WASHINGTON - Two agencies have oversight authority for Fannie Mae and Freddie Mac - to regulate different functions. But last week's report by the Office of Federal Housing Enterprise Oversight suggested that the regulators will sometimes cross paths.
In its annual report to Congress, the oversight office, which is charged with monitoring Fannie and Freddie's fiscal soundness, weighed in on the affordable housing goals proposed by the Department of Housing and Urban Development, their other regulator.
The oversight office said that Fannie Mae and Freddie Mac could meet most of the goals proposed for 1996, which are set at higher levels than the 1993 and 1994 goals.
That comment will likely strengthen HUD's hand as it reviews the objections of Fannie Mae and Freddie Mac to the higher goals.
The secondary market agencies have criticized the new goals on the ground that they overstate the size of the low-income market and do not adequately account for the mortgage business' cyclical nature.
In its report the regulator said that in 1994, Fannie Mae, formally the Federal National Mortgage Association, had already exceeded the proposed 1996 target of 40% for low-income and moderate-income loans. And Freddie Mac, formally the Federal Home Loan Mortgage Corp., was close, the report said.
In addition, Fannie's 1994 purchases also satisfied the newly defined goals to finance loans to very-low-income and central-city borrowers.
Freddie Mac would require further targeted purchases, the report said.
If the affordable housing programs increase risk at the agencies, the oversight office would require Fannie and Freddie to hold more capital, the report said.
Both agencies have commended their regulator for the report but declined to comment on its specific findings.
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The oversight office also reported on its examinations of corporate governance at Fannie Mae and Freddie Mac.
At both agencies, the regulator said, it found no safety-and-soundness concern.
The report described Fannie Mae as a "highly organized and performance- driven institution, with emphasis on risk control, communication, and accountability."
Freddie Mac's corporate culture was described as "predominantly concerned with minimizing risk."
At Freddie, the office recommended that the board of directors and management complete a management succession plan.
"To assure continuity of operations, it is important that Freddie Mac identify and train a core group of individuals to succeed to senior levels of management should vacancies arise," the report said.
