WASHINGTON–Fannie Made and Freddie Mac are scaling back on some mortgages aimed at helping make homeownership more affordable, including the proportion of loans made to borrowers with small down payments and mortgages to deeply indebted borrowers, according to one new report.
The cutbacks are coming at the behest of the two companies’ regulator, the Federal Housing Finance Agency, which wants Fannie and Freddie to be prepared for a possible economic downturn, according to the Wall Street Journal.
“Tamping down risk could limit their defaults and produce bigger profits, which in turn could help them appeal to potential investors,” the Journal reported. “The FHFA has made it a priority to get Fannie and Freddie out from under government control, but doing so will likely require the firms to raise billions of dollars from investors.”
Mark Calabria, the director of the FHFA, told the Journal, “Some of this really is a reflection of the increased emphasis and focus on: let’s do what we need to do to get out of conservatorship.”
A ‘Broader Debate’
The Journal’s analysis suggested the recent pullback in some affordability-oriented programs “feeds into a broader debate about the extent to which they should shoulder risk to make homeownership possible for modest-income borrowers.”
The report added some critics are arguing the changes could run counter to Fannie’s and Freddie’s mission of making homeownership more accessible and affordable.
“All the signals from FHFA leadership point in the same direction: a more constrained footprint and less focus on affordability,” Julia Gordon, president of the National Community Stabilization Trust, a nonprofit that focuses on neighborhood revitalization, told the Journal.