WASHINGTON - The debate over low-income lending is heating up. A prominent advocacy group has challenged Freddie Mac's assertions about the poor performance of some of its low-income loans.

At a recent industry conference, Freddie Mac's chairman, Leland Brendsel, said that his agency's low-down-payment loans to low-income people are going delinquent at up to double the rate of traditional mortgages.

In a letter to Mr. Brendsel, the Greenlining Institute suggested his remarks could cause an "unnecessary panic" about the risks of lending to low-income borrowers.

The Greenlining Institute has asked Freddie Mac to submit to an independent analysis of its California loans.

The aim is to see how Freddie Mac's loans compare with those in the portfolios of the four largest inner-city home lenders in California: the Bank of America, Great Western Bank, American Savings Bank, and Home Savings Bank.

Freddie Mac has not responded officially to the letter. But in an interview with American Banker, Steve Hopkins, senior vice president and national sales director, defended Mr. Brendsel's remarks. He said they were not intended to caution lenders about all low-income lending, but only about some of the experimental low-down-payment loan programs extended to this group.

"I think our lenders expect to hear from us as we learn new information about credit," Mr. Hopkins said.

Mr. Hopkins added that the majority of low-income loans financed by Freddie Mac are not made with small down payments.

In its letter, the Greenlining Institute also raised the issue of Freddie Mac's recent recommendation to lenders that they use credit scores to underwrite loans sold to Freddie Mac.

"Your speech that, in effect, criticizes inner-city loans is particularly alarming in the context of Freddie Mac's decision to use a potentially biased SAT-like credit score to discourage inner-city homeownership," the letter said.

Robert Gnaizda, general counsel of the Greenlining Institute, told American Banker that his group believes credit scores are useful to predict the performance of loans to white, suburban borrowers, who have had extensive experience with credit. But with low-income borrowers, the scoring just doesn't work, Mr. Gnaizda said.

"If you're delinquent on your vacuum cleaner and the jewelry you bought at three times its market value and at 35% interest, then that hurts your credit rating when it has nothing to do with whether you'll pay off your home," he said.

Mr. Hopkins said that Freddie Mac disagrees, and believes that credit scores do predict loan performance for borrowers at all income levels.

A July 11 letter to lenders from Freddie Mac executive vice president Michael K. Stamper urges them to "perform a particularly detailed review" of the credit history of borrowers whose credit scores indicate a high probability of default, according to Freddie Mac's data.

Separately, Freddie Mac said that it had not discontinued the purchase of so-called 3/2 loans, as reported in the American Banker on July 21. Speaking to reporters on July 19 at a conference sponsored by the Western League of Savings Institutions, Mr. Brendsel said Freddie Mac planned to "stop some of the experimentation."

Last week, Mr. Hopkins clarified that the agency had not discontinued the 3/2 program but was now scrutinizing these loans with greater care because of high delinquencies.

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