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488 Dissenting Statement

agencies and individuals are constantly trying to fi nd scapegoats for their own
bad decisions, but HUD’s eff ort to blame Fannie and Freddie for the decline in
underwriting standards sets a new standard for running from responsibility.
Contrast the 2010 statement quoted above with this statement by HUD in 2000,
when it was signifi cantly increasing Fannie and Freddie’s aff ordable housing goals:
Lower-income and minority families have made major gains in access to the
mortgage market in the 1990s. A variety of reasons have accounted for these gains,
including improved housing aff ordability, enhanced enforcement of the Community
Reinvestment Act, more fl exible mortgage underwriting, and stepped-up enforcement
of the Fair Housing Act. But most industry observers believe that one factor behind these
gains has been the improved performance of Fannie Mae and Freddie Mac under HUD’s
aff ordable lending goals. HUD’s recent increases in the goals for 2001-03 will encourage
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the GSEs to further step up their support for aff ordable lending. [emphasis supplied]
Or this statement in 2004, when HUD was again increasing the aff ordable
housing goals for Fannie and Freddie:
Millions of Americans with less than perfect credit or who cannot meet some of
the tougher underwriting requirements of the prime market for reasons such as
inadequate income documentation, limited downpayment or cash reserves, or the
desire to take more cash out in a refi nancing than conventional loans allow, rely on
subprime lenders for access to mortgage fi nancing. If the GSEs reach deeper into the
subprime market, more borrowers will benefi t from the advantages that greater stability
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and standardization create. [emphasis supplied]
Or, fi nally, this statement in a 2005 report commissioned by HUD:
More liberal mortgage fi nancing has contributed to the increase in demand for
housing. During the 1990s, lenders have been encouraged by HUD and banking
regulators to increase lending to low-income and minority households. Th e
Community Reinvestment Act (CRA), Home Mortgage Disclosure Act (HMDA),
government-sponsored enterprises (GSE) housing goals and fair lending laws
have strongly encouraged mortgage brokers and lenders to market to low-income
and minority borrowers. Sometimes these borrowers are higher risk, with blemished
credit histories and high debt or simply little savings for a down payment. Lenders have
responded with low down payment loan products and automated underwriting, which
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has allowed them to more carefully determine the risk of the loan. [emphasis supplied]
Despite the recent eff ort by HUD to deny its own role in fostering the
growth of subprime and other high risk mortgage lending, there is strong—indeed
irrefutable—evidence that, beginning in the early 1990s, HUD led an ultimately
successful eff ort to lower underwriting standards in every area of the mortgage
market where HUD had or could obtain infl uence. With support in congressional
legislation, the policy was launched in the Clinton administration and extended
almost to the end of the Bush administration. It involved FHA, which was under
the direct control of HUD; Fannie Mae and Freddie Mac, which were subject to
HUD’s aff ordable housing regulations; and the mortgage banking industry, which—
while not subject to HUD’s legal jurisdiction—apparently agreed to pursue HUD’s

62 Issue Brief: HUD’s Aff ordable Housing Goals for Fannie Mae and Freddie Mac, p.5.
63 Final Rule, http://fdsys.gpo.gov/fdsys/pkg/FR-2004-11-02/pdf/04-24101.pdf.
64 HUD PDR, May 2005, HUD Contract C-OPC-21895, Task Order CHI-T0007, “Recent House Price
Trends and Homeownership Aff ordability”, p.85.