Magazine article American Banker

HUD Presses Fannie Mae and Freddie Mac to Defend New Businesses

Magazine article American Banker

HUD Presses Fannie Mae and Freddie Mac to Defend New Businesses

Article excerpt

The Department of Housing and Urban Development has stepped up its scrutiny of Fannie Mae and Freddie Mac.

Concerned that Fannie and Freddie may be overstepping their chartered mission to buy home loans, HUD has given the two government-sponsored enterprises until the end of this month to give detailed explanations of two new programs, and it threatened them with enforcement action if the deadline is not met.

The tough stance takes HUD Secretary Andrew Cuomo's ongoing skirmish with the companies to a new level. Last year he pushed them to step up their fair-lending commitments. Now he is turning his sights on confining them to their chartered secondary market role.

At issue is a Fannie Mae pilot program with Home Depot in which Fannie helps finance energy-efficiency improvements. Homeowners can apply in stores for loans made by Chevy Chase (Md.) Bank, which are then bought by Fannie Mae. Also under scrutiny is Freddie Mac's real estate sales unit, which includes the HomeSteps Home Buying Center of Moreno Valley. Calif., a "one-stop shop" selling properties in Freddie's foreclosure inventory.

In letters dated Dec. 21, HUD warned that a failure to make "detailed and comprehensive responses" by the deadline could prompt enforcement actions or even suspension of the programs until the agency completes its review. If HUD takes enforcement action, it would refer the matter to the Office of Federal Housing Enterprise Oversight, which could penalize the companies with fines ranging from $5,000 to $1 million per day or with a cease-and-desist order.

One official at a major lender, who did not want to be identified, said Freddie Mac's HomeSteps program goes directly to the consumer and thus is not consistent with its secondary market mission. "It's not in their charter, not in their mission, and it's a clear violation of the Mortgage Banking Association's GSE policy statement," he said. …

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