Fannie Mae sets $1 trillion for low-income loans

March 16, 1994|By Victoria White | Victoria White,Contributing Writer

WASHINGTON -- The Federal National Mortgage Association announced a plan yesterday to invest $1 trillion in housing for low- and moderate-income people and for minorities. The figure reflects an increase of $150 billion over its previous commitment through 2000.

The money will be used to finance about 10 million homes for people whose incomes fall below the median for their area and for others who have had trouble getting loans: minorities, immigrants, the disabled and families in central cities and distressed communities.

Fannie Mae, as the government-sponsored entity is known, also said it would work to ensure that minorities and immigrants are aware of their eligibility for mortgages and that they are not the objects of lenders' discrimination.

In outlining its commitment, Fannie Mae said that white mortgage applicants are permitted to take advantage of flexibility in Fannie Mae's underwriting guidelines more often than minority applicants. Those guidelines are used by banks and thrifts to approve mortgages that they intend to sell to Fannie Mae.

To ensure that flexible provisions are applied equally, Fannie Mae plans to develop a training program for underwriters and to establish "flexibility hot lines" to answer questions. Fannie Mae will also spend $5 billion to test new ways to determine whether an applicant can afford a mortgage.

Fannie Mae also announced that it will go national with a pilot outreach program to potential homebuyers that it started in Baltimore and several other cities last year. Under the "Opening Doors" program, the company plans to print brochures in different languages.

At a news conference yesterday, Fannie Mae's chairman and chief executive, James A. Johnson, said the company hopes to receive 5 million responses through the campaign. "We are convinced the information barrier is a very substantial barrier" to homeownership, he said.

Mr. Johnson said it makes good business sense to focus on the needs of racial minorities and immigrants. By the end of the decade, he said, 30 percent of U.S. households will be minority families.

Mr. Johnson noted that the homeownership rate among minority groups is about 40 percent, compared with about 70 percent for whites. Those figures, he said, show that the market for first-time homebuyers will be disproportionately minority.

Other initiatives announced by Fannie Mae yesterday include financing $50 billion worth of multifamily rental housing over the rest of the decade -- doubling its recent spending pace -- and donating $30 million over the next three years to nonprofit housing groups.

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