Working Paper No. HF-013 

THE GSEs’ FUNDING OF AFFORDABLE LOANS:
 

A 2000 UPDATE
 

Harold L. Bunce 

April 2002 

Office of Policy 

Development 

and Research 

Comments Welcome 

e-mail address: 

Harold_L._Bunce@hud.gov 

Housing Finance 

W O R K I N G P A P E R S E R I E S
 

U.S. Department of Housing and Urban Development 
The GSEs’ Funding of Affordable Loans: A 2000 Update 

ABSTRACT 

The main purpose of this study is to assess the extent to which Fannie Mae and Freddie 

Mac are funding loans for low-income borrowers and others who historically have not 

been well served by the mortgage market. The study is the fourth in a series of working 

papers examining the affordable lending performance of these two Government 

Sponsored Enterprises (GSEs) in the secondary mortgage market. This study, which 

updates the earlier analyses to include year 2000 data, compares the borrower and 

neighborhood characteristics of single-family mortgages purchased by Fannie Mae and 

Freddie Mac between 1992 and 2000 with the characteristics of loans originated in the 

primary market during the same time period. There are five main findings. First, while 

both GSEs improved their affordable lending performance during the 1990s, they 

continued in the year 2000 to underperform the conventional conforming market in 

funding mortgages for lower-income borrowers and for properties located in low-income 

and high-minority census tracts (i.e., underserved areas). Second, the GSEs’ 

performance improved markedly between 1999 and 2000, allowing them to partially 

close their performance gap relative to the market. Third, during most of the 1990s, 

Fannie Mae’s purchases were more targeted to low-income borrowers and underserved 

areas than Freddie Mac’s purchases; however, the relative performance of the two GSEs 

has been rather similar during the past two years. Fourth, while the GSEs account for a 

significant share of the total market for home purchase loans (government-backed and all 

conventional conforming home loans), their market share for each of the affordable 

lending categories is much less than their share of the overall market, and they contribute 

only a small share of funding in important market segments such as the market serving 

first-time minority homebuyers. And finally, the GSEs’ small market share in the firsttime homebuyer market could be due to the preponderance of high (over-20-percent) 

downpayment loans in their mortgage purchases, although further study is needed to fully 

explain the reasons for the GSEs’ limited role in these markets. 
 

 

 

The GSEs' Funding of Affordable Loans: A 2000 Update1 

I. Introduction and Main Findings2 

This is the fourth in a series of studies that examine whether Fannie Mae and Freddie 

Mac lead or lag the overall mortgage market in funding affordable loans for low-income 

borrowers and other groups who historically have not been well served by the mortgage 

market. 3 This issue has been highlighted by the new affordable housing regulations that the 

Department of Housing and Urban Development (HUD) recently issued for Fannie Mae and 

Freddie Mac, discussions of the desirability of privatizing these two government-sponsored 

enterprises (GSEs), and a report by the Congressional Budget Office concluding that the 

GSEs pass only a portion of the Federal benefits they receive to homeowners.4 Fannie Mae 

and Freddie Mac receive substantial benefits from their Federal charters, mainly in the form 

of lower funding costs due to their "agency status". In exchange for their Federal benefits, 

they are required by Congress to promote access to mortgage credit for underserved families 

and their communities, as well as promote stability in the overall secondary market. 

This paper examines how well the GSEs are providing mortgage funding for lowincome and other underserved families. The characteristics (e.g., borrower income and race, 

location in low-income census tracts) of mortgages purchased by the GSEs are compared 

with those of mortgages originated in the conventional conforming market and mortgages 

originated and retained by banks and thrift institutions. The GSEs' performance is measured 

from loan-level data that they report to HUD, while information about the mortgage market 

is drawn from Home Mortgage Disclosure Act (HMDA) data. Following earlier HUD 

research, this paper focuses on home purchase loans, which are important for 

homeownership opportunities. However, to provide a complete picture of the GSEs’ 

mortgage activity, much of the home purchase analysis is reproduced for total loans, which 

include refinance as well as home purchase loans. 

This study updates to the year 2000 the author’s earlier study, which examined the 

GSEs' affordable lending performance between 1992 and 1999 (Bunce, 2000b). That study 

had two main findings: (1) Fannie Mae and Freddie Mac improved their affordable lending 

1

 The author would like to thank Nana Farshad and Ian Keith from CBSI for their assistance in this project. 

The author also appreciates the advice and comments of Randall M. Scheessele of the Office of Policy 

Development and Research and the comments of John Gardner, Paul Manchester, and Nandinee Kutty of 

the same office, as well as the comments of Sandy Fostek of the Office of Housing and Phyllis Armstrong 

of the Office of Fair Housing and Equal Opportunity. 

2

 The paper's main findings are reported on page 5, followed by 16 specific findings. 

3 The two papers by Bunce and Scheessele (1996, 1998) examine the GSEs’ performance through 1997; 

Bunce (2000b) updates their results through 1999. 

4

 The Congressional Budget Office (2000) recently estimated that the GSEs retained 37 percent of the 

$10.6 billion in benefits that accrue to them due to their agency status. The remaining 63 percent is passed 

through to homeowners in terms of lower interest rates. 

1 
 

 

 

 

performance between 1992 and 1999, but throughout that period they lagged the 

conventional conforming market in funding mortgages for lower-income and minority 

borrowers and their neighborhoods; and (2) Freddie Mac’s performance slightly surpassed 

Fannie Mae’s during 1999, which was significant given that in the previous six years Fannie 

Mae had out-performed Freddie Mac in purchasing home loans for lower-income borrowers 

and underserved neighborhoods. This study extends the 1992-99 analysis by including GSE 

and HMDA data for the year 2000. To provide continuity, the analysis and data tables in 

this paper are in the same format as the earlier study (hereafter "the 1999 Study"). One 

difference between the two studies is that this study includes an expanded “market share” 

analysis that examines the role of the GSEs in important market segments such as the firsttime homebuyer portion of the housing market (see Section V). 

The next part of this introductory section provides background on the affordable 

lending market and the GSEs' mandate to improve their purchases of loans for targeted 

borrowers.5 Then, the paper's main findings concerning the GSEs' performance are reported, 

followed by an outline of the topics discussed in the main text and technical appendices. 

A. Background 

The 1990s were years of increased affordable lending for low-income and minority 

families in the conventional mortgage market. Lenders introduced and marketed special 

lending programs to low-income families and their neighborhoods, they revamped their 

underwriting standards to deal with the special circumstances of these families, and they 

attempted to prevent mortgage defaults by offering borrower counseling programs and 

developing innovative loss mitigation programs. Other actors in the conventional market, 

including Fannie Mae and Freddie Mac, also played an important role in what one study 

termed a revolution in affordable lending (Rutgers University, 1998). HMDA data show 

substantial growth in conventional lending to low-income and minority borrowers during the 

1990s, which suggests that these new affordable lending initiatives had an impact. Between 

1993 and 1999, the number of conventional loans to low-income and minority borrowers 

more than doubled. Most observers generally agree that in addition to low interest rates and 

economic expansion, enhanced regulation of depositories' Community Reinvestment Act 

(CRA) obligations and the affordable housing goals (discussed below) that HUD established 

for Fannie Mae and Freddie Mac also contributed to a renewed emphasis on low-income and 

minority lending in the conventional market (Litan et al., 2000).6 

5

 The term "affordable lending" is used generically here to refer to lending for lower-income families and 

neighborhoods that have historically been underserved by the mortgage market. 

6

 Evidence is also growing that lending to low-income families can be profitable, particularly when combined 

with intensive loss mitigation efforts to control credit risk. While there is limited information on borrower 

defaults associated with the new affordable lending programs, there are some encouraging signs. For 

example, in a recent survey conducted by the Federal Reserve, lenders reported that most CRA loans are 

profitable although not as profitable as the lenders' standard products (Board of Governors, 2000). For an 

overview of the early default performance of the new affordable programs and of industry efforts to control 

default risk, see U.S. Department of Housing and Urban Development (2000a,b). 

