Fannie Mae and Freddie Mac came under fire from an influential member of the House Banking Committee Wednesday as a subcommittee opened hearings on their performance.

Rep. Richard H. Baker, the Louisiana Republican who heads the panel that oversees the government-sponsored enterprises, said Fannie and Freddie were not doing enough to justify the financial benefits they enjoy through their congressional charters.

His criticism came in the course of questioning the chairmen of the Federal National Mortgage Association, or Fannie Mae, and Federal Home Loan Mortgage Corp., or Freddie Mac, along with their regulators.

Citing a study by the Department of Housing and Urban Development, Rep. Baker said Fannie Mae and Freddie Mac lagged behind private lenders in financing loans to low-income borrowers.

In 1993, other lenders made 7.9% of their loans to very-low-income borrowers, while Fannie Mae and Freddie Mac's ratio was 5.3%. In 1994, those ratios were 11.6% and 8.4%, respectively, Rep. Baker said.

He asked Nicolas Retsinas, assistant secretary at HUD, who oversees the agencies' compliance with federal housing goals, to explain that discrepancy.

Mr. Retsinas said other lenders may have bolstered their low-income financing by using government insurance plans such as those offered by his department's FHA program.

Rep. Bruce F. Vento, D-Minn., also defended the agencies' record. He argued that Fannie Mae's and Freddie Mac's financings depended on whether lenders made such loans in the first place. As secondary-market agencies, Fannie and Freddie buy home loans originated by others.

But Rep. Baker was not satisfied. He pressed the point later, saying that 1995 statistics showed Freddie Mac making 68% of its loans to borrowers at or above median income and 6.8% to very-low-income borrowers.

"I understand the necessity of having higher-income mortgages to subsidize those on the lower end," Rep. Baker said. "But those contrasts seem to be excessive."

Citing increased risks as the agencies try to drum up business in a shrinking market, Rep. Baker also raised the issue of cutting their ties to the federal government.

He asked the chairmen of each agency which of two options they would choose: privatization or higher capital standards that would better protect taxpayers from rising risk.

The answer from both executives was a most emphatic "neither."

James A. Johnson, Fannie Mae's chairman, and Leland C. Brendsel, Freddie Mac's chairman, said homebuyers would face higher mortgage rates in both cases. Taxpayers are adequately protected by existing capital standards, Mr. Johnson said, adding that these are tougher than those applied to banks.

"What would be the point of layering on additional costs on Fannie Mae and Freddie Mac?" Mr. Johnson asked.

In his testimony, Mr. Johnson said Fannie Mae had financed a million residents of central cities and 500,000 first-time homebuyers in the last two years.

Rep. Baker is to hold hearings again June 12 and 13 to consider four long-overdue government reports on whether Fannie Mae and Freddie Mac should be privatized. The Department of Treasury, HUD, General Accounting Office, and Congressional Budget Office are each expected to release studies on the subject next month.

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