FANNIE MAE CHAIRMAN COMMITS COMPANY TO 'TRANSFORMING THE HOUSING FINANCE SYSTEM'; VOWS COMPANY WILL PROVIDE $1 TRILLION IN TARGETED LENDING

    WASHINGTON, March 15 /PRNewswire/ -- The Federal National Mortgage Association (Fannie Mae) (NYSE: FNM) today said that between now and the end of the decade, it will commit $1 trillion to help finance over 10 million homes for families and communities most in need.  The company's chairman and chief executive officer, James A. Johnson, also committed Fannie Mae to "transforming the nation's housing finance system to make it accessible to everyone, free of arbitrary barriers, and dedicated to the elimination of lending discrimination."
    The $1 trillion is the largest commitment ever made by any entity, public or private, to provide housing finance to those who need it most, Johnson said.  It will serve families with incomes at or below the median for their communities, minorities, new immigrants, residents of central cities and other underserved areas, and people who have special housing needs.
    Johnson said that while the American dream of owning a home is more powerful today than ever before, millions of Americans are denied the opportunity for homeownership because of racial discrimination; a lack of information and home buyer counseling; and arbitrary barriers in the housing finance system.
    Through Fannie Mae's commitment to transforming the nation's housing finance system, the company will:  reach out to every renter in America to provide the information they need to buy a home; break down arbitrary barriers to getting a mortgage; and do everything in its power to make the elimination of lending discrimination the number one priority of the housing finance system.
    Fannie Mae's commitment, called "Showing America A New Way Home," consists of 11 initiatives.  They are:
    -- "Opening Doors for Every American,"  a national consumer outreach campaign that will use multilingual television, radio, and print advertising; direct mail; and other techniques to reach out to every renter in America to provide the information they need to buy a home. "We believe that through this effort, more than 5 million families will respond to Fannie Mae's outreach as their first step to owning a home," Johnson said.
    -- A commitment that Fannie Mae will seek to make the elimination of discrimination the number one priority of every participant in the mortgage finance system. "Fannie Mae has a moral obligation to help lead this fight, and we support the renewed vigor with which the federal government is clarifying and enforcing fair housing laws," Johnson said. He noted that the company is working with the U.S. Department of Housing and Urban Development to determine how Fannie Mae can aid the vernment's efforts.
    Johnson said that Fannie Mae will provide its lenders with the products and services they need to reach underserved families and communities and will take specific steps to increase the diversity of the mortgage industry and the participation of minority- and women-owned lenders in the housing finance system.
    -- A "New Americans" campaign targeted to the fastest growing segment of the population -- the eight million immigrants who will come to the U.S. during the 1990s. Fannie Mae will provide these new Americans with home-buying information, often in their native language, and will utilize multilingual media to reach them.
    -- A "HomePath Initiative," which has as its goal the elimination of any final "no" in the mortgage application process.  Through a series of second and third reviews of rejected mortgage applications, coupled with high quality home buyer counseling offered by local counseling agencies and Fannie Mae, every American who wants to get a mortgage will have their loan approved, or be put on a path that can lead to approval.
    -- A commitment to ensure that Fannie Mae's underwriting guidelines for lenders are clear, flexible, and applied equally to all loan applicants.  Among the steps Fannie Mae will take to fulfill this commitment are the development of the most comprehensive training program for mortgage underwriters in the country, and the establishment of hotlines that lenders can call for instant guidance on underwriting policies.
    -- The opening of 25 "Fannie Mae Partnership Offices" throughout the country that will form long-term partnerships with cities, rural areas, and other underserved communities.
    -- $5 billion in new underwriting experiments to probe and test new approaches aimed at making the mortgage finance system more accessible to minorities, low- and moderate- income families, central city and rural residents, and people with special housing needs.
    -- An "Innovations for Change" initiative, which represents the most significant product development effort ever undertaken in the history of housing finance.  This initiative will develop at least ten new financing tools to serve the full range of housing needs.  The initial focus will be on programs for the elderly, housing renovation, rural housing, housing for Native Americans, and housing to meet the special needs of persons with developmental disabilities or AIDS.
    -- A $50 billion commitment to multifamily housing finance, to create more affordable rental housing opportunities.  This commitment is double the amount of multifamily finance Fannie Mae has provided over the past seven years.
    -- An initiative to develop and make available new technologies that will reduce the major barriers to homeownership faced by many families as a result of the cost, complexity, paperwork, and time involved in obtaining mortgage credit. Fannie Mae's goals include the use of technology to simplify the mortgage application process and reduce the fees charged to borrowers by $1,000, Johnson said.
    -- A major increase in the size of the Fannie Mae Foundation. According to Johnson, the Fannie Mae Foundation will spend more than $30 million over the next three years to support housing and community development, making it the most significant source of corporate philanthropic funds for nonprofit housing activities in the country.
    Johnson said the $1 trillion in targeted housing finance will result in homes for approximately 10 million families.  It will represent well over half of the business Fannie Mae will do over the remainder of this decade.
    Fannie Mae is a congressionally chartered, shareholder owned company, and is the nation's largest source of home mortgage funds.