2 
 

 

 

This study examines the record of Fannie Mae and Freddie Mac in providing 

mortgage funds for low-income borrowers and underserved neighborhoods. Fannie Mae and 

Freddie Mac are two major government-sponsored enterprises (GSEs) in the secondary 

mortgage market. They purchase mortgages from primary lenders and either hold the 

mortgages in portfolio or sell them to other investors as mortgage-backed securities, with a 

guarantee that the investors will receive full and timely payment of principle and interest.7 

Several studies have documented the dominant role that the GSEs' purchase guidelines and 

underwriting standards play in determining the types of loans that primary lenders will 

originate in the conventional conforming market.8 

In 1992, Congress expressed concern about the GSEs' funding of affordable loans for 

low-income families, particularly those living in inner-city neighborhoods that had been 

"redlined" by prime lenders.9

 Because of this concern, Congress called for HUD to establish 

three affordable housing goals that the GSEs must meet: 

1. Low- and Moderate-Income Goal, which targets borrowers with income no greater 

than area median income (AMI); 

2. Special Affordable Goal, which targets very low-income borrowers and lowincome borrowers living in low-income census tracts; and; 

3. Geographically-Targeted or Underserved Areas Goal, which targets low-income 

and high-minority neighborhoods.10 

The main objective of the housing goals is to encourage Fannie Mae and Freddie 

Mac to introduce new affordable lending programs in underserved areas and to make 

prudent adjustments in their mortgage purchase standards that recognize the special 

circumstances of low-income families and others who have found it difficult to access 

credit in the conventional mortgage market. HUD, which has general regulatory authority 

over the GSEs, was tasked to establish specific targets for these three goals. Explanations of 

the goals are provided in HUD's October 2000 GSE rule, which called for increases in the 

7

 For explanations of the overall role of Fannie Mae and Freddie Mac in the secondary mortgage market, 

see the recent study by the Congressional Budget Office (2000) and the four Congressionally-mandated 

privatization studies conducted during 1996 by the Congressional Budget Office (1996), U.S. General 

Accounting Office (1996), U.S. Department of Housing and Urban Development (1996), and U.S. 

Department of Treasury (1996). 

8

 For a discussion of the GSEs' underwriting standards, see Rutgers University (1998), The Urban Institute 

(1999), and Van Order and Schnare (1994). 

9

 102d Congress, S. Rep. No. 282, pages 31, 33, and 42-43. 

10 Within metropolitan areas, underserved areas are census tracts where (1) median income of families in 

the tract does not exceed 90 percent of the metropolitan area median income or (2) minorities comprise 30 

percent or more of the residents and the median income of families in the tract does not exceed 120 of area 

median income. 

3 
 

 

 

 

levels of the housing goals beginning in year 2001. For example, beginning in 2001, HUD 

requires that 20 percent of the GSEs' mortgage purchases serve special affordable borrowers, 

a substantial increase from the special affordable goal of 14 percent that was in place 

between 1997 and 2000.11 

There have been several studies by HUD staff and other researchers concerning the 

GSEs' performance in providing affordable lending under the housing goals.12 These studies 

focus on whether or not the GSEs are "leading the market" in funding affordable loans. 

"Leading the market" is typically determined by comparing (a) the percentage of the GSEs' 

purchases accounted for by a particular affordable lending category (say loans for lowincome families) with (b) the corresponding percentage for loans originated in the overall 

conventional conforming market. Most of these studies conclude that while the GSEs have 

significantly improved their affordable loan purchases under the housing goals, their 

performance lags that of primary lenders (such as banks and thrifts) in the overall 

conventional market.13 

This study contributes to this discussion by comparing the borrower and 

neighborhood characteristics of the GSEs' acquisition of home purchase mortgages with 

home loans originated in the market in 2000. This study utilizes the loan-level data that the 

GSEs report to HUD on the characteristics of loans that they purchase. In order to fully 

characterize the loans that the GSEs purchase, several analyses of these data are presented, 

either in the main body of the paper or in two appendices. Following earlier papers in this 

series, this analysis is conducted at a very aggregate level, as the GSEs' purchases are 

reported for all metropolitan areas combined.14 

B. Study Findings 

11 HUD also increased the low-mod goal from 42 percent to 50 percent and the underserved areas goal 

from 24 percent to 31 percent. For a discussion of the housing goals and the GSEs’ performance under the 

goals, see U.S. Department of Housing and Urban Development (2002b). 

12 See Bunce and Scheessele (1996, 1998), Canner and Gabriel (1992), Lind (1996a,b; 2000), Manchester 

(1998, 2002), Manchester et al. (1998), and U.S. Department of HUD (1996; 2000a,b). The GSE grant 

studies that HUD’s Office of Policy Development and Research (PD&R) recently funded used a variety of 

data bases and analytical techniques to examine the GSEs' affordable lending performance. Five of the 

eleven grant studies are presented in a special 2001 issue -- entitled Fannie Mae and Freddie Mac in the 

Housing Finance System: I -- of PD&R’s Cityscape: A Journal of Policy Development and Research. In 

that publication, see the overview of the studies by Gardner, et al. (2001) as well as the specific studies by 

Williams, McConnell and Nesiba (2001), McClure (2001), Boxall and Silver (2001), MacDonald (2001), 

and Pearce (2001). Also see Bradford (2000b) and Case and Gillen (2000) 

13 Fannie Mae and Freddie Mac each conduct similar analyses but reach different conclusions -- they 

conclude that they match or exceed the primary market in funding affordable loans for lower-income 

families. Their analyses are reported in their comments on HUD's proposed GSE rule; see Fannie Mae 

(2000) and Freddie Mac (2000). See U.S. Department of Housing and Urban Development (2000b) for 

HUD’s response to the GSEs’ comments. 

14 Other studies are beginning to examine the GSEs’ mortgage purchases in individual metropolitan areas. 

For examples, see the 2001 issue of Cityscape referenced above and Bradford (2000b). 

4 
 

 

 

 

Main Findings. There are five main findings from this study concerning the GSEs' 

purchases of single-family mortgages: 

• Fannie Mae and Freddie Mac have each improved their affordable lending 

performance since 1992, but during 2000 they continued to underperform the 

conventional conforming market in funding affordable home purchase loans for 

borrowers and neighborhoods targeted by the housing goals.15 

• The GSEs markedly improved their performance between 1999 and 2000, allowing 

them to partially close their gap relative to the market. 

• Shifts in the relative performance of Fannie Mae and Freddie Mac continued in 2000 

– as noted in the 1999 study, Freddie Mac exhibited poorer performance than Fannie 

Mae during most of the 1990s but, during 1999, the goals-qualifying share of Freddie 

Mac's single-family purchases was slightly higher than the corresponding share for 

Fannie Mae on each of the three housing goal categories: special affordable, lowand moderate-income, and underserved areas.16 This study finds that Freddie Mac 

continued to out-perform Fannie Mae on the two borrower-income categories 

(special affordable and low-mod) but during 2000 Fannie Mae caught and slightly 

out-performed Freddie Mac on the underserved areas goal. 

• The GSEs account for a significant share of the total (government as well as 

conventional conforming) market for home purchase loans, but their market share for 

each of the affordable lending categories is less than their share of the overall market; 

and they account for a very small share of the market for important groups such as 

minority first-time homebuyers. 

• The GSEs’ small market share in the first-time homebuyer market could be due to 

the preponderance of high downpayment loans in their mortgage purchases, although 

further study is needed to fully explain the reasons for the GSEs’ limited role in the 

first-time homebuyer market. 

Specific Findings. There are 16 specific findings from this study, organized under 

the following five topics: 

(B.1) Longer-term Performance of the GSEs; 

15 In this paper, the “affordable lending performance” of Fannie Mae and Freddie Mac refers to the 

performance of the GSEs in funding loans for low-income and underserved borrowers through their 

purchase (or guarantee) of loans originated by primary lenders. It does not, of course, imply that the GSEs 

themselves are lenders originating loans in the primary market. 

16 Throughout this paper, the term “goals-qualifying” refers to loans that qualify under the three GSE 

housing goals. The term “targeted borrowers” or “targeted groups” will refer to lower-income borrowers 

and others who have not been well-served by the mortgage market. 

5 
 

 

(B.2) Performance of the GSEs during 2000 and Recent Years; 

(B.3) Performance of the GSEs Based on Total (Home Purchase and Refinance) 

Loans; 

(B.4) GSE Market Shares; and, 

(B.5) Additional Findings. 

B.1 Longer-term Performance of the GSEs 

(1) Since the early nineties, the mortgage industry has introduced new affordable 

lending programs and has allowed greater flexibility in underwriting lower-income 

loans. There is evidence that these programs are paying off in terms of more 

mortgages for low-income and minority borrowers. Fannie Mae and Freddie Mac 

have played an active role in this upsurge of affordable lending, as indicated by the 

high growth rates of their goals-qualifying business. 

Between 1993 and 2000, the GSEs' purchases of home loans in metropolitan areas 

increased by 32 percent.17 Their purchases of home loans for the three housing 

goals increased at much higher rates -- 157 percent for special affordable loans, 

84 percent for low- and moderate-income loans, and 55 percent for loans in 

underserved census tracts. 

(2) Both Fannie Mae and Freddie Mac improved their purchases of affordable loans 

during the 1990s, as indicated by the increasing share of their business going to the 

three goals-qualifying categories.18 

Between 1992 and 2000, the special affordable share of Fannie Mae’s business 

more than doubled, rising from 6.3 percent to 13.0 percent, while the underserved 

areas share increased more modestly, from 18.3 percent to 23.6 percent (see Table 

A). The figures for Freddie Mac are similar. The special affordable share of 

Freddie Mac’s business rose from 6.5 percent to 14.3 percent, while the 

underserved areas share also increased more modestly, from 18.6 percent to 22.2 

percent. 

