Mortgage lending to low-income families could increase slightly under a plan by Federal Housing Finance Agency Director Mel Watt.
Purchases by mortgage giants Fannie Mae and Freddie Mac for low-income, single-family homes will be targeted at 24% of the companies' business through 2017, the FHFA said Wednesday. That's one percentage point higher than last year's level. Another goal, for the poorest families, was reduced to 6%, from 7% in 2014.
As the government overseer of Fannie and Freddie, the FHFA sets benchmarks that lay out the government’s vision for affordable housing. The single-family goals released Wednesday advance the companies' objective to provide borrowers with access to credit and the U.S. housing market with liquidity, "while operating in a safe and sound manner," Watt said in a statement.
The affordable housing goals are aimed at spurring mortgage lending in economically disadvantaged neighborhoods. The practice of requiring Fannie Mae and Freddie Mac to purchase an increasing percentage of loans in poor communities became a political flash point after the housing bubble burst. By 2007, loans to low- and moderate-income borrowers were 55% of the companies' books.
The biggest change in the final rule released Wednesday was to increase lending in low-income areas to 14% of Fannie Mae and Freddie Mac's book of business for 2015 through 2017 from 11% last year. That goal applies to mortgages made in areas where incomes are low as defined by the U.S. Census Bureau.
A preliminary rule released a year ago proposed a 23% target from 2015 to 2017 for low-income, single-family homes and 7% for the very poor, unchanged from 2014. Today's revisions were made after the FHFA reviewed more than 140 comments submitted by the public.
Fannie Mae and Freddie Mac, which have operated under U.S. conservatorship since 2008, provide liquidity to the housing market by buying loans and packaging them into bonds on which payments of principal and interest have implied guarantees.
