Fannie Mae 2004 Annual Report Download - page 33

The following table shows each of our housing goals and home purchase subgoals during 2005, and our
performance against those goals and subgoals in 2005.
Housing Goals and Subgoals Performance: 2005
Goal
(1)
Fannie Mae Actual
Results
(2)
2005
Housing goals:
Low- and moderate-income housing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52.0% 55.1%
Underserved areas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37.0 41.4
Special affordable housing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22.0 26.3
Home purchase subgoals:
Low- and moderate-income housing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45.0% 44.6%
Underserved areas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32.0 32.6
Special affordable housing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.0 17.0
Multifamily minimum in special affordable housing ($ in billions) . . . . . . . . . . $5.49 $10.39
(1)
The home purchase subgoals measure our performance by the number of loans (not dwelling units) providing purchase
money for owner-occupied single-family housing in metropolitan areas.
(2)
The source of this data is HUD’s analysis of data we submitted to HUD. Some results differ from the results reported
in our Annual Housing Activities Report for 2005.
As shown in the table above, we met all of our three affordable housing goals: the low- and moderate-income
housing goal, the underserved areas goal and the special affordable housing goal. We also met three of the
four subgoals: the special affordable home purchase subgoal, the underserved areas home purchase subgoal,
and the special affordable multifamily subgoal. We fell slightly short of the low- and moderate-income home
purchase subgoal.
The affordable housing goals are subject to enforcement by the Secretary of HUD. HUD’s regulations allow
HUD to require us to submit a housing plan if we fail to meet our housing goals and HUD determines that
achievement was feasible, taking into account market and economic conditions and our financial condition.
The housing plan must describe the actions we will take to meet the goals in the next calendar year. If HUD
determines that we have failed to submit a housing plan or to make a good faith effort to comply with the
plan, HUD has the right to take certain administrative actions. The potential penalties for failure to comply
with HUD’s housing plan requirements are a cease-and-desist order and civil money penalties. Pursuant to the
1992 Act, the low- and moderate-income housing subgoal and the underserved areas subgoal are not
enforceable by HUD. As noted above, we did not meet the low- and moderate-income home purchase subgoal
in 2005. Because this subgoal is not enforceable, there is no penalty for failing to meet this subgoal.
These new housing goals and subgoals are designed to increase the amount of mortgage financing that we
make available to target populations and geographic areas defined by the goals. We have made, and continue
to make, significant adjustments to our mortgage loan sourcing and purchase strategies in an effort to meet
these increased housing goals and the subgoals. These strategies include entering into some purchase and
securitization transactions with lower expected economic returns than our typical transactions. We have also
relaxed some of our underwriting criteria to obtain goals-qualifying mortgage loans and increased our
investments in higher-risk mortgage loan products that are more likely to serve the borrowers targeted by
HUD’s goals and subgoals, which could increase our credit losses. The Charter Act explicitly authorizes us to
undertake “activities . . . involving a reasonable economic return that may be less than the return earned on
other activities” in order to meet these goals.
We believe that we are making progress toward achieving our 2006 housing goals and subgoals. Meeting the
higher subgoals for 2006 is challenging, however, as increased home prices and higher interest rates have
reduced housing affordability. Since HUD set the home purchase subgoals in 2004, the affordable housing
markets have experienced a dramatic change. Newly-released Home Mortgage Disclosure Act data show that
the share of the primary mortgage market serving low- and moderate-income borrowers declined in 2005,
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