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FANNIE MAE OFFERS OPTIONS TO SLASH COSTS OF MORTGAGE INSURANCE
Press of Atlantic City, The (NJ) - January 15, 1999
Author: BYLINE: Associated Press
Seeking to open home ownership to more Americans, mortgage giant Fannie Mae is offering new options that will make mortgage insurance cheaper for home buyers who cannot afford large down payments.
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“We can cut costs to consumers, qualify more home buyers, and give them more home for their mortgage-payment dollar by reducing their mortgage insurance costs,” Raines said in a statement. “Eventually, we hope all low down payment borrowers will benefit from new approaches to mortgage insurance .”
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Fannie Mae said the new insurance options were made possible by the use of its “desktop underwriter” computer software and a new strategy for reducing losses from mortgage defaults.
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HOME OWNERSHIP AMONG MINORITIES SOARS UNDER CLINTON
Commercial Appeal, The (Memphis, TN) - June 3, 1999
Author: Ronald Brownstein Ronald Brownstein a reporter for the Los Angeles Times.
It’s one of the hidden success stories of the Clinton era: In the great housing boom of the 1990s, black and Latino homeownership has surged to the highest level ever recorded.
The number of blacks owning their own home is now increasing nearly three times as fast as the number of whites; the number of Latino homeowners is growing nearly five times as fast as that of whites.
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All of this suggests that Clinton ‘s efforts to increase minority access to loans and capital also have spurred this decade’s gains. Under Clinton , bank regulators have breathed the first real life into enforcement of the Community Reinvestment Act, a 20-year-old statute meant to combat “redlining” by requiring banks to serve their low-income communities.
The administration also has sent a clear message by stiffening enforcement of the fair housing and fair lending laws. The bottom line: Between 1993 and 1997, home loans grew by 72 percent to blacks and by 45 percent to Latinos, far faster than the total growth rate.
Lenders also have opened the door wider to minorities because of new initiatives at Fannie Mae and Freddie Mac- the giant federally chartered corporations that play critical, if obscure, roles in the home finance system.
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But with discrimination in the banking system not yet eradicated, maintaining the momentum of the 1990s will also require a nudge from Washington. One key is to defend the Community Reinvestment Act, which the Senate shortsightedly voted to retrench recently. Clinton has threatened a veto if the House concurs.
The priority may be to ask more of Fannie Mae and Freddie Mac. The two companies are now required to devote 42 percent of their portfolios to loans for low- and moderate-income borrowers; HUD, which has the authority to set the targets, is poised to propose an increase this summer.
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HUD requires more mortgages for families of modest means
The Kansas City Star - July 30, 1999
Author: The Associated Press
The government is requiring the two biggest housing-finance companies, Fannie Mae and Freddie Mac, to finance more mortgages for low- and moderate-income families.
The move, announced Thursday by Housing and Urban Development Secretary Andrew Cuomo, means the companies must buy an additional $488.3 billion in mortgages from banks and other lenders, enough to provide housing loans for about 7 million families of modest means.
The total amount of such mortgages would be boosted to $2.4 trillion over 10 years.
HUD , which regulates Fannie Mae and Freddie Mac, has raised the proportion of mortgage loans they must earmark for low- and moderate-income families from the current 42 percent of their total purchases to 50 percent.
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HUD to Revise Mortgage Scoring
Washington Post - November 12, 1999
Author: Sandra Fleishman, Washington Post Staff Writer
EXCERPT
HUD officials say consumer groups are concerned that a disproportionate number of minorities are kicked out of the approval stream by the scorecards and referred to loan officers for time-consuming manual processing.
HUD officials said their scorecard will be more flexible in evaluating the creditworthiness of people whose records may have some flaws.
The score used as a main building block by most lenders is called FICO, named for Fair, Isaac & Co., the San Rafael, Calif., firm that developed scoring. The score assigns risk rankings to applicants based on complex statistical analyses of their credit histories. People whose credit reports show that they have always paid bills on time and that they use credit cards responsibly get the highest scores. Those who have been late in paying bills get lower scores.