17 Throughout this paper, the terms "home loan" and "home mortgage" will refer to a "home purchase 

loan," as opposed to a "refinance loan." As noted earlier, the mortgage data reported in this paper are for 

metropolitan areas, unless stated otherwise. Restricting the GSE data to metropolitan areas is necessary to 

make it comparable with the HMDA-reported conventional primary market data, which is more reliable for 

metropolitan areas. The GSE and American Housing Survey data reported in Section V cover both 

metropolitan and non-metropolitan areas. 

18 Of the two borrower-income goals, this analysis will typically focus on the special affordable category, 

which is a much more targeted category than the rather broadly defined low- and moderate-income (lessthan-median-income) category. 

6 
 

 

(3) While both GSEs improved their performance during the 1990s, they lagged the 

market in providing affordable loans to low-income borrowers and underserved 

neighborhoods. Freddie Mac’s average performance, in particular, fell far short of 

market performance during the 1990s. Fannie Mae's average performance was 

better than Freddie Mac's during the 1993-2000 period as well as during the 1996-

2000 period, which covers the period under HUD's currently-defined housing 

goals.19 

Between 1993 and 2000, 8.9 percent of Freddie Mac's mortgage purchases were 

for very low-income borrowers, compared with 9.8 percent of Fannie Mae's 

purchases, 12.9 percent of loans originated by depositories, and 13.0 percent of 

loans originated in the conventional conforming market (without estimated B&C 

loans).20 

Considering the underserved areas category for the 1996-2000 period, 20.7 

percent of Freddie Mac's purchases financed properties in underserved 

neighborhoods, compared with 22.6 percent of Fannie Mae's purchases, 24.4 

percent of loans originated by depositories, and 25.2 percent of loans originated in 

the conventional conforming market. 

B.2 Performance of the GSEs During 2000 and Recent Years 

(4) In 2000, both Fannie Mae and Freddie Mac fell significantly below the market in 

funding affordable loans. 

In 2000, special affordable loans accounted for 13.0 percent of Fannie Mae's 

purchases, 14.3 percent of Freddie Mac's purchases, and 16.8 percent of loans 

19 HUD first implemented the current definitions of the special affordable and underserved areas goals in 

1996; until 2000, the targets for these two goals were 14 percent and 24 percent, respectively. See 

Manchester (1998) for the definitions of these two goals during the 1993-95 period. The low-mod goal has 

had the same definition since 1993, focusing on less-than-median income families; however, in 1995, HUD 

increased the percentage target for the low-mod goal from 30 percent to 40 percent for 1996 and 42 percent 

for 1997-2000. As noted earlier, HUD established even higher targets for all three housing goals 

beginning in 2001 -- special affordable (20 percent), low-mod (50 percent) and underserved areas (31 

percent). The reader should note that these overall goal targets are much higher than the performance 

percentages reported in this paper for the GSEs’ purchases of single-family-owner mortgages. Each GSE’s 

overall goals performance also incorporates their purchases of mortgages for multifamily and singlefamily-rental properties, which have much higher goals-qualifying percentages than do mortgages for 

single-family owner properties. For analysis of the GSEs’ overall performance on the housing goals, see 

U.S. Department of Housing and Urban Development (2000b). 

20 Unless otherwise noted, the conventional market data reported in this section exclude an estimate of 

B&C loans; the less-risky A-minus portion of the subprime market is included in the market definition. 

See Section III for a discussion of primary market definitions and the uncertainty surrounding estimates of 

the number of B&C loans in HMDA data. As noted there, B&C loans are much more likely to be 

refinance loans rather than home purchase loans. 

7 
 

 

 

 

originated in the market; thus, the "Fannie-Mae-to-market" ratio was 0.77 and the 

"Freddie-Mac-to-market" ratio was 0.85. (See Table A.) 21 

(5) After experiencing declines from 1997 to 1999, Fannie Mae's affordable lending 

performance increased during 2000, particularly in the underserved areas category. 

(See Figure A.) 

Fannie Mae's purchases of loans in underserved areas declined (as a percentage share 

of its total home loan purchases) throughout the 1997 to 1999 period, falling from 

23.5 percent in 1997 to 20.6 percent in 1999. But, in 2000, Fannie Mae’s 

underserved areas percentage jumped by three percentage points to 23.6 percent, 

which was similar to its level in 1997.22 

The share of Fannie Mae’s single-family-owner business going to special affordable 

home loans increased from 11.7 percent in 1997 to a peak of 13.2 percent in 1998 

before declining to 12.3 percent in 1999 and then rebounding to 13.0 percent in 

2000. 

(6) In 2000, Freddie Mac continued improving its affordable lending performance, 

particularly in the special affordable category. (See Figure A.) 

The share of Freddie Mac’s single-family-owner business going to special affordable 

home loans increased from 9.0 in 1997 to 12.5 in 1999, and then to 14.3 percent in 

2000. 

Freddie Mac's purchases of underserved areas loans also increased between 1997 and 

2000 but at a more modest rate -- from 19.9 percent in 1997 to 21.2 percent in 1999 

before increasing further to 22.2 percent in 2000. 

(7) The 1999 and 2000 shifts have reversed the long-standing pattern of Fannie Mae 

outperforming Freddie Mac. Freddie Mac's performance in 1999 matched (in fact, 

slightly surpassed) Fannie Mae's performance on all three housing goal categories, 

for the first time since 1992. In year 2000, Freddie Mac continued to out-perform 

Fannie Mae on the borrower-income categories while Fannie Mae surpassed 

Freddie Mac on the underserved areas category. 

Fannie Mae and Freddie Mac had practically the same performance in 1992 on 

the three housing goal categories -- special affordable loans accounted for 6.3 

percent of Fannie Mae's purchases and 6.5 percent of Freddie Mac's purchases, 

21 The fact that Freddie Mac's performance during 2000 was slightly better than Fannie Mae's performance 

seems at odds with the results reported in (3) above; the recent shift in performance between the two GSEs 

is explained in (7) below. 

22 As shown in Table 4 of Section III, the year 2000 underserved areas percentage of 23.6 percent was 

below Fannie Mae’s peak performances of 24-25 percent during 1994 and 1995. 

8 
for a "Fannie-Mae-to-Freddie-Mac" ratio of 0.97; the 1992 ratio for underserved 

areas was also 0.98 and that for low-mod, 1.02. (See Table A.) Reflecting Fannie 

Mae's much better performance, the special affordable "Fannie-Mae-to-FreddieMac" ratio had risen to 1.30 by 1997, the underserved areas ratio to 1.18, and the 

low-mod ratio to 1.10. 

However, in 1999, the "Fannie-Mae-to-Freddie-Mac" ratio for each of the three 

goals-qualifying categories fell to slightly below one. 1999 was the first year 

since 1992 that Freddie Mac had outperformed Fannie Mae in purchasing 

affordable home loans (although only by a very slight margin). 

In 2000, Freddie Mac’s sharper increases in special affordable and low-mod 

funding further reduced the “Fannie-Mae-to-Freddie-Mac” ratios for these two 

categories to 0.91 and 0.96, respectively. On the other hand, Fannie Mae’s 

sharper increase in underserved areas funding during 2000 resulted in the 

“Fannie-Mae-to-Freddie-Mac” ratio rising from slightly below one (0.97) in 1999 

to 1.06 in 2000. 

(8) Through 1998, Fannie Mae had significantly improved its performance relative 

to the market. But as a result of recent shifts in its purchases of affordable loans, 

Fannie Mae lagged the market even further in 2000 than it had in some earlier 

years. 

Through 1998, Fannie Mae had made progress closing its gap with the market. 

The "Fannie-Mae-to-market" ratio increased from 0.61 in 1992 to 0.86 in 1998 

for the special affordable category and from 0.82 to 0.95 for the underserved areas 

category. (See Table A.) 

However, Fannie Mae's decline in performance during 1999 resulted in the 

"Fannie-Mae-to-market" ratio falling sharply to 0.72 for special affordable and to 

0.82 for underserved areas. 

In 2000, Fannie Mae improved and reversed its declining trend, as the “FannieMae-to-market” ratios increased to 0.77 for special affordable purchases and to 

0.89 for underserved areas purchases. While higher than the 1999 ratios, these 

2000 “Fannie-Mae-to-market” ratios remained lower than Fannie Mae’s special 

affordable (0.86) and underserved areas (0.95) market ratios in 1998. 

(9) Freddie Mac's performance relative to the market has consistently improved as 

a result of the recent shifts in its purchases of affordable loans. Still, in 2000, 

Freddie Mac continued to lag the market in funding affordable loans. 

