[Congressional Record Volume 140, Number 33 (Tuesday, March 22, 1994)]
[Extensions of Remarks]
[Page E]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]


[Congressional Record: March 22, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]

 
                FANNIE MAE AFFORDABLE HOUSING COMMITMENT

                                 ______


                         HON. HENRY B. GONZALEZ

                                of texas

                    in the house of representatives

                        Tuesday, March 22, 1994

  Mr. GONZALEZ. Mr. Speaker, last week James A. Johnson, chairman and 
chief executive officer of the Federal National Mortgage Association 
[Fannie Mae] announced a trillion dollar commitment by Fannie Mae to 
affordable housing between now and the end of the decade.
  This commitment to affordable housing will finance over 10 million 
homes for households with incomes below the area median income. It will 
serve minorities and new immigrants, families living in central cities 
and distressed communities, and people with special housing needs.
  As part of this commendable effort, Fannie Mae is seeking to 
transform the Nation's housing finance system. It will do so by 
reaching out to every renter in the United States to provide 
information they need to buy a home; break down arbitrary barriers to 
getting a home mortgage; and will make every effort to eliminate 
discrimination the top priority of the mortgage finance system.
  Mr. Speaker, I want to commend Mr. Johnson and Fannie Mae for this 
great effort. Mr. Johnson has aggressively moved forward to implement 
the affordable housing mission which the Congress created in the 
Housing and Community Development Act of 1992.
  I am including, following my remarks, Mr. Johnson's statement and a 
summary of the initiatives that Fannie Mae will be taking.

                     Showing America a New Way Home

(By James A. Johnson, Chairman and Chief Executive Officer, Fannie Mae)

       Good morning and Welcome.
       Thank you for being a part of the most important 
     announcement in Fannie Mae's history.
       We are very pleased that so many good friends, including 
     the Secretary of Housing and Urban Development, Henry 
     Cisneros, could join us.
       Three years ago yesterday, Fannie Mae committed to deliver 
     $10 billion in housing finance for low- and moderate-income 
     families and others with special housing needs by the end of 
     1994.
       At the time, our commitment was the largest ever made by a 
     shareholder owned company. Some people thought we couldn't do 
     it. Others though we didn't mean it. But we not only 
     delivered on our commitment--16 months ahead of schedule--we 
     exceeded it.
       Now we are ready to do more
       Today is the first day of a new commitment, massive in 
     scope and revolutionary in design. We call it ``Showing 
     America a New Way Home.'' Through it, we believe we can help 
     show ten million families who have been shut out of the 
     housing finance system a new way to achieve the American 
     dream of homeownership.
       Today, too many minorities are victims of racial bias in 
     lending. Fannie Mae will do everything in our power to make 
     eliminating discrimination the number one priority of every 
     participant in the mortgage finance system.
       Today, too many people are unaware of how to buy a home and 
     qualify for a mortgage. Fannie Mae will reach out to every 
     renter in America and provide the information they need.
       Today, too many low- and moderate-income families, 
     residents of central cities and rural areas, and people with 
     special needs are denied mortgage credit. Fannie Mae will 
     break down the arbitrary barriers that stand in their way.
       Our commitment includes 11 very significant initiatives.


                    opening doors to every american

       First, Fannie Mae will reach out to open the doors of 
     homeownership to every American. We will launch an 
     unprecedented national consumer education effort, using 
     television, radio, and print advertising, and direct mail, 
     and other techniques to reach out to every renter in the 
     nation. We want to have an ongoing conversation about how to 
     buy a home with everyone who wants to become a homeowner.
       We've learned in recent years that millions of people are 
     confused and intimidated by a mortgage process that is often 
     unwelcoming, but they will respond when they are given an 
     invitation, and a map to the front door. When we conducted 
     our consumer outreach effort in just seven cities last year, 
     more than 100,000 people responded. We believe that at least 
     five million motivated households will respond to the 
     outreach effort we are announcing today and take their first 
     step to owning a home.


                     the ``new americans'' campaign

       Our second initiative is a ``New Americans'' campaign, 
     targeted to the fastest growing segment of the population--
     new immigrants. As many immigrants will arrive in the United 
     States in the 1990s as came during the peak immigration years 
     at the turn of the 20th century. They are highly motivated to 
     become citizens, and homeowners. Fannie Mae will use 
     multilingual media to communicate with millions of these new 
     Americans, and we'll provide them with consumer information 
     as often as possible in their native language. We want the 
     path to citizenship to also be a path to homeownership for as 
     many immigrants as possible.


                     fannie mae partnership offices

       Third, Fannie Mae will open at least 25 Fannie Mae 
     Partnership Offices, beginning with 10 this year, in 
     communities around the country that will form long-term 
     partnerships with us to address a broad range of affordable 
     housing and homeownership needs. The staff of our new offices 
     will work in a practical way with lenders, public officials, 
     housing advocates, and others, to expand Fannie Mae's 
     outreach and service in those communities.


