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Publication Date

May 2002


Eric Stein, Michael A. Stegman, Roberto G. Quercia, Walter R. Davis


Ford Foundation

The government sponsored enterprises, Fannie Mae and Freddie Mac, should look to community lending products to help expand their homeownership opportunities to underserved populations. These products are more flexible than the GSE affordable offerings and more likely to reach women, minorities and rural borrowers.

Center researchers write in a chapter of Low Income Homeownership: Examining the Unexamined Goal (Brookings Institution Press, 2002), that  government-sponsored enterprises (GSEs) have been very successful extending credit to nontraditional borrowers using technology, homeownership education, and outreach.

Between 1993 and 1999, for instance, the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) increased their combined total purchases of home loans by 22 percent. Their purchases of home loans originated to very low- and low-income borrowers increased at much higher rates Unfortunately, in 1999, both GSEs fell significantly below other market players in funding affordable goals.

In all likelihood, if the GSE affordable market is to continue to grow, the GSEs will need to expand their guidelines for affordable loan purchases. This requires the development and mainstreaming of new affordable and more flexible products. Unfortunately, these are limited in number and not as aggressive as many community lending portfolio products.

Community lending products have the potential to help the GSEs in their continued expansion of homeownership opportunities to underserved populations. These products are more flexible than the GSE affordable offerings, and they are more likely to reach women, minorities, and rural borrowers.

Low Income Homeownership gathers the observations of housing experts on low-income homeownership and its effects on households and communities. The book is divided into five chapters that focus on the following subjects: homeownership trends in the 1990s; overcoming borrower constraints; financial returns to low-income homeowners; low-income loan performance; and the socioeconomic impact of homeownership.

Topics(s): Affordable Homeownership, Housing Policy, Mortgage Finance