Unlike Fannie Mae, Freddie Mac had not made any progress through 1997 in 

closing its gap with the market. As shown in Table A, the "Freddie Mac-tomarket" ratio for the special affordable category actually declined from 0.63 in 

1992 to 0.59 in 1997. But Freddie Mac's sharp improvement in special affordable 

9 
 

 

 

 

purchases during 1998 and 1999 resulted in the "Freddie-Mac-to-market" ratio 

rising to 0.74, before increasing even further to 0.85 in 2000. After declining 

from 0.84 in 1992 to 0.80 in 1997, the "Freddie-Mac-to-market" ratio for 

underserved areas had risen only modestly to 0.84 by the year 2000. 

Thus, Freddie Mac’s recent improvements have allowed it to close its gap with 

the market, mainly for the special affordable category where its gap had been the 

widest. In 2000, Freddie Mac continued to fall short of the market on all goalsqualifying categories. 

B.3 Performance of the GSEs Based on Total (Home Purchase and Refinance) 

Loans 

(10) Section IV examines the GSEs' acquisitions of total loans (including refinance 

loans as well as home purchase loans). The main results, which are summarized in 

Table B, are similar to those discussed above for home purchase loans, with some 

minor differences. 

With respect to total loans, the recent shifts in performance between Fannie Mae 

and Freddie Mac occurred about one year earlier than those described above for 

home purchase loans. Freddie Mac essentially matched Fannie Mae in funding 

affordable loans during 1998; out-performed Fannie Mae during 1999 on all three 

goals-qualifying categories; and, in 2000, out-performed Fannie Mae on the 

borrower income categories but not on the underserved areas category. 

With respect to “leading the market”, the findings for total (home purchase and 

refinance) loans are similar to those discussed earlier for home purchase loans -- 

while both GSEs improved their performance during 2000, their performance 

continued to fall short of the market. (See the “GSE-to-market” ratios in Table 

B.)23 

B.4 GSE Market Shares 

This study includes an expanded “market share” analysis that documents the size 

of the GSEs’ contribution to important segments of the home purchase and first-time 

homebuyer markets. In this section, the market includes all home loans (both 

government and conventional) below the conforming loan limit. The main findings are 

as follows: 

(11) The GSEs account for a significant share of the total (government as well as 

23 As explained in Section IV, deducting B&C loans from the market totals has more impact on the market 

percentages for total (both home purchase and refinance) loans than for only home purchase loans. The 

effects of excluding B&C loans from the total market can be seen by comparing the third and eighth 

columns of data in Table 7. 

10 
 

 

conventional conforming) market for home purchase loans. However, their market 

share for each of the affordable lending categories is much less than their share of 

the overall market. 

The GSEs' purchases were estimated to be 46-48 percent of all home loans 

originated in metropolitan areas during 2000 but only 24-29 percent of loans 

originated for African-American and Hispanic borrowers and approximately 35-

37 percent of loans originated for low-income borrowers and for properties in 

underserved areas. 

A study by staff from the Federal Reserve Board suggests that the GSEs have a 

much more limited role in the affordable lending market than is suggested by the 

data presented above.24 The Fed study, which combined market share, 

downpayment, and default data, concluded that the GSEs play a very minimal 

role in providing credit support and assuming credit risk for low-income and 

minority borrowers; for example, the study concluded that in 1995 the GSEs 

provided only four percent of the credit support going to African-Americans and 

Hispanic borrowers. 

Section V of this study begins to reconcile these different results by examining 

the role of the GSEs in the first-time homebuyer market and the downpayment 

characteristics of mortgages purchased by the GSEs. 

(12) The market role of the GSEs appears to be particularly low in important 

market segments such as minority first-time homebuyers. 

Using American Housing Survey data on home purchases from 1997 to 1999, 

Section V estimates that the GSEs’ share of the market for first-time AfricanAmerican and Hispanic homebuyers was only 10-11 percent, or less than onethird of their share (36 percent) of all home purchases during that period. (See 

Figure B.)25 

(13) A noticeable pattern among the lower-income-borrower loans purchased by the 

GSEs is the predominance of loans with high downpayments. This pattern of 

purchasing mainly high downpayment loans is one factor explaining why the Fed 

study found such a small market role for the GSEs. It may be the explanation for 

the small role of Fannie Mae and Freddie Mac in the first-time homebuyer market. 

24 See Glenn B. Canner, Wayne Passmore, and Brian J. Surette, “Distribution of Credit Risk Among 

Providers of Mortgages to Lower-Income and Minority Homebuyers” in Federal Reserve Bulletin, 82(12): 

1077-1102, December, 1996. 

25 HMDA market data were not used because HMDA does not require lenders to report information on 

first-time homebuyers. As explained in Section V, the American Housing Survey data include both 

financed home purchases and homes purchased with cash. If only financed home purchases were used, the 

GSEs’ market shares would have been slightly higher but the various patterns discussed in the text would 

remain the same. 

11 
Further study of this issue is needed. 

During 2000, approximately 55 percent of Fannie Mae’s special affordable, lowmod, and underserved areas loans had downpayments of at least 20 percent, a 

percentage only slightly smaller that the corresponding percentage (59.0 percent) 

for all Fannie Mae’s home loan purchases. Similar patterns of high 

downpayments on the goals-qualifying loans were evident in Freddie Mac’s 2000 

purchases, as well as in prior years for both GSEs. 

B.5 Additional Findings 

Following the 1999 study, this update analysis examined additional topics such as 

the funding of loans for different racial and ethnic groups, the affordable lending 

performance of other major industry sectors (such as FHA and depositories), and the use 

of HMDA data for measuring the characteristics of loans originated in the conventional 

conforming market. 

(14) The share of Fannie Mae's and Freddie Mac's purchases of home loans for 

African-American borrowers exhibited different trends between 1997 and 2000, with 

Fannie Mae's share declining and Freddie Mac's share slightly increasing. In 2000, 

both GSEs' purchases of loans for African Americans fell significantly below the 

market. (See Figure C.) 

Loans for African-American borrowers declined from 4.5 percent of Fannie Mae's 

purchases in 1997 to 3.4 percent in 1999 before partially rebounding to 4.1 percent in 

2000. Fannie Mae’s performance during 2000 was 76 percent of the performance of 

the conventional conforming market (which was 5.4 percent in 2000). 

The share of African-American borrowers in Freddie Mac’s purchases increased 

from a low 3.2 percent in 1997 and 1998 to 4.3 percent in 2000. Thus, Freddie 

Mac’s performance during 2000 was 80 percent of market performance. 

(15) The 1999 paper raised questions about the overall performance of the 

conventional conforming market in financing homeownership for AfricanAmerican and Hispanic borrowers. For these two groups of minority borrowers, 

the conventional conforming market may set a low standard for evaluating the 

performance of the GSEs. This update paper reaches the same conclusion. (See 

Figure D.) 

In 2000, African-American and Hispanic borrowers accounted for 13.5 percent of the 

home loans originated in the conventional conforming market, compared with 36.2 

percent of loans insured by FHA, and 19.2 percent of loans originated in the total 

(government and conventional conforming combined) market. FHA-insured loans 

totaled only 19-20 percent of all home loans originated during 2000, but accounted 

for almost 40 percent of home loans going to African-American and Hispanic 

borrowers. There is evidence that some FHA borrowers might qualify for a 

12 
 

conventional or GSE loan. In addition, some studies conclude that conventional 

lenders steer minority borrowers to higher-cost FHA loans. However, as the 1999 

study noted, more research is needed before definitive conclusions can be reached 

about mortgage steering and the overlap between FHA and conventional loans. 

(16) Some studies have concluded that HMDA data overstate the share of market 

loans going to low-income borrowers and underserved areas. Appendix A reports 

data that do not support this conclusion. 

Appendix A compares the low-income and underserved areas characteristics of 

the GSEs' purchases of newly-originated ("current-year") loans as reported both 

by the GSEs' own data and by HMDA data.26 For recent years, HMDA data on 

loans sold to the GSEs do not always have higher percentages of low-income and 

underserved areas loans than the GSEs' own data on their purchases of newlyoriginated mortgages. For example, from 1996-2000, both HMDA and Fannie 

Mae reported that special affordable loans accounted for 11.7 percent of Fannie 

Mae’s purchases of newly-originated loans. HMDA reported a 21.0 underserved 

areas percentage for Fannie Mae, which was practically the same as the 

underserved areas percentage (21.3 percent) reported by Fannie Mae itself. Given 

that similar patterns were observed for Freddie Mac’s mortgage purchases, it 

appears that there is no bias in the HMDA-based market benchmarks used in this 

study. 

