Fannie Mae has loosened its mortgage approval standards for lower-income borrowers as it strives to meet its government-mandated affordable housing goals.Starting April 23, Fannie's automated underwriting system will approve more home purchase loans for borrowers with incomes of 100% (or less) of the area median income. This enhancement to Desktop Underwriter applies to most single-family loans, including Fannie's expanded approval loans. "It is important to note that DU will apply the same risk assessment as it does today (we are not changing the way DU analyzes risk for these loans); instead, we are changing (improving) the underwriting recommendation when the loan is identified by DU as meeting criteria for our regulatory housing goals to serve low- and moderate-income borrowers," Fannie says in a note to lenders. Fannie and Freddie Mac face incrementally higher affordable housing goals through 2008, and the Department Housing and Urban Development has made the goals more challenging by creating home purchase subgoals. Fannie has disclosed that it fell short in meeting two of the three subgoals in 2005.

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