HUD About To Get Tough With Fannie Mae?
January 4, 2000
In a nation which values recognizable lines between the public and private sectors, the mortgage brokers Fannie Mae and Freddie Mac are an odd and, some say, dangerous mixture of the two. They are subsidized and protected from competition by the federal government, yet they are private firms whose stocks are traded publicly.
Critics would like to see their subsidized and protected status -- which has allowed them to control nearly 90 percent of the secondary-mortgage market -- abolished. Now, a modicum of help may be coming from an unexpected quarter.
The Department of Housing and Urban Development is considering taking action against Fannie Mae for failing to comply with government requests for information about its proprietary mortgage-approval system.
- HUD officials charge that Fannie Mae supplied it information that was "grossly incomplete" and that included documents falsely labeled as confidential and proprietary.
- At issue is whether the two firms' automated mortgage underwriting systems comply with fair-lending standards -- or whether they employ criteria involving low-income and poor credit histories that might disproportionately affect minorities.
- In a speech in November, HUD Secretary Andrew Cuomo questioned the near-monopolistic power of the two outfits.
- HUD claims that in responding to requests for information, Fannie Mae marked as "proprietary" information several news releases, speeches by executives and even a list of its regional offices.
A senior HUD official says the agency is tired of Fannie Mae's delaying tactics and has threatened to take enforcement action if the firm hasn't submitted a detailed response by Jan. 31. HUD is also preparing a letter to Freddie Mac threatening enforcement actions.
Source: Michael Schroeder, "HUD Mulls Action Against Fannie Mae," Wall Street Journal, January 4, 2000.
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