C. Organization of the Remainder of the Paper 

Section II summarizes the growth in affordable lending during the 1990s and briefly 

examines the performance of major segments of the mortgage market, such as FHA, the 

GSEs and depositories (banks and thrifts). Sections III and IV provide a detailed analysis of 

the affordable lending performance of Fannie Mae and Freddie Mac relative to each other 

and relative to the conventional conforming market. Section III focuses on home purchase 

loans, which are linked to changes in homeownership, while Section IV reports results for 

total loans (that is, refinance as well as home purchase loans). Section V presents a market 

share analysis that estimates the contribution of the GSEs to the overall funding of 

mortgages for various targeted groups, such as low-income and minority borrowers as well 

as first-time homebuyers. In addition to reporting findings about relative performance, this 

paper necessarily addresses several data and technical issues that arise when comparing the 

GSEs with the market. Appendix A covers several of the technical issues. 

26 In this comparison, a higher special affordable percentage for HMDA-reported mortgage originations 

that lenders report as also being sold to the GSEs -- as compared with the special affordable percentage for 

newly-originated mortgages that the GSEs report as being actually purchased by them -- would suggest 

that HMDA market data are biased; that is, in this situation, the special affordable percentage for all 

mortgage originations reported in HMDA would likely be larger than the special affordable percentage for 

all new mortgage originations, including those not reported in HMDA as well as those reported in HMDA. 

13 
 

 

 

II. Affordable Lending in the Mortgage Market27 

During the last decade, lenders, private mortgage insurers and the GSEs 

implemented numerous changes in their business practices to extend homeownership 

opportunities to lower-income and historically underserved households. The industry 

started offering more customized products, more flexible underwriting, and expanded 

outreach so that the benefits of the mortgage market could be extended to those who have 

not been adequately served through traditional products, underwriting, and marketing. 

Following the 1999 paper, subsection A briefly summarizes the various initiatives 

undertaken by the industry and the GSEs to expand affordable housing. 

Subsection B then compares the major market sectors in terms of their focus on 

affordable lending. To place the GSEs in the context of the overall market, this section 

examines data for government (FHA, VA) loans as well as conventional conforming loans. 

The important role of FHA in the affordable lending market is highlighted and questions are 

raised about whether the conventional conforming market could be doing a better job 

helping low-income and minority borrowers obtain access to mortgage credit. With this 

general background, Sections III and IV will evaluate the GSEs' performance within the 

conventional conforming market. 

A. Trends in Affordable Lending During the Last Decade 

During the 1990s, the mortgage industry began offering a wide range of 

affordable lending programs designed to attract those who had not been adequately 

served through traditional programs. While the details of these affordable loan programs 

vary, they generally have four distinct elements: targeted groups, special marketing and 

outreach, the application of flexible underwriting, and the use of risk mitigation 

activities.28 Targeted groups are usually defined with eligibility criteria tied to borrower 

or neighborhood income, loan-to-value ratios, homebuyer status (e.g., first-time 

homebuyers), and other factors. Borrower or neighborhood income is typically the most 

important eligibility criteria, with eligibility restricted to lower-income families or census 

tracts. 

Special marketing typically includes homebuyer education programs and outreach 

through nonprofit and community groups that are active in targeted neighborhoods. In 

fact, partnership efforts are quite common with local community groups often responsible 

for screening the applicants and making recommendations to lenders. In addition, 

27 Readers not interested in this background section on affordable lending may want to proceed to Section 

III, which compares the GSEs and the primary conventional conforming market in terms of the three goalsqualifying categories. 

28 This description of affordable lending programs is taken from Avery et al. (1996). Also see Rutgers 

University (1998), The Urban Institute (1999), and HUD (2000a,b) for other descriptions of the rise in 

affordable lending during the 1990s. 

14 
 

 

 

lenders sometimes pool their resources and operate their affordable programs through 

lender consortia. 

Flexible underwriting is perhaps the most important attribute of special lending 

programs. Flexible underwriting can have the following characteristics: low-downpayment loans, high debt-to-income ratios, reduced cash reserve requirements, and use of 

alternative credit history (such as payment of rent and utilities). To reduce the applicant’s 

costs, lenders sometimes offer below-market interest rates and waive private mortgage 

insurance requirements. As noted above, these underwriting changes are often 

accompanied by homeownership and credit counseling to ensure homeowners are ready 

for the responsibilities of homeownership. A recent study by Freddie Mac suggests that 

homeownership counseling can reduce delinquent mortgage payments (Hirad and Zorn, 

2001). 

The industry has also engaged in intensive loss mitigation to control any extra 

default risks associated with their special lending programs. This can include quick 

follow-up calls to borrowers who miss a monthly payments as well as use of automated 

models that assist servicers in determining which loss mitigation strategy should be 

pursued for different situations involving a delinquent borrower. The industry’s efforts 

to control the default risks of their special lending programs and the early default 

performance of these programs are both discussed in HUD (2000a). 

GSE Initiatives.29 Fannie Mae and Freddie Mac have each been playing an 

active role in these market initiatives. During 1998, Fannie Mae introduced its “Flexible 

97” and Freddie Mac introduced its “Alt 97” low downpayment lending programs. 

Under these programs borrowers are required to put down only 3 percent of the purchase 

price. The downpayment, as well as closing costs, can be obtained from a variety of 

sources, including gifts, grants or loans from a family member, the government, a nonprofit agency and loans secured by life insurance policies, retirement accounts or other 

assets. The GSEs have recently started programs for "A-minus" borrowers (i.e., those 

with blemished credit) that offer interest rate reductions for those borrowers who are not 

delinquent on their mortgage payments for a period of two years. 

In addition to developing new affordable products, the GSEs and lenders have 

been entering into partnerships with local governments and nonprofit organizations to 

increase mortgage access to underserved borrowers. Fannie Mae’s partnership offices in 

50 central cities, serving to coordinate Fannie Mae’s programs with local lenders and 

affordable housing groups, are an example of this initiative.30 Freddie Mac does not have 

a partnership office structure similar to Fannie Mae’s, but it has undertaken a number of 

initiatives in specific metropolitan areas. 

29 For information on the GSEs’ affordable lending initiatives, see the various Annual Housing Activities 

Reports that they have submitted to HUD since 1993. Examples include Fannie Mae (2001) and Freddie 

Mac (2001). 

30 See Boxall and Silver (2001) for the functions of Fannie Mae's partnership offices. 

15 
 

 

The GSEs have also been modifying their underwriting standards to attempt to 

address the needs of families who find qualifying under traditional guidelines difficult. 

The changes to underwriting standards include, for example: using a stable income 

standard rather than a stable job standard, which particularly benefits low-skilled 

applicants who have successfully remained employed, even with frequent job changes; 

and allowing pooling of funds for qualification purposes, which benefits applicants with 

extended family members. In conjunction with changes in their underwriting standards, 

the GSEs have encouraged homeownership counseling to ensure homeowners are ready 

for the responsibilities of homeownership and loss mitigation programs to keep families 

in dtheir homes and to control their own credit risks. 

1993-2000 Trends. HMDA data suggest that the industry and GSE initiatives are 

increasing the flow of credit to underserved borrowers. Between 1993 and 2000, 

conventional loans to low-income and minority families increased at much faster rates 

than loans to higher income and non-minority families. As shown below, conventional 

home purchase originations to African-American and Hispanic borrowers more than 

doubled between 1993 and 2000 and home loans for low-income borrowers and census 

tracts almost doubled during this period. 

1993-2000 Growth 1993-2000 Growth 

Rate Rate 

All Home Loans Conventional Home 

Loans 

African-American Borrowers 89% 122% 

Hispanic Borrowers 138% 147% 

White Borrowers 25% 35% 

Low-Income Borrower (Less Than 80% 79% 97% 

AMI) 

Upper-Income Borrower (Greater Than 

120% AMI) 56% 66% 

Low-Income Census Tract 87% 113% 

Upper-Income Census Tract 52% 60% 

The increase in GSE purchases for lower-income borrowers has shown a similar pattern -

- while their annual purchases of all home loans increased by 32 percent between 1993 

16 
 

 

 

 

and 2000, their special affordable purchases increased by 157 percent, their low-mod 

purchases increased by 84 percent, and their purchases in underserved areas increased by 

55 percent during this period. 

While low interest rates and economic expansion certainly played an important 

role in the substantial increase in conventional affordable lending in recent years, most 

observers believe that the GSE housing goals and the Community Reinvestment Act 

(discussed later) were important contributors. 

B. Affordable Lending Shares by Major Market Segment 

Before comparing the GSEs’ performance with primary lenders in the conventional 

conforming market, it is useful to examine the role of the conventional conforming market in 

funding affordable loans. Therefore, Table 1 reports borrower and neighborhood 

characteristics for home purchase mortgages insured by FHA, purchased by the GSEs, 

originated by depository (mainly banks and thrift) institutions, and originated in the 

conventional conforming market and in the total market for owner-occupied properties in 

metropolitan areas.31 In this case, the "total" market consists of both the conventional 

conforming market and the government (mainly FHA and VA loans) market; “jumbo” loans 

above the conventional conforming loan limit are excluded from this analysis. 32 

HMDA is the source of the FHA, depository, and market data, while the GSE data is 

their own data. Data for low-income, African-American, Hispanic, and minority borrowers 

are provided as well as data for four types of neighborhoods – low-income census tracts, 

tracts where minorities (or African-Americans) account for more than 30 percent of the 

census tract population, and underserved areas as defined by HUD. Thus, Table 1 offers a 

good summary of lending to low-income and minority borrowers and their communities for 

the years 1997 to 2000. 33 The discussion below will focus on the year 2000. 

