Before the housing collapse of 2008 we were sounding the alarm about the practices of FannieMae.
We undertook a major research effort to understand the role of FannieMae in the real estate markets of Dallas and Fort Worth. What we found was a runaway subprime lending market that FannieMae was fueling through loan purchases. We documented FannieMae’s abandonment of prime lending to minority homebuyers in these markets and the explosion of subprime lending in its place. We criticized FannieMae for fueling the subprime market through subprime loan purchases rather than leading the market with responsibly underwritten prime loans to creditworthy minority borrowers.
We tried to present the extensive data we developed to FannieMae who met with and then ignored us. We took our findings to HUD who paid no attention. We also contacted elected officials, many of who were the recipients of lavish perks from FannieMae and its officers.
It is popular today among some to blame the Affordable Housing Lending Goals Congress assigned to FannieMae and FreddieMac for the housing collapse. This is absolutely incorrect. Like many things in life the true cause of major public policy problems is not a simple one.
It was not the affordable housing goals that were the problem, it was FannieMae’s decision not to lead the market with responsible prime lending for credit worthy borrowers, especially in minority homebuyer markets. Having stopped offering prime loans to credit worthy borrowers, FannieMae determined to fulfill its affordable housing lending goals through the purchase of poorly underwritten subprime loans whose terms were often onerous to the borrowers.
It was tragic to have watched the collapse of the housing sector, fueled in part by FannieMae’s irresponsible behavior and to have been unable to get anyone to heed the findings of our study. We can only hope as Congress considers the future of the Government Sponsored Enterprises such as FannieMae the real role of FannieMae in the economic collapse is understood.
Closing the Gap or Closing the Door? is our report on the failure of Fannie Mae to make prime mortgage loans to low-income and minority homebuyers in Dallas/Fort Worth and its tragic role in propping up a subprime market that would produce truly disaster results for the homebuyers and our country..