U.S. housing regulator seeks support from housing finance giants for low-income Americans
By MoneyTimes
Aug 23, 2015 07:10 AM EDT
Regions
A man collecting cans pauses along Eighth Avenue in Manhattan on May 18, 2015 in New York City. As many parts of once seedy New York City have been transformed into family and shopping friendly environments, 8th Avenue near the Port Authority bus station is one of the last hold-outs to old gritty Manhattan. Last week a man was shot by police after he attacked numerous people with a hammer along a stretch of the street. There is a high police presence along the street and fights and arrests for vagrancy are common. (Photo : MoneyTimes)
The Federal Housing Finance Agency seeks to have housing finance giants Fannie Mae and Freddie Mac to offer more support for American families with low income who are taking out mortgages and are refinancing their home loans.
On Wednesday, the FHFA released its goals for 2015 to 2017 for the two state-owned firms. The agency's targets would advance the goals of its chief Mel Watt to provide wider and easier housing credit.
In FHFA's goals, Freddie Mac is required to expand its number of loans for low-income multifamily buildings. FHFA wants the firms to have 230,000 loans for multi-family building by 2017, an increase to its 200,000 target in 2015. Freddie Mac comes second to Fannie Mae when it comes to the amount of housing finance provided.
The US government owns Fannie Mae and Freddie Mac since 2008 when taxpayers bailed the firms out during the housing market implosion. These firms don't lend money directly. They buy mortgages from other lenders and turn them into packages with government guarantee before selling them. They usually back new US mortgages. Their purchases serve as the main driver of credit access.
FHFA's proposals require the two giant firms to continue making sure low-income families are accounted for 23 percent of Fannie Mae and Freddie Mac's purchases of single-family home mortgages.
But the firms must increase the share of their purchases that supports mortgages in low-income areas with high density of minorities. The firms are also asked to increase the share of their mortgages that refinances operations for low-income Americans.
The proposal is geared to the FHFA's transitions ever since Watt went on board in January. Watt is a Democrat nominated by President Barack Obama to head FHFA. He put on hold the plans of his predecessors to scale back the limits on the amounts of loans backed by Fannie Mae and Freddie Mac.
There are fears coming from Republicans that these new proposals might lead to another housing bubble, like what happened in 2006.