The focus of different market sectors on affordable lending is summarized by the 

"distribution of business" percentages reported in Table 1, which are defined as the share 

of loans originated (or, for the GSEs, purchased) that had a particular borrower or 

neighborhood characteristic. The interpretation of the “distribution of business” 

percentages can be illustrated using the FHA percentage for low-income borrowers: 

during 2000, 48.7 percent of all FHA-insured home purchase loans in metropolitan areas 

31 Table 2 provides the same information as Table 1 but for total (both home purchase and refinance) loans. 

Thus, it provides a complete picture of overall mortgage activity. 

32 The “Total Market” is defined as all loans (including both government and conventional) below the 

conforming loan limit of $214,600 in 1997, $227,150 in 1998, $240,000 in 1999, and $252,700 in 2000. 

33 The affordable market shares reported in Table 1 for the “Conventional Conforming Market W/O B&C” 

were derived by excluding the estimated number of B&C loans from the HMDA data. Because B&C 

lenders operate mainly in the refinance sector, excluding these loans from the conforming market has little 

impact on the home purchase percentages reported in Table 1. HUD’s method for excluding B&C loans is 

explained in Section III. 

17 
 

were originated for borrowers with an income less than 80 percent of the local area 

median income. These percentages are to be contrasted with "market share" percentages, 

which are presented later in Section V. A “market share” percentage is the share of loans 

with a particular borrower or neighborhood characteristic that was funded by a particular 

market sector (e.g., FHA-insured, originated or held by a depository, purchased by the 

GSEs, etc.). As will be discussed later, FHA’s “market share” for low-income borrowers 

is 28 percent which is interpreted as follows: of all home purchase loans originated for 

low-income borrowers in metropolitan areas during 2000, 28 percent were FHA-insured 

loans. Thus, in this example, the “distribution of business” percentage measures the 

importance (or concentration) of low-income borrowers in FHA’s overall business while 

the “market share” percentage measures the importance of FHA to the market’s overall 

funding of loans for low-income borrowers. 

Both concepts are important for evaluating performance – for an industry sector 

such as FHA or the GSEs to have a significant impact on lending to a targeted group, that 

sector’s business must be concentrated on the targeted group and that sector must be of 

some size. The discussion below and in Sections III-IV will focus on the degree to which 

different mortgage sectors concentrate on targeted groups, while Section V will provide 

estimates of market shares. 

The main insights from the “distribution of business” percentages in Table 1 

pertain to four topics. 

(1) FHA-Insured Loans. FHA has traditionally been the mechanism used by 

borrowers who have difficulty obtaining mortgage financing in the private conventional 

market. FHA has long been recognized as the major source of funding for first-time, 

low-income and minority homebuyers who have not been able to raise cash for large 

downpayments.34 Table 1 shows that FHA places much more emphasis on affordable 

lending than the other market sectors. Low-income borrowers accounted for 48.7 percent 

of FHA-insured loans during 2000, compared with 25.9 percent of the home loans 

purchased by the GSEs, 29.7 percent of home loans originated by depositories, and 29.8 

percent of conventional conforming loans. Likewise, 42.1 percent of FHA-insured loans 

were originated in underserved census tracts, while only 23.0 percent of the GSEpurchased loans and 27.1 percent of conventional conforming loans were originated in 

these tracts.35 As will be discussed in Section V, FHA’s share of the minority lending 

market is particularly high -- while FHA insured only 19-20 percent of all home purchase 

34 Almost two-thirds of the borrowers with an FHA-insured home purchase loan make a downpayment less 

than five percent and over 80 percent are first-time home buyers. For discussions of the role of FHA in the 

mortgage market, see Bunce et al. (1995), U.S. General Accounting Office (1998), and Office of Policy 

Development and Research (2000). See Bunce, Reeder and Scheessele (1999) for data on the credit 

characteristics of FHA borrowers. 

35 FHA, which focuses on first-time homebuyers and low downpayment loans, experiences higher 

mortgage defaults than conventional lenders and the GSEs. Still, the FHA system is actuarially sound 

because it charges an insurance premium that covers the higher default costs. See Deloitte & Touche 

(2001) for the results of FHA's latest actuarial analysis. 

18 
 

mortgages originated in metropolitan areas during 2000, it is estimated that FHA insured 

37-38 percent of all home loans originated for African-American and Hispanic 

borrowers. 

(2) Conventional Minority Lending. The affordable lending shares for the 

conventional conforming sector are low for minority borrowers, particularly AfricanAmerican and Hispanic borrowers. These borrowers accounted for only 14.2 percent of 

all conventional conforming loans originated during 2000, compared with 36.2 percent of 

FHA-insured loans and 19.2 percent of all loans originated in the total market. The 

African-American and Hispanic share of the GSEs’ purchases is even lower than the 

corresponding share for the conventional conforming market.36 In 2000, home purchase 

loans to African-American and Hispanic borrowers accounted for 10.9 percent of Freddie 

Mac’s purchases, 12.1 percent of Fannie Mae’s purchases, and 13.5 percent of loans 

originated in the conventional conforming market (with B&C loans excluded from the 

market definition).37 Not surprisingly, the minority lending performance of conventional 

lenders has been subject to much criticism. Recent studies contend that primary lenders 

in the conventional market are not doing their fair share of minority lending which forces 

minorities, particularly African-American and Hispanic borrowers, to rely on more costly 

FHA and subprime loans.38 

(3) Fannie Mae and Freddie Mac. During the 1997-2000 period, the GSEs 

lagged the conventional conforming market (defined without B&C loans) in funding 

affordable loans for low-income families and their neighborhoods – in 2000, for example, 

low-income census tracts accounted for 9.1 percent of Freddie Mac's purchases, 9.6 

percent of Fannie Mae's purchases, 11.9 percent of loans originated by depositories, and 

11.5 percent of home loans originated by conventional conforming lenders. Fannie 

Mae’s performance between 1997 and 2000 has consistently been higher than Freddie 

Mac’s for Hispanic and minority borrowers and high-minority census tracts. However, 

as the 1997-2000 annual percentages indicate, the relative performance of the two GSEs 

has recently shifted back and forth on the remaining categories listed in Table 1. For 

example, during both 1997 and 1998, low-income census tracts accounted for 7.9 percent 

of Freddie Mac's purchases, compared with about 9.5 percent of Fannie Mae's purchases. 

36 For a comprehensive analysis of the GSEs' purchases of minority loans, see Harold L. Bunce, An 

Analysis of GSE Purchases of Mortgages for African-American Borrowers and their Neighborhoods, 

December, 2000. 

37 As shown in Table 1, the results change somewhat when other minority borrowers are considered. 

During 1997 and 1998, Fannie Mae purchased mortgages for minority borrowers and their neighborhoods 

at higher rates than these loans were originated by primary lenders in the conventional conforming market. 

For example, 17.7 percent of Fannie Mae's 1997 purchases were mortgages for minority borrowers, 

compared with 16.3 percent of conventional conforming loans (without B&C). However, during 1999 and 

2000, Fannie Mae was slightly below the market for these groups. 

38 See Green and Associates. Fair Lending in Montgomery County: A Home Mortgage Lending Study, a 

report prepared for the Montgomery County Human Relations Commission, (March 1998). Also see 

Bradford (2000a,b). In addition, Pennington-Cross, et al. (2000) suggest that some minorities receiving 

FHA loans could qualify for conventional loans. 

19 
 

 

 

Between 1998 and 1999, Freddie Mac's performance improved while Fannie Mae's 

declined with the result that Freddie Mac surpassed Fannie Mae. But during 2000, Fannie 

Mae’s low-income-tract percentage increased to 9.6 percent, while Freddie Mac’s 

increased to only 9.1 percent, thus re-establishing Fannie Mae’s higher performance in 

this category. A different pattern occurred for low-income borrowers. Freddie Mac, 

which in 1997 fell behind Fannie Mae, sharply increased its low-income-borrower 

percentage from 19.2 percent in 1997 to 27.1 percent in 2000 while Fannie Mae more 

modestly increased its initially higher low-income-borrower percentage of 22.6 percent 

in 1997, to only 24.9 percent by 2000. A more complete analysis of these trends for the 

GSEs' purchases of mortgages qualifying for the housing goals is provided below in 

Sections III and IV. 

