Fannie Mae, home builders work together, CEO says

First phase to create 6 million first-time homeowners in next decade

Fannie Mae, one of the nation's largest sources of financing for home mortgages, joined its partners Jan. 27 to announce its pledge to help 6 million families including 1.8 million minority families become first-time homeowners over the next decade.

The pledge boosts the company's commitment to President George W. Bush's minority homeownership initiative and will help raise the minority homeownership rate from the current 49 percent to 55 percent, with the ultimate goal of closing the gap between minority homeownership rates and nonminority homeownership rates entirely.

According to a Fannie Mae news release, the company's new commitment to first-time home buyers is part of its "American Dream Commitment," a plan announced in 2000 to provide $2 trillion in private capital for 18 million minority and underserved Americans to own or rent a homes by the end of the decade.

Having met the $2 trillion goal and the company's previous Trillion Dollar Commitment launched in 1994, Fannie Mae, along with many others including its lender, mortgage insurer, nonprofit, real estate, home builder, housing finance agency and other federal, state, and local government partners has now provided more than $3 trillion in funds for more than 28 million underserved families in 10 years. In 2003 alone, these strong partnerships allowed Fannie Mae to achieve a record level of more than $240 billion in mortgage purchases serving minority families.

"After the greatest year in housing and mortgage finance history, we are renewing and increasing our American Dream Commitment," said Franklin D. Raines, chairman and CEO of Fannie Mae. "We and our housing partners have bold ideas and big plans to work on the toughest housing problems facing America. The first phase will emphasize getting people especially minority families into homes of their own."

Under the three-phase American Dream Commitment expansion plan, Fannie Mae will pledge significant new resources through several dozen new and enhanced mortgage initiatives to achieve these goals. Over the course of the next few weeks, the company will be announcing additional plans to achieve these goals:

expand access to homeownership for millions of first-time home buyers and help to raise the minority homeownership rate to 55 percent with the ultimate goal of closing the homeownership gaps entirely;

make homeownership and rental housing a success for millions of families at risk of losing their homes; and

expand the supply of affordable housing where it is needed most.

Under the first phase, Fannie Mae will help create 6 million new homeowners including 1.8 million new minority homeowners. This goal will require the company to increase its average annual financing of first-time home buyers by more than 250,000 households an increase of more than 70 percent over the annual average for the first four years of this decade and increase its average annual financing of minority first-time home buyers by more than 93,000 households to a level more than double the annual average for the first four years of the decade.

In addition, the company announced a comprehensive set of additional goals and objectives designed to increase opportunities for homeownership and to help lenders reach out and serve more first-time home buyers. Steps Fannie Mae outlined to achieve this goal include applying technology to lower the costs of mortgage originations and expanding access to mortgage credit, building stronger partnerships with those who serve as trusted advisors to first-time home buyers, adapting products and processes that build upon public sector assistance to potential home buyers, and working to transform manufactured housing lending. Among the goals are:

to double the 10-year commitment to provide mortgage financing to people with disabilities from 10,000 to 20,000;

to expand access to Fannie Mae's HCO technology the company's free, automated client tracking and counseling support software by linking to more than 5,000 counseling agencies and lenders who will, in turn, serve more than 1 million clients.

to create direct electronic links between counselors and lenders to ensure the smooth transition from counseling to an affordable mortgage with a goal of converting at least 100,000 of the HCO-assisted clients into first-time home buyers;

to help lenders market to recent immigrants using underwriting flexibilities that allow borrowers to apply for a home loan even before obtaining permanent residency, and permit the inclusion of boarder incomes and nontraditional credit histories in underwriting;

to work with lender and community partners to identify barriers to homeownership, create new underwriting pilots to test additional approaches to serving these communities, and offer new flexibilities through direct underwriting; and

to create marketing materials for lenders and other partners in at least five more languages in addition to English and Spanish.

As a first step toward a broader transformation, Fannie Mae will work with its lender partners and other industry participants, and will develop at least one new pilot approach within the next year with a goal of the pilot to save consumers at least 10 percent of the cost of buying and financing a manufactured home.