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 Identifying text that has been changed in a word processing document by displaying it in a special color, for example. It allows the original author of the text or other users to see ongoing revisions. The term comes from manual editing where a red pen is used to mark up the pages. and mortgage loan discrimination have led to sound bite sound bite
A brief statement, as by a politician, taken from an audiotape or videotape and broadcast especially during a news report: "The box has been spitting forth maddening nine-second sound bites" 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 Fannie Mae: see Federal National Mortgage Association. ) 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 Mortgage-backed securities (MSBs)
Securities backed by a pool of mortgage loans. .
A 1992 study by the Federal Reserve Bank of Boston The Federal Reserve Bank of Boston is responsible for the First District of the Federal Reserve, which covers Connecticut (excluding Fairfield County), Massachusetts, Maine, New Hampshire, Rhode Island and Vermont. It is headquartered in Boston, Massachusetts. concluded that Fannie Mae's underwriting guidelines, which defines credit qualification on the basis of income and debt, was skewed skewed
curve of a usually unimodal distribution with one tail drawn out more than the other and the median will lie above or below the mean.
skewed Epidemiology adjective Referring to an asymmetrical distribution of a population or of data 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 savings bank, financial institution that, until recently, performed only the following functions: receiving savings deposits of individuals, investing them, and providing a modest return to its depositors in the form of interest. in Los Angeles Los Angeles (lôs ăn`jələs, lŏs, ăn`jəlēz'), city (1990 pop. 3,485,398), seat of Los Angeles co., S Calif.; inc. 1850. . "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 Freddie Mac: see Federal Home Loan Mortgage Corporation. ) 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 (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. James A. Johnson James A. Johnson could refer to:
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.