(4) Depositories. Finally, within the conventional conforming market, depository 

institutions are important providers of affordable lending for lower-income families and 

their neighborhoods.39 As shown in Table 1, underserved areas accounted for 26.7 

percent of all depository originations during 2000, which was almost the same as the 

underserved areas percentage (27.1 percent) for the overall conventional conforming 

market.40 Depository lenders have extensive knowledge of their communities and direct 

interactions with their borrowers, which may enable them to introduce flexibility into 

their underwriting standards without unduly increasing their credit risk (see Avery et al., 

1996). Another important factor influencing the types of loans held by depository 

lenders is the Community Reinvestment Act (CRA), which requires depository 

institutions to help meet the credit needs of their communities. CRA provides an 

incentive for lenders to initiate affordable lending programs with underwriting 

flexibility.41 CRA loans are typically made to low- and moderate-income borrowers 

earning less than 80 percent of median income for their area, and in moderate-income 

neighborhoods. A recent report by the Department of Treasury indicates that CRA 

lending has been somewhat effective in stimulating lending to low- and moderate-income 

(LMI) borrowers and areas.42 

39 Table 1 includes data for all loans originated by depositories as well as for the subset of loans originated 

but not sold, the latter being a proxy for depository portfolio lending. (See the notes to Table 1 for 

definitions of the depository data.) 

40 As shown in Table 1, depository institutions resemble other conventional lenders in their relatively low 

level of originating loans for African-American, Hispanic and minority borrowers. 

41 For an analysis of the impact of CRA agreements signed by lending institutions, see Alex Schwartz, 

“From Confrontation to Collaboration? Banks, Community Groups, and the Implementation of Community 

Reinvestment Agreements”, Housing Policy Debate, 9(3), (1998), pp. 631-662. 

42 See Robert E. Litan, Nicolas P. Retsinas, Eric S. Belsky, and Susan White Haag, The Community 

Reinvestment Act After Financial Modernization: A Baseline Report, U.S. Department of Treasury, April 

2000. 

20 
 

 

 

 

 

III. GSEs Compared with the Primary Conventional Conforming Mortgage 

Market 

This section provides a more detailed analysis of the extent to which the GSEs’ 

loan purchases mirror or depart from the patterns found in the primary mortgage market. 

As in the previous section, the GSEs' affordable lending performance is also compared 

with the performance of depository lenders such as commercial banks and thrift 

institutions. Dimensions of lending considered include the borrower income and 

underserved areas dimensions covered by the three housing goals -- the "goalsqualifying" categories examined here include very low-income, special affordable, and 

less-than-median income borrowers and underserved areas. Subsection A defines the 

primary mortgage market and discusses some technical issues related to the use of GSE 

and HMDA data; subsection B presents the results. 

A. Definition of Primary Market and Some Technical Issues 

The market analysis in this section is based mainly on HMDA data for home 

purchase loans originated in the conventional conforming market of metropolitan areas 

during the years 1992 to 2000. The conventional conforming market is used as the 

benchmark against which to evaluate the GSEs because that is the market definition 

Congress requires that HUD consider when setting the affordable housing goals. 

However, as discussed in Section II, some have questioned whether conventional 

conforming lenders are doing an adequate job meeting the credit needs of minority 

borrowers which suggests that this market may be a low benchmark.43 

Manufactured Housing Loans. Questions have arisen about whether loans on 

manufactured housing should be excluded when comparing the primary market with the 

GSEs (Fannie Mae, 2000; Freddie Mac, 2000). While the GSEs have not played a 

significant role in the manufactured housing loan market in the past, they have been 

looking for ways to increase their purchases of these loans. But more importantly, the 

manufactured housing sector is one of the most important providers of affordable 

housing, which makes it appropriate to include this sector in the market definition. As 

discussed in HUD's final GSE rule (HUD, 2000b), HUD believes that the manufactured 

housing market is an important source of low-income loans and for that reason, includes 

this market in most of its affordable lending analyses. However, for comparison 

purposes, data are presented for the primary market defined both to include and exclude 

mortgages originated by manufactured housing lenders. It should also be noted that 

because this analysis focuses on metropolitan areas, it does not include the substantial 

number of manufactured housing loans originated in non-metropolitan areas. 

43 The market definition in this section is narrower than the data presented earlier in Section II and Tables 1 

and 2, which covered all loans (both government and conventional) less than or equal to the conforming 

loan limit. As in that section, only the GSEs’ purchases of conventional conforming loans are considered; 

their purchases of FHA-insured, VA-guaranteed, and Rural Housing Service loans are excluded from this 

analysis. 

21 
 

 

 

Subprime Loans. Questions have also arisen about whether subprime loans 

should be excluded when comparing the primary market with the GSEs (Fannie Mae, 

2000; Freddie Mac, 2000). In its final GSE rule, HUD argued that the low-income and 

minority borrowers in the A-minus portion of the subprime market could benefit from the 

standardization and lower interest rates that typically accompany an active secondary 

market effort by the GSEs. A-minus loans are not nearly as risky as B&C loans and the 

GSEs have already started purchasing these loans. Thus, HUD concludes that A-minus 

loans should be included in the market benchmark. With respect to the remaining B&C 

portion of the subprime market, HUD's final GSE rule estimated the effects of excluding 

the B&C loans from the market definition (see HUD, 2000b). 

Unfortunately, HMDA does not identify subprime loans, much less separate them 

into their A-minus and B&C components.44 Thus, it is not possible to exclude B&C loans 

from the HMDA market data. However, Randall M. Scheessele at HUD has identified 

HMDA reporters that primarily originate subprime loans.45 Scheessele has identified 

approximately 300 lenders that probably account for about 60-70 percent of the subprime 

market. To adjust HMDA data for B&C loans, this analysis follows HUD (2000b) which 

assumes that the B&C portion of the subprime market is equal to one-half of the loans 

originated by the subprime lenders included in Scheessele’s list.46 As shown below, the 

effects of adjusting the various market percentages for B&C loans are minor mostly 

because the analysis in this section focuses on home purchase loans, which historically 

have accounted for less than one quarter of the mortgages originated by subprime lenders 

-- the subprime market is mainly a refinance market.47 

Lender-Purchased Loans in HMDA. When analyzing HMDA data, Fannie 

Mae includes in its market totals those HMDA loans identified as having been purchased 

by the reporting lender, above and beyond loans that were originated by the reporting 

lender (Fannie Mae, 2000).48 Fannie Mae contends that there are a subset of loans 

44 And there is some evidence that many subprime loans are not even reported to HMDA, although there is 

nothing conclusive on this issue. See Fair Lending/CRA Compass, (June 1999), p. 3. 

45 The list of subprime lenders as well as Scheessele’s list of manufactured housing lenders are available at 

http://www.huduser.org/publications/hsgfin.html. 

46 The one-half estimate may be too conservative as some observers estimate that B&C loans account for 

only 30-40 percent of the subprime market. However, varying the B&C share from 50 percent to 30 

percent does not significantly change the following analysis of home purchase loans because subprime 

loans are mainly for refinance purposes. 

47 The reductions in the market shares are more significant for total loans, which include refinance as well 

as home purchase loans; for data on total loans, see Tables 6 and 7 in Section IV. It should be noted that 

subprime lenders have been focusing more on home purchase loans recently. The home purchase share of 

loans originated by the subprime lenders in Scheessele’s list increased from 20 percent in 1998 to 25 

percent in 1999 to 33 percent in 2000. 

48 In 2000, lenders reported in HMDA that they purchased 806,393 conventional conforming, home 

purchase loans in metropolitan areas; this compares with 2,605,400 loans that these same lenders reported 

22 
 

 

 

originated by brokers and subsequently purchased by wholesale lenders that are neither 

reported by the brokers nor the wholesale lenders as originations but are reported by the 

wholesale lenders as purchased loans. According to Fannie Mae, these HMDA-reported 

purchased loans should be added to HMDA-reported originated loans to arrive at an 

estimate of total mortgage originations. 

This paper’s market definition includes only HMDA-reported originations; 

purchased loans are excluded from the market definition. While some purchased loans 

may not be reported as originations in HMDA (the Fannie Mae argument), there are 

several reasons for assuming that most HMDA-reported purchased loans are also 

reported in HMDA as market originations. First, Fed staff has told HUD that including 

purchased loans would result in double counting mortgage originations (Scheessele, 

1998). Second, comparisons of HMDA-reported FHA data with data reported by FHA 

supports the Fed’s conclusion. For instance, FHA’s own data indicate that during 1999 

FHA insured 946,000 home purchase loans (covering both metropolitan and nonmetropolitan areas); the sum of HMDA-reported purchased home loans and HMDAreported originated home loans in metropolitan areas alone yields a much higher figure of 

1,157,000 FHA-insured loans during 1999.49 While these calculations are for the FHA 

market (rather than the conventional market), they suggest that including HMDAreported purchased loans in the market definition would overstate mortgage origination 

totals. Third, Abt Associates surveyed nine wholesale lenders and questioned them 

concerning their guidelines for reporting in HMDA loans purchased from brokers. Most 

of these lenders said brokered loans were reported as originations if they [the wholesale 

lender] make the credit decision; this policy is consistent with the Fed’s guidelines for 

HMDA reporting. Abt Associates concluded that “brokered loans do seem more likely to 

be reported as originations...”50 

that they originated in metropolitan areas. 