                        the homepath initiative

       The HomePath initiative involves one of the most far-
     reaching commitments we have ever made. We want to eliminate 
     any final ``no'' from the mortgage application process. Our 
     goal is for every mortgage application that is denied to get 
     a second look; if it is still denied, the applicant can take 
     it to a third-party review board to be looked at again. For 
     applicants who are still not approved for a mortgage, home 
     buyer counseling will be available. The counseling will give 
     them the information they need to get firmly on a path that 
     can lead to a home of their own.
       To reach this goal, Fannie Mae will encourage our lenders 
     to conduct ``second look'' reviews for minority- and low-
     income applicants, and we'll help create models for third 
     party review boards made up of community representatives and 
     lenders.
       The Fannie Mae Foundation will commit $5 million over the 
     next three years to increase the effectiveness of home buyer 
     counseling organizations nationwide, many of which are 
     hampered by a lack of resources, capacity, training, tools, 
     and a comprehensive referral system. Our $5 million in 
     funding will help address those needs.
       We will also provide a new computer software program called 
     Desktop Home Counselor, and within 90 days we will begin 
     operating a nationwide toll free number that consumers can 
     call for referrals to counseling agencies. Fannie Mae's 
     Public Information Office will hire counselors to provide 
     counseling services directly to consumers who live in 
     communities where no such agencies exist.


                       underwriting flexibilities

       Our fifth initiative is a commitment we admit is long 
     overdue. We will make sure that our underwriting guidelines 
     are clear and flexible, and are applied equally to everyone. 
     Our lenders have told us they need better guidance on how to 
     use our guidelines. A study conducted by the Federal Reserve 
     Bank of Boston confirms this fact. It shows that some lenders 
     apply the flexibility in Fannie Mae's underwriting guidelines 
     to white mortgage applicants more often than to minority 
     applicants. And a recent report of the Interagency Task Force 
     on Fair Lending, of which Secretary Cisneros is a key member, 
     urged lenders to be aware of ``the provisions of the 
     secondary market guidelines that provide various alternative 
     and flexible means by which applicants may demonstrate their 
     ability and willingness to repay their loans.''
       We assume the full responsibility to make sure our 
     guidelines are understood, and appropriately used, by all our 
     lending partners. To do this:
       We will maintain a constant dialogue with our mortgage 
     lending partners to identify the loan characteristics and 
     underwriting procedures they think need clarification.
       We will develop the most comprehensive training program for 
     mortgage industry underwriters in the country.
       We will develop easy-to-use reference tools for 
     underwriters, including on-line access to Fannie Mae 
     guidelines.
       We will establish regional hotlines that lenders can call 
     for instant guidance on our underwriting.
       We will establish an internal Fannie Mae loan review board 
     to review loans initially rejected by our underwriters.
       We will make a new automated underwriting system available 
     to lenders very soon that will use artificial intelligence to 
     analyze loans, ensure consistency, and free up time for 
     underwriters to work on complex applications.


                        underwriting experiments

       A commitment of $5 billion to conduct experiments in new 
     underwriting approaches is our sixth initiative. We will 
     probe and test ways to underwrite loans that could make 
     credit more accessible to minorities, low- and moderate-
     income families, central city and rural residents, and people 
     with special housing needs. We will also systematically 
     revalidate the components of our own underwriting guidelines.


                         innovations for change

       Our seventh initiative, ``Innovations for Change,'' is the 
     most significant product research and development effort in 
     the history of housing finance. Through it, we will develop 
     at least ten new financing tools to serve the full range of 
     housing needs.
       Our efforts will initially focus on rural communities; 
     elderly people who want to stay in their homes; Native 
     Americans living on tribal lands; families who want to make 
     their homes more energy efficient; and those who want to 
     renovate their homes. Because we are also the nation's 
     largest private investor in multifamily housing, Innovations 
     for Change will also find new ways for the private sector to 
     finance rental housing for low-income families; shelter for 
     the homeless; the developmentally disabled; people who suffer 
     from AIDS and other illnesses; as well as the frail elderly 
     and other groups in need of housing and supportive services.


                          multifamily housing

       Our eighth commitment is to provide $50 billion in new 
     financing for multifamily rental housing between now and the 
     end of the decade. This level is double what we provided over 
     the past seven years. Through it, we will help create 
     affordable housing opportunities for people who want to make 
     their homes in rental housing, or who need to live in 
     apartments while they are preparing to buy a home.


                    using technology to lower costs

       Our ninth initiative is to develop and use advanced 
     technology to reduce the largest barrier to homeownership 
     faced by many families: the cost, complexity, paperwork and 
     time it takes to get a mortgage. By simplifying and 
     streamlining the way mortgages are created and serviced, 
     Fannie Mae can cut the cost of lending and reduce the fees 
     charged to borrowers by at least $1,000.
       We will also provide technology to make it more profitable 
     for lenders to originate loans to buy homes that don't cost 
     very much, because these are the kinds of loans that low- and 
     moderate-income families, and residents of distressed 
     communities, are more likely to seek.


