WASHINGTON (Reuters) - The regulator for U.S. housing finance giants Fannie Mae FNMA.OB and Freddie Mac <FMCC.OB) said on Friday it wants the two firms to provide more support to some low-income Americans taking out mortgages and refinancing their home loans.
The Federal Housing Finance Agency released proposed goals for the two state-owned firms for 2015-2017 that would advance agency chief Mel Watt’s aim to widen access to housing credit.
The FHFA said it wants Freddie Mac, which is second only to Fannie Mae in the amount of housing finance it provides, to gradually expand the number of loans it backs for low-income multifamily buildings, such as apartment buildings, to 230,000 in 2017 from its target of 200,000 this year.
Fannie Mae and Freddie Mac have been owned by the U.S. government since taxpayers bailed them out in 2008 during a housing market implosion.
The two firms don’t lend money directly, but rather buy mortgages from lenders and sell them as packaged securities with a government guarantee. They back most new U.S. mortgages, and their purchases are a major driver of credit access.
Under the FHFA proposal, the two firms would continue to make sure low-income families accounted for 23 percent of the firms’ purchases of single-family home mortgages. However, the firms would raise the share of their purchases that back mortgages in low-income areas with large minority populations.
The proposal would also have the firms increase the share of their mortgage refinancing operations that target low-income Americans.
The proposal is part of the shift at the FHFA that began in January when Watt took the helm. Watt, a Democrat who was nominated to head the agency by President Barack Obama, mothballed his predecessor’s plans to scale back limits on the sizes of loans backed by Fannie Mae and Freddie Mac.
Boosting support for low-income borrowers could stir controversy in the U.S. Congress. Many Republican lawmakers think Fannie Mae and Freddie Mac’s policies to support mortgage access for the poor helped inflate the U.S. housing bubble that eventually burst around 2006.
For details on FHFA’s housing finance goals, please see:
Reporting by Jason Lange; Editing by Chizu Nomiyama and Jonathan Oatis