Making the process transparent, said Cuomo, will not only ensure that lending is nondiscriminatory but also that it will attract more applicants to the FHA. And that will put pressure on Freddie Mac, Fannie Mae and other big lenders to follow suit, he said.
September 30, 1999
Fannie Unveils ‘Timely Pay’ Mortgage
Fannie Mae has announced a new product aimed at borrowers with slightly impaired credit who do not qualify for a lower-cost conventional mortgage. Under the Timely Payment Rewards mortgage, borrowers who qualify will be able to obtain a mortgage rate as much as 2% lower than what credit-impaired borrowers typically pay, and will be guaranteed a mortgage rate reduction of 1% after 24 monthly payments without a delinquency. “Through dramatic improvements in our risk-assessment technology, which enables us to more precisely identify a borrower's risk of defaulting on his or her home, we can say ‘yes’ to more borrowers and extend our service to them at lower costs,” Fannie Mae chairman and CEO Franklin D. Raines said at a news conference. (Mr. Raines also announced a new Fannie Mae Foundation educational campaign to inform consumers about the role credit plays in the homebuying process.) Under the new program, a borrower with slightly impaired credit may be eligible for a 30-year, fixed-rate $100,000 mortgage at an initial interest rate of 9.5% and a monthly payment of $841, compared with an average interest rate of 11.5% and a monthly payment of $990 for a loan originated in the subprime market, Fannie Mae said.
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Fannie Mae , Freddie Mac fiscally sound, panel told
The Advocate (Baton Rouge, La.) - May 17, 2000
Author: JOAN McKINNEY
The chief executives who run Fannie Mae and Freddie Mac told Congress Tuesday that they’re meeting their mandate to make home ownership “affordable,” and that their enterprises are financially strong.
They said their operations are virtually collapse-proof and pose no risk to taxpayers.
The testimony came at a hearing of a U.S. House banking subcommittee, chaired by U.S. Rep. Richard Baker , R-Baton Rouge. Baker has proposed a regulatory overhaul of Fannie Mae , Freddie Mac and the Federal Home Loan Bank - also known as GSEs (or government-sponsored enterprises).
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Baker’s allies, mostly Republican subcommittee members, likened the situation to taxpayer exposures during the 1980s collapses of banks and thrifts, when government insurance funds were forced to pay off depositors.
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“There’s no conceivable default” under Fannie Mae’s current capital structure, Raines said. Even if the enterprise faced bankruptcy, its regulators would force a sell-off of assets, which are easily sold because they are, in essence, backed by equity in houses, Raines testified.
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Critics seek to curb power of Fannie Mae , Freddie Mac
Star-Ledger, The (Newark, NJ) - July 9, 2000
Author: Pamela Yip, DALLAS MORNING NEWS
EXCERPT
Too much influence, say critics who are seeking to curb the power of Fannie and Freddie. They say the companies have gotten too big and pose a serious risk if the economy gets into real trouble and the government has to bail them out.
One of the critics , U.S. Rep. Richard Baker (R-La.), is sponsoring legislation that would streamline oversight of Fannie Mae and Freddie Mac and remove what critics call their line of credit with the U.S. Treasury Department.
“I have long been a strong supporter of the mission that Fannie and Freddie were designed to fulfill,” said Baker, chairman of the House Banking Subcommittee on Capital Markets, Securities and Government-Sponsored Enterprises. “Clearly, American home ownership has benefited by the existence of a strong secondary mortgage market, and I would never support legislation that would weaken the secondary market.”
At the same time, he also wants to ensure that “taxpayers are not left to pay off the debt of these enterprises,” Baker said.
Fannie Mae and Freddie Mac issue debt to finance their purchases of mortgages from lenders.
“Keep in mind, any profits they make, they keep,” Baker said. “If there are any losses, taxpayers pay. Not a bad deal, wouldn’t you say?”
Baker’s bill, called the Housing Finance Regulatory Improvement Act, is scheduled for committee hearings. Baker said he doesn’t expect it to pass this year, although that could change if momentum picks up.