The Federal Home Loan Mortgage Corp. has cloned a low-income lending program that was introduced last year by its chief rival, the Federal National Mortgage Association.

At a mortgage conference last week, Freddie Mac spelled out the criteria for loans it will buy under the program.

The plan allows people whose income is less than 115% of the median income in their area to lay out down payments of just 5% for their homes. Only 3% of that has to come from the borrower's own funds. The remainder, along with closing costs, can be covered by a gift, a grant, or an unsecured loan.

Family Resemblance

Freddie Mac's program dubbed Affordable Gold, is very similar to the popular Community Home Buyer plan introduced last year by Fannie Mae.

Both agencies are under pressure from Congress to step up their support of low- to middle-income housing. They also are being pressed by banks and thrifts who want Fannie and Freddie to adopt more flexible underwriting standards so the institutions can meet Community Reinvestment Act requirements.

Under Freddie's Affordable Gold program, a borrower's housing expenses may equal up to 33% of monthly income, versus 28% normally. Total monthly debt payments can be 38% to 40% of monthly income, compared with 36% normally.

To head off defaults, the agency is requiring borrowers to attend classes on the mortgage process and home ownership. Also, it is demanding detailed property inspections to make sure borrowers won't face unexpected expenses like roof repairs.

Loan Quality Holding Up

Fannie Mae's Community Home Buyer's program, with similar criteria, has met with notable success. Since January 1991, lenders have committed to sell Fannie Mae more than $11.5 billion of loans under the plan. The agency says that loan quality to date has held up well.

Freddie Mac's Affordable Gold is "essentially a competitive product with Community Home Buyer's," says Mark Spates, the agency's manager of single-family affordable programs.

Indeed, Fannie Mae has generally been viewed by mortgage executives as leading its rival in promoting special programs for lower-income borrowers. But Freddie Mac is no stranger to affordable housing.

The agency's defenders say it is often more willing than Fannie Mae to accommodate low-income mortgages in its mainstream purchase operations.

Freddie Mac officials have taken pride in this lower-profile approach.

"We're the quiet company that does extraordinary things," Freddie Mac chairman Leland Brendsel told reporters at a recent press conference.

In rolling out Affordable Gold, Freddie has turned up the volume a bit.

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