Mortgage giant Fannie Mae is well on its way to financing $1 trillion in housing for low income, minority, and other underserved borrowers by the end of the decade, despite anemic loan volumes in the first half of 1995, chairman James A. Johnson said.
"We are on course," Mr. Johnson said at a news conference Friday, "and our efforts already have fundamentally transformed how millions of American families now gain access to the mortgage credit system."
The government-sponsored agency, formally the Federal National Mortgage Association, financed $84 billion in home loans to targeted borrowers in 1995. Fannie Mae's total since the initiative began two years ago is $186 billion.
To reach its trillion-dollar goal, Fannie will need to pick up speed. Mr. Johnson said Fannie plans to do just that in the last three years of the financing plan, as many of its experimental products and outreach strategies bear fruit. The continued growth of the secondary market will also aid in reaching the goal, Mr. Johnson said.
Two years ago, in a public relations blitz, Mr. Johnson announced the eye-popping trillion-dollar goal. Financial institutions were under pressure to expand their lending to underserved borrowers by an activist administration and a Democratic-controlled Congress. Now the political heat on these issues has cooled, but Fannie Mae says it remains committed.
In the past two years, Fannie has unveiled a tailored approach to expanding its market. It has opened new offices in 20 cities, including New York, St. Louis, Houston, Cleveland, and Miami. Barry Zigas, executive director of Fannie Mae's National Housing Impact Division, said being on the ground in these cities has helped Fannie Mae in designing new loan products that suit the needs of each city.
Fannie has also spent $3.4 billion in testing new underwriting approaches to finance home loans for targeted groups.
Housing activists, such as Barbara Burnham, executive director of Fenway Community Development Corp., say it is too early to tell if the new programs will add up to real change.
"It's very clear to me that what Fannie Mae is trying to do is support their seller servicers in increasing originations in populations that they haven't heretofore been particularly aggressive in," said Ms. Burnham, a recent appointee to Fannie Mae's National Advisory Council.
"Whether or not ultimately Fannie Mae will end up buying loans that will reflect real change in the neighborhoods is to my mind the test of whether the change is real," she said.
Reaching out to new markets involves new risks, and these have become more evident as industry executives, such as Freddie Mac chairman Leland Brendsel, have spoken publicly about high delinquencies on the new, flexibly underwritten loans.
Asked about the added risk, Mr. Johnson said, "It's no surprise to us at Fannie Mae that harder-to-do lending is harder to do. We knew that when we started down this path." He said Fannie is satisfied with the performance of its affordable-housing loans.