                    SHOWING AMERICA A NEW WAY HOME
                       A $1 Trillion Commitment
                                to
               Transform the U.S. Housing Finance System
    "Showing America a New Way Home" is Fannie Mae's commitment to provide $1 trillion to finance over ten million homes for families and communities most in need between now and the end of the decade. This targeted housing finance will serve families with incomes below the median for their area; minorities and new immigrants; families who live in central cities and distressed communities; and people with special housing needs.
    "Showing America a New Way Home" is also Fannie Mae's commitment to transforming the nation's housing finance system.  Through it, Fannie Mae will: reach out to every renter in America to provide the information they need to buy a home;  break down arbitrary barriers to getting a home mortgage; and do everything in the corporation's power to make the elimination of lending discrimination the number one priority of the housing finance industry.
    "Opening Doors for Every American" Outreach Campaign
    Fannie Mae will launch an unprecedented national outreach effort that will provide every American who wishes to buy a home with the information they need to do so. The corporation will utilize multilingual television, radio, and print advertising, direct mail, and non-traditional communications techniques to conduct an ongoing dialogue with every aspiring home buyer in the country, particularly minorities. We believe that through this effort, more than five million renter families will respond to Fannie Mae's outreach as their first step to owning a home.
    Fannie Mae's Commitment to Fight Discrimination
    Fannie Mae will seek to make the elimination of discrimination the number one priority of every participant in the mortgage finance system. It is Fannie Mae's moral obligation, and a core value of the company, to help lead this fight.
    Fannie Mae supports the renewed vigor with which the federal government is clarifying and enforcing fair lending laws. Fannie Mae is working with the U.S. Department of Housing and Urban Development to identify steps the corporation can take to aid the government's efforts.
    Fannie Mae's principal role in promoting fair lending is to provide our lenders with the products and services they need to reach underserved families and communities.  Building on its ability to collect and analyze loan-level data, Fannie Mae will provide lenders with data on how well they are serving minority families and communities.  As described in more detail below, Fannie Mae will continue to clarify its underwriting guidelines for lenders, conduct underwriting experiments to assess ways to further extend the reach of its lending products, and support the expansion of pre-purchase counseling to help increase the number of families who will be able to qualify for a mortgage.
    Fannie Mae will:
    -- increase participation in the mortgage finance system by minorities and women through providing additional training to currently approved Fannie Mae lenders, reaching out to minority- and women-owned lenders to help them become Fannie Mae seller-servicers, and assisting those lenders who are not able to achieve full seller-servicer status in finding or establishing industry relationships or financial conduits which enable them to deliver their loans to Fannie Mae.
    -- pursue business relationships with every community development financial institution that provides residential housing finance in minority and distressed communities; and
    -- invest at least $25 million in seed capital in new and existing community development financial institutions.
    To promote diversity and make the mortgage industry more responsive to minority borrowers, Fannie Mae will form partnerships with colleges and universities to help train minorities for technical and professional positions in the industry.
    The "New Americans" Campaign
    In addition to the millions of American-born renters who will be the focus of our "Opening Doors for Every American" campaign, Fannie Mae will target the fastest growing segment of the population -- new immigrants.  Over eight million immigrants will arrive in America during the 1990s -- as many as came during the peak immigration years at the turn of the 20th Century.  Fannie Mae will provide millions of these new Americans with home buying information in their native language (when possible), as well as in English.
    Fannie Mae will utilize multilingual media to reach them, and work with community organizations to ensure that as many new immigrants as possible who are on the path to citizenship are also on the path to homeownership.
    The "HomePath" Initiative
    This initiative encompasses one of the most far-reaching commitments ever made by the company:  to eliminate any final "no" in the mortgage application process.  It is Fannie Mae's goal that every person in America who seeks a home mortgage will have their loan approved -- or be placed on a path of review and home buyer counseling that potentially leads to loan approval, if they have the financial capacity to sustain homeownership. If an applicant's request for a mortgage is denied, he or she will get the information needed to understand what caused the rejection and what steps must be taken to move toward homeownership.
    Every Fannie Mae lender will be encouraged to conduct second reviews for all minority and low-income applicants.  Fannie Mae will help create models for third-party review boards that permit potential borrowers, whose applications were not accepted after a second look review, to have the application considered by a group of community representatives and lenders.
    Every potential home buyer who needs more time and assistance should have access to high quality home buyer counseling.  The Fannie Mae Foundation will commit $5 million over the next three years to take home buyer counseling to a new level of effectiveness.  Fannie Mae will develop curricula and provide specialized materials and training to local counseling organizations.  The corporation will provide counseling agencies with new computer software called "Desktop Home Counselor" to help them provide better service to clients.
    Within 90 days, Fannie Mae will establish a toll free number that consumers can call for referrals to home buyer counseling agencies in their communities, or to receive home buying counseling directly from counselors on the staff of Fannie Mae's Public Information Office.
