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ALL IN 

To ensure an adequate supply of mortgages in case the goals were not met in the
normal course of business, Fannie and Freddie instituted outreach programs in un-
derserved geographic areas and conducted educational programs for originators and
brokers.  In addition, as explained by Mike Quinn, the Fannie executive responsible
for the goals, Fannie set lower fees on loans that met the goals, although it would not
purchase mortgages that fell outside its predetermined risk targets.  Ashley also
maintained that Fannie did not shift eligibility or underwriting standards to meet
goals but instead directed its resources to marketing and promotional efforts, hous-
ing fairs, and outreach programs run by the company’s partnership offices. “The ef-
fort was really in the outreach as opposed to reduced or diminished or loosened
standards,” Ashley told the FCIC. 
Former OFHEO Director Armando Falcon Jr. testified that the GSEs invested in
subprime and Alt-A mortgages in order to increase profits and regain market share
and that any impact on meeting affordable housing goals was simply a by-product of
this activity.  Lockhart, a subsequent OFHEO director, attributed the GSEs’ change
in strategy to their drive for profit and market share, as well as the need to meet hous-
ing goals. Noting that the affordable housing goals increased markedly in ,  he
said in an FCIC interview that the “goals were just one reason, certainly not the ex-
clusive reason” for the change.  These views were corroborated by numerous other
officials from the agency. 
The former HUD official Mike Price told the FCIC that while the “GSEs cried
bloody murder forever” when it came to the goals, they touted their contribution to
increasing homeownership. In addition, Price and other HUD officials told the FCIC
that the GSEs never claimed that meeting the goals would leave them in an unsafe or
unsound condition. 
Indeed, the law allowed both Fannie Mae and Freddie Mac to fall short of meeting
housing goals that were “infeasible” or that would affect the companies’ safety and
soundness.  And while the GSEs often exceeded the goals, in some cases those tar-
gets were adjusted downward by HUD or, in rare cases, were simply missed by the
GSEs.  For example, on December , , Mudd wrote to HUD: “Fannie Mae be-
lieves that the low- and moderate-income and special affordable subgoals are infeasi-
ble for .”  Fannie Mae’s  strategic plan had already anticipated such a
communication, stating, “In the event we reach a viewpoint that achieving the goals
this year is ‘infeasible,’ we will determine how best to address the matter with HUD
and will continue to keep the Board apprised accordingly.”  In fact, both Fannie and
Freddie appealed to HUD to lower two components of the goals for affordable hous-
ing. HUD complied and allowed the GSEs to fall short without any consequences. 

The impact of the goals
At least until HUD set new affordable housing goals for , the GSEs only supple-
mented their routine purchases with a small volume of loans and non-GSE mort-
gage–backed securities needed to meet their requirements. The GSEs knew that they
might not earn as much on these targeted goal loans as they would earn on both