                         fannie mae foundation

       Our tenth initiative is a commitment to provide more than 
     $30 million over the next three years to support non-profit 
     housing efforts around the country. This commitment will make 
     Fannie Mae the most significant source of corporate 
     philanthropic funds dedicated to housing and community 
     development in the country, and one of the top five sources 
     of private and corporate funding in this arena.


                   commitment to fight discrimination

       Our final, and most important commitment under ``Showing 
     America a New Way Home,'' is to fight racial discrimination 
     in mortgage lending.
       We believe all our new initiatives will help ensure that 
     minorities gain equal access to mortgage credit. But sadly, 
     these efforts won't be enough. For reasons that most 
     Americans cannot and will not accept, credit continues to be 
     allocated based on a person's race, rather than on their 
     ability and willingness to pay.
       We know Fannie Mae can't singlehandedly eliminate racial 
     discrimination from lending. But today we commit to do 
     everything in our power to make eliminating it the number one 
     priority of every participant in the mortgage finance system. 
     It is our moral obligation, and a core value of our company, 
     to help lead the fight.
       We join the Congress, the Administration, and many others 
     in the lending community who want to hold those who 
     discriminate accountable for their actions. We strongly 
     support the renewed vigor with which the federal government 
     is clarifying and enforcing fair lending laws, and we are 
     working with the U.S. Department of Housing and Urban 
     Development, represented here today by Secretary Cisneros, to 
     identify the steps we can take to aid the government's 
     efforts. The ``sunshine'' of public disclosure must shine on 
     those who would discriminate, leaving them no place to hide.
       Our principal role in promoting fair lending is to provide 
     our lenders with the products and services they need to reach 
     minority families and underserved communities. We will do 
     this in a number of ways.
       We will provide our lenders with data on how well they are 
     serving minority families and communities.
       We will help make the industry more diverse, and more 
     responsive to minority borrowers, by training minorities for 
     positions in mortgage lending.
       We will increase the participation of minorities and women 
     in the mortgage industry by providing additional training to 
     current Fannie Mae lenders, qualifying more minority- and 
     women-owned lenders as our seller-servicers, and by helping 
     others establish relationships and financial conduits through 
     which they can deliver their loans to Fannie Mae.
       We will pursue business relationships with every community 
     development financial institution that provides residential 
     housing finance in minority and distressed communities.
       We will invest $25 million of seed capital in new and 
     existing community lending institutions.


                     the trillion dollar commitment

       ``Showing America a New Way Home'' is our commitment to 
     transforming the housing finance system in America.
       We're putting $1 trillion on the table to back it up.
       Between now and the end of the decade, we will provide $1 
     trillion to finance 10 million homes for the families and 
     communities that have not been well served by the housing 
     finance system in the past.
       We're already on our way to providing some of this 
     financing; the rest will be a stretch. The $1 trillion in 
     targeted lending we will do in the next seven years is twice 
     the amount of targeted lending we did over the past seven 
     years. It is also twice the amount of financing we provided 
     to all households in the 1970s and 1980s combined. The result 
     of this commitment will be that significantly more than half 
     of all the business we do in the next seven years will be 
     targeted to those who have not been well served in the past.
       We will provide $1 trillion in housing finance, and do all 
     the things I've mentioned, through the genius of a system in 
     which Fannie Mae, as a shareholder owned company, seeks out 
     good and profitable business from markets that have never 
     before been tapped.
       Three years ago, when I announced our $10 billion ``Opening 
     Doors to Affordable Housing'' initiative, I said ``I know we 
     will meet this challenge, as we have met so many in the past, 
     with intelligence, commitment, a sense of fairness, and hard 
     work.''
       Fannie Mae's employees may have been worried, or skeptical, 
     or just plain thought I was crazy about the new challenge. 
     But you delivered far beyond anyone's greatest expectations. 
     Your performance was a credit not only to Fannie Mae, but 
     also to yourselves, your families, and your nation.
       On March 14, 1991 I told you ``there will be more to 
     come,'' and that $10 billion was ``the preface for future 
     programs and initiatives still on the drawing board or only 
     now coming into focus.''
       Ladies and Gentleman, the future is here.
       We learned a lot in the past three years. We are ready to 
     put what we learned in to action.
       When we're through, Fannie Mae will be a very different 
     place than it was when we started.
       It will be stronger, better, more efficient and effective.
       The Housing finance industry we lead will be very different 
     than when we started.
       It will be more open, fair, diverse and easy to understand.
       The nation we love will be different.
       It will have more homeowners--and the kind of strong and 
     vibrant communities that homeownership builds.
       That is a result that is well worth the effort.
       Thank you for all you have done, and all you will do, to 
     make the American dream come true for those who need it most. 
     [Applause.]
       It is now my great pleasure to introduce to your the 
     distinguished Secretary of Housing and Urban Development, 
     Henry Cisneros.

                          ____________________