    Underwriting Flexibilities
    The corporation is committed to ensuring that its underwriting guidelines are clear and flexible, and are applied equally to everyone. Substantial evidence, including findings in a study conducted by the Federal Reserve Bank of Boston, exists to show that while there is flexibility in Fannie Mae's guidelines, it is applied to white mortgage applicants more often than to minority applicants.  A recent report of the federal Interagency Task Force on Fair Lending, made up of top officials of the ten federal agencies responsible for implementing and enforcing fair lending laws,  urges lenders to be aware of "the provisions of the secondary market guidelines that provide various alternative and flexible means by which applicants may demonstrate their ability and willingness to repay their loans."
    Lenders have advised Fannie Mae that they need guidance on how to fully utilize the flexibilities in Fannie Mae's underwriting guidelines. Fannie Mae will take substantially greater steps to make sure that the flexibilities in its guidelines are appropriately utilized by all the company's lending partners.  In addition, Fannie Mae will continually survey its mortgage lending partners to identify the loan characteristics and underwriting procedures in need of improvement and clarification.
    Fannie Mae will develop the most comprehensive training program for mortgage industry underwriters in the country.  The corporation will develop easy-to-use reference tools -- including on-line access to Fannie Mae underwriting guidelines -- for underwriters to use in their everyday application of Fannie Mae's underwriting.  Within 90 days, the company will establish regional "Flexibility Hotlines" that lenders can call for answers to questions on underwriting.
    Fannie Mae will establish an internal Fannie Mae Loan Review Board to review the loans sold to the company as part of its Housing Impact programs that the company's own underwriters initially believe do not meet Fannie Mae's guidelines.
    Fannie Mae will provide prompt and timely loan performance information to all active lenders participating in Fannie Mae's Housing Impact programs.  Fannie Mae's forthcoming automated underwriting system will help lenders underwrite loans by using an artificial intelligence software system to analyze and render decisions on loan applications. The system will help ensure consistency in underwriting decisions, and will allow underwriters to spend more time on complex and unusual applications.
    Through hiring and training practices, Fannie Mae will assure lenders that its underwriting staff remain innovative, flexible, and responsive -- and consistent among Fannie Mae regional offices.
    New "Fannie Mae Partnership Offices"
    Fannie Mae will open at least 25 new "Partnership Offices" throughout the country.  Through these new offices, the company will form long-term partnerships with cities, rural communities, and other underserved areas that are committed to making affordable housing and homeownership opportunities available to more people.  The new Partnership Offices will work with local lenders, public officials, housing organizations, non-profits, and others to expand the corporation's capacity to serve more people, especially minorities and new immigrants.  Ten Partnership Offices will open in 1994.
    Underwriting Experiments
    Fannie Mae will commit $5 billion to test new underwriting approaches.  The company will probe and test a variety of underwriting criteria that could make the mortgage finance system more accessible to minorities, low- and moderate-income families, central city and rural residents, and people with special housing needs.  The corporation will systematically revalidate the components of its underwriting guidelines.
    "Innovations for Change"
    Fannie Mae will undertake the most significant product development effort in the history of housing finance, to develop new approaches to serving the full span of housing needs.  The company will develop at least ten new financing tools.  Our initial focus will be on: conventional reverse annuity mortgages; housing renovation loans; mortgage products serving rural areas; financing tools to serve Native Americans; mortgages to finance the new construction or substantial rehabilitation of rental housing for low-income families; loans to finance energy efficiency improvements; financing for rental housing with support services for elderly people; housing for people with developmental disabilities or chronic mental illness; housing for persons with AIDS; and others whose housing needs combine supportive services with permanent shelter.
    $50 Billion Commitment to Multifamily Housing
    Fannie Mae will provide $50 billion in new financing of multifamily rental housing between now and the end of the decade.  This is double the amount we provided over the past seven years.  Through this financing, we will help create affordable housing opportunities for people who want to make their homes in rental housing, or who need to live in apartments while they are preparing to buy a home.
    Using Technology to Lower Costs
    Fannie Mae will use technology to reduce the barriers to homeownership created by the cost, paperwork, and time involved in obtaining mortgage credit.  The complexity of the mortgage application process and the cash required at closing are the largest barriers to homeownership for many families.  The costs can be reduced and the process simplified by streamlining the way mortgages are created and serviced.  Fannie Mae will develop and make available technology that will simplify the application process, automate loan underwriting and reduce the cost of loan servicing.  By cutting the costs of lending, we will reduce the fees charged to borrowers by at least $1,000.
    We will also provide technology to make it more profitable for lenders to originate low balance loans, which low- and moderate-income families and those living in distressed communities are more likely to seek.
    Fannie Mae Foundation Giving Grows
    The Fannie Mae Foundation will dedicate more than $30 million in funding during the next three years to nonprofit housing efforts around the country. The Fannie Mae Foundation will be the most significant source of corporate philanthropic funds for these efforts, and one of the largest funders, including both corporate and private foundations.
    -0-            3/15/94
    /CONTACT:  David Jeffers, 202-752-5962, or Charlotte Sterling, 202-752-7928, both of Fannie Mae/
    (FNM)

CO: Federal National Mortgage Association ST: District of Columbia IN: FIN SU:

KW-DC -- DC009 -- 0373 03/15/94 10:06 EST