Academic journal article ABA Banking Journal

Fannie Mae Increases CRA Options

Academic journal article ABA Banking Journal

Fannie Mae Increases CRA Options

Article excerpt

Franklin Raines, CEO of Fannie Mae, took the opportunity of his speech before the 125th ABA Annual Convention to introduce a new initiative designed to help banks, as well as Fannie Mae itself, meet their Community Reinvestment Act requirements.

"HUD [the Department of Housing and Urban Development] will soon require us to dedicate 50% of our business to low- and moderate-income families," said Raines. He noted that since 1997 Fannie Mae has done nearly $7 billion in specially targeted CRA business with depository institutions, but its goal is to push this to $20 billion by 2010. Specially targeted CRA loans are those in which additional flexibility is applied to underwriting and pricing terms. In addition, the stockholder-owned government sponsored enterprise has committed to purchase or securitize over the next decade $530 billion in CRA eligible low- and moderate-income loans that meet Fannie's traditional standards.

As part of its affordable housing effort, Fannie Mae has launched an initiative specifically to help ABA members achieve their CRA goals.

The initiative has three primary components, described below.

1. Purchase CRA-qualified mortgage investments. To assist banks to meet the CRA investment test, Fannie Mae's Investor Trading Desk will create customized mortgage-backed securities for ABA members from pools of CRA-qualified loans originated in the banks' market areas (by other lenders). …

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