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496 Dissenting Statement

21.1 million families that would have been generated if the current goals had been
retained.” Th e release also noted that “Fannie Mae Chairman Franklin D. Raines
joined Cuomo at the news conference in which Cuomo announced the HUD action.
Raines committed Fannie Mae to reaching HUD’s increased Aff ordable Housing
goals.”
Th e policy behind this substantial increase in the AH goals was expressed in
HUD’s discussion of the rule-making: “To fulfi ll the intent of [the GSE Act], the GSEs
should lead the industry in ensuring that access to mortgage credit is made available
for very low-, low- and moderate-income families and residents of underserved
areas. HUD recognizes that, to lead the mortgage industry over time, the GSEs will
have to stretch to reach certain goals and close the gap between the secondary mortgage
market and the primary mortgage market. Th is approach is consistent with Congress’
89
recognition that ‘the enterprises will need to stretch their eff orts to achieve’ the goals.”
[emphasis supplied]
Th e new AH goals announced in 1999 were not fi nally issued until October
2000. Th eir specifi cs were stunning and drove Fannie and Freddie into a new and
far more challenging era. Th e basic goal, an LMI requirement of 42 percent, was
raised to 50 percent, and the special aff ordable goal was raised from 14 percent to 20
percent. As a result, 75 percent of the increase in goals was concentrated in the low-
and very-low income category—where the risks were the greatest. A HUD memo
summarized the new rules: 90
For each year from 2001 through 2003, the goals are:
• Low- and moderate-income goal. At least 50 percent of the dwelling units fi nanced by
each GSE’s mortgage purchases should be for families with incomes no greater than
area median income (AMI), defi ned as median income for the metropolitan area or
nonmetropolitan county. Th e corresponding goal was 42 percent for 1997-2000.
• Special aff ordable goal. At least 20 percent of the dwelling units fi nanced by each
GSE’s mortgage purchases should be for very low-income families (those with
incomes no greater than 60 percent of AMI) or for low-income families (those with
incomes no greater than 80 percent of LMI) in low-income areas. Th e corresponding
goal was 14 percent for 1997-2000.
• Underserved areas goal. At least 31 percent of the dwelling units fi nanced by each
GSE’s mortgage purchases should be for units located in underserved areas. Research
by HUD and others has demonstrated that low-income and high-minority census
tracts have high mortgage denial rates and low mortgage origination rates, and this
forms the basis for HUD’s defi nition of underserved areas. Th e corresponding goal
was 24 percent for 1997-2000.
HUD’s new and more stringent AH goal requirements immediately
stimulated strong interest at the GSEs for CRA loans, substantial portions of which
were likely to be goals-qualifying. Th is is evident in a speech by Fannie’s Vice Chair,
Jamie Gorelick, to an American Bankers Association conference on October 30,

89 http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=2000_register&docid=page+65043-
65092.
90 HUD, Offi ce of Policy Development and Research, Issue Brief No. 5, January 2001, p.3.