To the Editor:

I was dismayed by FHFA Director James Lockhart's comments ["In Finance Agency's Birth, a Lesson for Obama Plan," July 8] blaming Fannie Mae and Freddie Mac's affordable housing goals for their downfall. Director Lockhart was quoted as saying, "Some of the problems we have today may have been the result of excessive requirements on affordable housing goals."

What the former government-sponsored enterprises — still the largest sources of mortgage finance capital in the United States — shouldn't have done is game the system, getting credit when it wasn't due. As The Washington Post reported, HUD, the companies' goals regulator at the time, allowed Fannie Mae and Freddie Mac to count triple-A-rated securities backed by higher-cost subprime and alternative-A loans as meeting their "affordable housing" goals.

In the early 1990s, Congress refocused Fannie Mae and Freddie Mac's mission on expanding affordable housing. The Federal Housing Enterprises Financial Safety and Soundness Act of 1992 allowed them to "take less than the return earned on other activities" to assist "mortgages on housing for low and moderate income families."

Rather than taking less of a return, Fannie Mae and Freddie Mac decided to take more of a return on "affordable housing" by issuing over $400 billion in GSE debt to make a market in financing higher-cost, higher-yielding subprime mortgages. Unlike Director Lockhart's portrayal, the companies aren't victims of misguided regulation; seeking higher yield, Fannie Mae and Freddie Mac helped finance the rapid growth of an unregulated subprime and then alt-A mortgage market that originated nearly half of higher-priced home loans, inflating the housing bubble. These subprime mortgage lenders put millions of Americans into loans they couldn't afford.

The tragic irony is that if Fannie Mae and Freddie Mac had bought responsible, consumer-friendly, but lower-yielding mortgages originated by banks and nonprofit lenders under the Community Reinvestment Act — home loans that have provided good, affordable housing for low- and moderate-income families nationwide — they could have easily satisfied their affordable housing goals.Judith A. Kennedy
President and CEO
National Association of Affordable Housing Lenders

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