could do on its own, "you do get to a point ... where it just doesn't work anymore from the economic point of view, where you need something added to the system in order to make it go."

He added, "At that point it seems to me we have a very, very well-developed delivery system, property management system, outreach system that HUD has the potential to take advantage of."

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