To the Editor:
A strong voice has joined the chorus singing "Fannie Mae and Freddie Mac are looking for loans in all the wrong places."
Federal Home Loan Bank of New York President Alfred DelliBovi understands that there will continue to be a missing link in our nation's housing finance system until Fannie Mae and Freddie Mac finally bring the benefits of the government-sponsored secondary market to consumer-friendly mortgages for low- and moderate-income borrowers. ["
Insured depository institutions have long been helping to meet the credit needs of their communities by making responsible, affordable home loans to qualifying families with little cash to bring to the closing table.
Yet Mr. DelliBovi, a former deputy secretary of the U.S. Department of Housing and Urban Development, notes that "the poorly capitalized, often unlicensed broker distribution network effectively created by Fannie and Freddie may have actually caused the current problems in the subprime market."
The Los Angeles Times reported earlier this year that Fannie Mae and Freddie Mac have been "key enablers of subprime excess" by issuing government-sponsored entity debt to purchase triple-A-rated pieces of securities backed by subprime loans.
Press reports indicate that in 2004 the two companies purchased 44% of the $401 billion of private-label securities backed by subprime mortgages, for approximately $176 billion; in 2005 they purchased 35% of the $507 billion issued for approximately $178 billion; and in the first half of 2006 they purchased about 25% for approximately $78 billion.
Sadder still, HUD permitted the two GSEs to count these "least risky" pieces of securities backed by higher-cost loans toward their "affordable housing" goals. HUD's report on 2005 goals also documents that only about 6% of Fannie Mae's mortgages and 5% of Freddie Mac's were loans to African Americans.
How long can this keep going on? Mortgage reform legislation must be accompanied by GSE charter reform.
Judy Kennedy
President and CEO
National Association of Affordable Housing Lenders
Washington
Editor's Note: The NAAHA is a nonprofit representing private-sector lenders and investors in affordable housing and community economic development.
