HUD extended Fannie Mae's and Freddie Mac's 1994 performance goals into 1995, a move that will make the two government-sponsored enterprises wait to find out what HUD expects from their 1995 low- and moderate-income lending efforts.
HUD is ironing out the final details in its soon-to-be- released 1995 performance goals, which are scheduled to be released for comment early in 1995. The department said it expected the rule to be finalized by summer. Because the new goals wont be approved until midway through 1995, HUD also said the GSE goals for 1995 would be prorated based on the amount of time they are in place before the final rule becomes effective.
The 1994 goals required both GSEs to ensure that 30% of their purchases consisted of loans to low- and moderate-income borrowers and residents of central cities. The GSE standards, mandated by Congress in the Government-Sponsored Enterprises Act of 1992, also set a special two- year affordable housing goal targeting purchases of loans in very-low income areas and for very low-income families.
That two-year goal is the only target the GSEs know going into 1995. In setting that goal, Congress mandated that Fannie purchase $2 billion more than it had in 1992, while Freddie was required to purchase $1.5 billion more. Fannies 1995 goal is $4.6 billion (the revised baseline plus $1 billion), and Freddie's goal is $3.4 billion (the revised baseline plus $750 million, half the two-year goal).
Draft regulations leaked to the industry indicated that HUD had planned to increase the GSEs low- and moderate-income lending goals to 44% by 1998, up from the 1994 30% requirement (see Nov. 7 Mortgage Marketplace). Some mortgage industry sources said those percentages originally drafted in August may have undergone minor changes, although how much is uncertain. The draft regulations also showed the department is considering narrowing the definition of central city lending that will be recognized as undeserved areas to incorporate only specified census tracts within designated central city areas.
That poorly kept secret drew a terse response from some congressmen, including Reps. Barney Frank, D-Mass., and Doug Bereuter, R- Neb., who in a letter to HUD Secretary Henry Cisneros argued that altering the definition would disrupt many states reurbanization efforts.