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Secretary Snow described the concept of a "new program" very well in his recent testimony before the Senate: New programs are akin to "new lines of business."

Some proposals have suggested that a regulator should review all of the "new activities" of Fannie Mae. In H.R. 2575, for example, the term "activities" is broadly defined to include "any program, activity, business process, or investment that directly or indirectly provides financing or other services related to conventional mortgages." This definition is so broad that it could encompass every change in underwriting standards made by Fannie Mae or every transaction in which we buy mortgages.

Bank regulators do not mandate prior approval for “activities” in the manner some have suggested would be appropriate for Fannie Mae's "activities." In the banking context, the term "activities" is used to mean "lines of business." The Gramm-Leach-Bliley Act contains a list of preapproved "activities" financial institutions may undertake. The "activities" listed in the statute are broad lines of business, including insurance business, securities underwriting business, and merchant banking business.

Any proposal requiring prior notice for Fannie Mae's "activities," as defined in H.R. 2575, clearly has no parallel in current banking law.

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At Wednesday's Financial Services Comenktes hearing, you heard the assertion that Fannie Mae laga the primary market in funding mortgage loans for low-income and minority homebuyers. This is untrue. I am writing to you today to set the record straight. The truth is that Fannie Mae is the nation's largest private investor in affordable housing and minority lending. In 1994, we launched our Trillion Dollar Commitment to expand markets and increase access to mortgage credit. Upon completion in 2000, we followed up that success by announcing our $2 trillion American Dream Commitment, a decadelong effort to close homeownership gaps and strengthen communities. The results are that, since 1994, Fannie Mae has financed homes for more than 12 million low- and moderate-income families and more than 4.8 million minority families. Further, the fact is that – when measured correctly – Fannie Mae's performance in affordable housing lending has consistently surpassed the primary market's performanos.

& Lander in Creating Homeownershin Queortunities. Fannie Mac remains the leader in affordable housing and minority lending today. We are the largest single provider of mortgage credit to low- and moderate-income and minority families. In 2002 alone, Fannie Mae provided more than $279 billion in credit serving low- and moderate-income households. Fannio Mao's $136.2 billion investment in mortgages to minority families exceeded that of any other private financial services institution and even greatly exceeded the Federal Housing Administration's $46.4 billion in minority loan originations that

year.

Our growth in minority lending over time has been extraordinary. Comparing 1993 to 2002, loans to African Americans increased 219 percent and loans to Hispanics increased. 234 percent, while our loans to non-minorities increased by only 62 percent.

Fannie Mac has pledged to invest at least $700 billion to finance mortgages for minority families between 2000 and 2009 in support of the President's initiative to expand minority homeownership. As of the end of June 2003, we had invested $381 billion toward that comenitment, helping 2.8 million minority families-- by far the largest single contribution of any one of HUD's "Blueprint Partners.”

adership In Affordable Rental Housing and Community Development. Our leaderskip the financial services industry extends well beyond the provision of mortgage credit to homeowners. For example, we are the nation's largest investor in multifamily and single-family rental housing. In 2002, Fannie Mae provided mortgage financing supporting more than 1,000,000 units of rental housing in single-family and multifamily properties, of which more than two-thirds served renters with incomes below 80 percent of area median incomes. We are also the nation's largest investor in the Low-Income Housing Tax Credit (LIHTC). In 2002, we committed more than $1.6 billion in LIHTC investments to support the production and preservation of an estimated 37,500 hornma affordable to very low-income families. In addition, we are the nation's largest investor. in mortgage revenue bonds (MRBs), another important source of low-cost capital for affordable housing. Our 2002 investment of more than $4.2 billion in these bonds made possible affordable financing for an estimated 90,463 families. Through the end of 2002, Fannie Mac's American Communities Fund (ACF) has closed more than $725 million in commitments on more than 216 transactions making a tangible difference in communities across the country. And none of the ACF, LIHTC, or MRB investments count against our HUD goals --- a very important point when trying to assess leadership in the market. Leadership in Bringing Innovation to Mortgags Marketz. Market leadership is about qualitative as well as quantitative contributions. Fannie Mae has been an innovative leader in the affordable housing field. We were at the forefront of the mortgage industry expansion into low-downpayment lending, creating the Fannic 97 mortgage in 1994 as the first widely available and standardized 3 percent down-payment mortgags product and offering loans with as little as a $500 contribution from the borrower today. Our low-downpayment lending has increased twenty-fold over this time. Our investments in technology have increased the underwrking flexibilities available through our product offerings, expanded markets for our lender partners, and – by reducing the cost of originations – enhanced affordability for the home buyer. More recently, we have lunched new efforts to serve borrowers with blemished credit histories. Our Expanded

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Approval and Timely Payment Rewards mortgages are mumples of how we help conventional mortgage lenders broaden their markets to serve borrowers previously left only to subprime lenders. Along with our industry-leading anti-predatory lending guidelines, we have introduced this product in a pradest and responsible manner as part of our strategy to expand responsible lending and combat abusive leading practices.

