Fannie Mae's trillion dollar giveaway; the government agency pledges money to low- and moderate-income home buyers.

When it comes to having a piece of the American pie, the material evidence of home ownership has always ranked high on the lists of most people.

Unfortunately, that dream has often been deferred for African-Americans. Studies by academicians and community activist groups detailing the high incidence of redlining and mortgage loan discrimination have led to sound bite exposure in the media, and a cynical approach to mortgage loan applications by blacks.

In an effort to reinvigorate African-American homeowners' hopes, the Federal National Mortgage Association (Fannie Mae) announced that it is providing $1 trillion in financing to assist approximately 10 million low- to moderate-income families purchasing homes by the year 2000.

Recent U.S. statistics from Fannie Mae show that 40% of minority families own their own homes, compared with about 70% of whites.

Fannie Mae is a federally chartered, private corporation that buys and sells performing mortgage loans to and from originating lenders. It repackages and resells them in the open market as mortgage-backed securities.

A 1992 study by the Federal Reserve Bank of Boston concluded that Fannie Mae's underwriting guidelines, which defines credit qualification on the basis of income and debt, was skewed to benefit whites over blacks.

"Those guidelines must have been written sometime in the 1800s," says Beverly Hightower, chief lending officer and senior vice president at Family Savings Bank in Los Angeles. "In essence, the guidelines say that if a loan applicant's income-to-housing debt ratio exceeds 28%, they could be perceived as a credit risk." Hightower says the new program will allow a "qualifying flexibility" that will address the fact that black families traditionally spend a higher percentage of their incomes on living expenses (see "Money Stats," this issue).

Last year, pressure from President Clinton's administration caused Fannie Mae to initiate mortgage loans to two previously neglected groups: inner-city residents and low- to moderate-income home buyers.

The Fannie Mae effort is referred to by industry insiders as the Twin 30 Goals, since both Fannie Mae and the Federal Home Loan Mortgage Corp. (Freddie Mac) are expected to make 30% of their annual lending to residents of the inner city and 30% to low- to moderate-income recipients.

The new program will also provide black banking institutions with much sought-after access to cash.

When Fannie Mae purchases performing loans from financial institutions owned by African-Americans, like Family Savings, the selling bank generates more cash. With more cash, the bank is able to make more loans. With more loans, more African-Americans are able to purchase their own homes. Fannie Mae Chairman and CEO James A. Johnson says one priority is to make more information about the process available to African-American communities.

Last year, Fannie Mae ended a similar program funded with $10 billion. The government agency boasts that it exceeded its goal for low- to moderate-income home buyers by 3%, but missed its target for those in the inner city by somewhere between 2% and 4%.

According to Johnson, Fannie Mae has specifically addressed this problem by making the following allowance. Under Fannie Mae's new policy, low-income home buyers, in some cases, will be expected to pay only 3% down as part of a joint program Fannie Mae has with GE Capital Mortgage Corp.

To obtain more information on this program, call 1-800-7FANNIE. Fannie Mae will send you a 124-page booklet titled Opening the Door to a Home of Your Own. This booklet answers questions and provides tips on such topics as mortgage qualifications, credit problems, lender's criteria for determining eligibility and what to do if your mortgage application has been turned down.