Fanic Mac has also contributed nearly $500 million since 1996 to the independent Fannie Mae Foundation, the largest corporate foundation devoted to housing and community development in the country. This funding has enabled the Foundation,

ong other things, to carry out consumer education and outreach efforts that have led to more than 9 million families receiving important rmultilingual information about credit, mortgages, and the homebuying process.

parison to the Primary Market. One last measure of market leadership is a comparison of Fannie Mae's affordable housing performance in our· tingle-family business to the Horns Mortgage Disclosure Act (HMDA) data used to describe the primary market. We lead the market on this basis also.

HUD uses this HMDA-based approach for measuring market leadership. Over the years, Fannie Mae has disagreed with HUD's methodology primarily because the Department has used a definition of the primary market that over-weights mbprins lending, which has not traditionally been available to Fernie Maa. Done correctly, a HMDA-based market leadership analysis shows that we have consistently led or matched the conventional market in the past. I have attached several charts to illustrate this point.

In 2001, 43.1 percent of Fannie Mae's single-family business served low- and moderateincome borrowers compared to 42.0 percent for the conventional conforming market as described by HMDA. data. A total of 23.0 percent of Fannie Mae's business served minority homebuyers compared to 21.3 percent for the conventional conforming market We led the conventional conforming market in lending to African Americus, 5.2 percent to 4.4 percent, and matched the market in lending to Hispanics at 9.0 percent. These comparisons are based on owner-occupied, home purchase mortgages in MSAs – the appropriate subset for comparisons between HMDA data and Fannie Mae's performanc

Moreover, even using HUD's methodology and including half of subprime lending in the comparison market, the 2001 data reveals that Fannie Mae still would have led the market in lending to low- and moderate-income households (43.1 percent to 42.7 percent), minority borrowers (21.9 percent to 20.8 percent), and African-American borrowers (5.2 percent to 5.0 parvent).

Fannie Mae's affordable lending performance in 2002 was also excellent, with the percentages of our single-family business serving low- and moderate-income and minority borrowers increasing over the exceptional 2001 levels. For owner-occupied, home purchase lending in metropolitan areas, Faurie Mas achieved a 45.7 percent level in low-mod lending (representing a total investment of $69.3 billion for these borrowers), ■ 26.2 percent level in minority lending ($46.1 billion), a 5.4 percent level in lending to African Americans ($8.3 billion), and 11.0 percent level in leading to Hispazios ($18.3 billion). The 2002 HMDA data for the market was released in Angust, but eamot be fully analyzed until HUD provides its list of subprime lenders reporting to HMDAwhich we expect to receive in October.

Criticism of our support for first-time homebuyers is based on weak, outdated data. HMDA does not identify first-time homebuyers; therefore, HUD's analysis must use other data sources that are not true mortgage market estimates. Moreover, the HUD analysis covers the period from 1997 to 1999. When one looks at 2001 and 2002, Fannie Mae's average nammal zuumber of loans to minority first-time homebuyers increased by more than 40 percent. In 2002, Fannie Mae financing helped more than 351,000 families purchase their first homes, 30 percent of whom were minority households. While 24 percuct of our non-minority purchase money investraents helped first-time homebuyers, 33 percent of such lending to African-Americans helped first-time homebuyers, 31 percent of such lending to Hispanics went to first-time homebuyers, and 33 percent of much lending to all minorities went to first-time homebuyers.

FHA remains a powerful force in supporting first-time homebuyers, especially among minorities. However, loans insured by FHA do not count in our housing goals and therefore should be excluded from market cumparisons, something HUD's first-time homebuyer analysis did not do. Our steady emphasis on increasing low downpayment options for conventional borrowers is having an impact in the market even with this heavy FHA influence. For instance, in 1996, FELA accounted for 56 percent of all very low downpayment purchase money mortgages either insured by FHA or financed by Fannie Mas. Five years later, in 2001, FHA's share had dropped to only 26 percent while Fannie Mae's share had grown to 74 percent, demonstrating the increasing role we are playing in providing affordable credit to new homebuyers.

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