49 A more sophisticated analysis utilizing metropolitan area data for year 2000 yielded the same results as 

the simple example in the text. A matching procedure was developed for identifying FHA-insured 

purchased loans as reported in HMDA that were equivalent to FHA-insured loans as reported by FHA. 

These two sets of loans were matched in terms of their census tract location, loan amount, and borrower 

income, gender, and race or ethnicity. Based on this matching analysis, 138,344 HMDA-reported 

purchased loans were estimated to be duplicates of FHA-reported originations; subtracting these 138,344 

loans from the total number (386,653) of HMDA-reported purchased loans yielded a net of 248,308 

HMDA-reported purchased loans that were not considered duplicates of FHA-reported originations. In 

this example, implementing the Fannie Mae approach for estimating the HMDA-based volume of FHAinsured mortgage originations involves adding the 248,308 HMDA-reported purchased loans to 700,938 

HMDA-reported, FHA-insured originations; following this approach suggests that FHA-insured 949,246 

newly-originated home mortgages in metropolitan areas during 2000. However, FHA's own data show that 

there were only 761,027 FHA-insured home loans originated in metropolitan areas during 2000. Again, 

this large discrepancy suggests that a market estimate based on adding HMDA-reported purchased loans to 

HMDA-reported originations would substantially overstate the volume of mortgage originations in 

metropolitan areas. 

50 See Chapter III, “Reporting of Brokered and Correspondent Loans under HMDA”, in Exploratory Study 

of the Accuracy of HMDA Data, by Abt Associates Inc. under contract for the Office of Policy 

Development and Research, HUD, February 12, 1999 (page 18). 

23 
 

 

 

 

Finally, it should be noted that including purchased loans in the market definition 

does not significantly change the goals-qualifying shares of the market, mostly because 

borrower income data are missing for about 60 percent of purchased loans. In 2000, the 

following goals-qualifying shares for the conventional conforming home purchase market 

are obtained when both purchased and originated loans are included in the market 

definition: special affordable (16.8 percent), low-mod (44.5 percent), and underserved 

areas (27.4 percent). Defining the market to include only originated loans yields similar 

goals-qualifying shares: special affordable (17.1 percent), low-mod (44.8 percent), and 

underserved areas (27.1 percent) 

GSE-HMDA Data Issues. The GSE figures reported in this section are based on 

mortgage purchase data that Fannie Mae and Freddie Mac report annually to HUD; the 

market figures are taken from HMDA data. For any particular calendar year, the GSE 

data that are reported to HUD include their purchases of mortgages originated in prior 

years as well as their purchases of mortgages originated during the current year.51 The 

market data reported by HMDA include only mortgages originated in the current year. 

This means that the GSE-versus-market comparisons are defined somewhat 

inconsistently for any particular calendar year. Each year, the GSEs have newlyoriginated loans available for purchase, but they can also purchase loans from a large 

stock of seasoned (prior-year) loans currently being held in the portfolios of depository 

lenders. One method for making the data more consistent is to aggregate the data over 

several years, instead of focusing on annual data. This provides a clearer picture of the 

types of loans that have been originated and are available for purchase by the GSEs. This 

approach is taken in Table 3, which is discussed below. 

The approach of including the GSEs' purchases of both "current-year" and "prioryear" mortgages was chosen in order to give the GSEs full credit for their mortgage 

purchase activity in any particular year; this approach is also consistent with the statutory 

requirement for measuring GSE performance under the housing goals. Appendix A to 

this paper shows the effects on the analysis of restricting the GSEs' data to their 

purchases of only "current year" mortgages. That appendix also addresses other issues 

including the GSEs' criticisms of HUD's past use of HMDA data to measure their 

performance and the GSEs' assertion that HMDA data overstate the low-income and 

underserved areas portion of the mortgage market. 

B. Affordable Lending by the GSEs and the Market 

Overall Performance, 1993-2000. Table 3 summarizes goals-qualifying lending 

by the GSEs, depositories and the conforming market for the eight-year period between 

1993 and 2000 and for the more recent 1996-2000 period, when the current definitions of 

the housing goals were in effect. As noted above, the data are aggregated over time to 

51 In general, about one-fourth of the GSEs’ purchases are prior-year loans. A significant portion of their 

prior-year purchases are “pipeline” loans, that is, they were originated in the last few months of the 

calendar year prior to GSE purchase. 

24 
 

 

 

 

provide a clear picture of how the GSEs' purchases of both current-year and prior-year 

loans compare with the types of mortgages that have been originated during the past few 

years. Given the importance of the GSEs for expanding homeownership, this section 

focuses on home purchase mortgages; Section IV will more briefly discuss the GSEs’ 

overall performance, including refinance as well as home purchase loans. Several points 

stand out concerning the affordable lending performance of Freddie Mac and Fannie Mae 

through 2000. 

Freddie Mac lagged both Fannie Mae and the primary market in funding 

affordable home loans in metropolitan areas between 1993 and 2000. During that period, 

8.9 percent of Freddie Mac's mortgage purchases were for very low-income borrowers, 

compared with 9.8 percent of Fannie Mae's purchases, 12.9 percent of loans originated by 

depositories,52 and 13.0 percent of loans originated in the conforming market without 

B&C loans (or 11.4 percent if manufactured home loans are excluded from the 

conforming market definition).53 

A similar pattern characterized the more recent 1996-2000 period. Between 1996 

and 2000, 37.6 percent of Freddie Mac's purchases were for low- and moderate-income 

borrowers, compared with 39.0 percent of Fannie Mae's purchases, 42.6 percent of loans 

originated by depositories and 43.4 percent of loans originated in the primary market. 

Over the same period, 20.7 percent of Freddie Mac's purchases financed properties in 

underserved neighborhoods, compared with 22.6 percent of Fannie Mae's purchases, 24.4 

percent of depository originations, and 25.2 percent of loans originated in the 

conventional conforming market.54 

Thus, Fannie Mae's affordable lending performance has been better than Freddie 

Mac's over the 1993 to 2000 period as well as during the more recent 1996 to 2000 

period. During these two periods, both Fannie Mae and Freddie Mac lagged depositories 

and the overall market in funding affordable loans. However, as the above comparisons 

indicate, Fannie Mae's performance has been closer to the market than Freddie Mac's. 

The remainder of this section focuses on the annual data reported in Tables 4 and 

5. As explained below, there was a change in the relative positions of Fannie Mae and 

Freddie Mac during 1999, and again in 2000. Between 1993 and 1998, Freddie Mac’s 

performance fell below Fannie Mae’s, but a sharp improvement in Freddie Mac’s 

performance during 1999 pushed it pass Fannie Mae on all the goals-qualifying 

categories (i.e., borrower-income categories and the underserved areas category). But in 

52 As shown in Table 3, the depository percentage is slightly higher (14.3 percent) if the analysis is 

restricted to those newly-originated loans that depositories do not sell ( the latter being a proxy for 

depository portfolio lending). 

53 The “market without manufactured housing” in Table 3 excludes loans less than $15,000 as well as all 

loans originated by lenders that primarily originate manufactured housing loans. See Table 5 for market 

definitions that show the separate effects of excluding small loans and manufactured housing loans. 

54 Unless stated otherwise, the market in Sections III and IV is defined as the conventional conforming 

market without estimated B&C loans. 

25 
 

 

 

 

 

 

2000, Fannie Mae improved its underserved areas performance enough to surpass 

Freddie Mac in this category, while Freddie Mac continued to out-perform Fannie Mae 

on the borrower-income categories (very-low income, special affordable, and low-mod). 

In 2000, both GSEs remained significantly behind depositories and the overall market in 

funding affordable loans. 

Freddie Mac Performance – Annual Data. As shown by the annual data 

reported in Table 4, Freddie Mac improved its purchases of goals-qualifying loans during 

the 1990s. For example, its purchases of loans for very low-income borrowers increased 

from 5.3 percent of its business in 1992 to 7.6 percent in 1997, before jumping to 9.9 

percent in 1998, 11.0 percent in 1999, and 12.5 percent in 2000. Freddie Mac’s 

purchases in underserved areas increased at a more modest rate, rising from 18.6 percent 

in 1992 to 19.9 percent in 1997 and then to 22.2 percent in 2000.55 

Despite its improved performance between 1997 and 2000, Freddie Mac 

continued to lag the market in funding goals-qualifying loans. In 2000, special 

affordable loans accounted for 14.3 percent of Freddie Mac's purchases and 16.8 percent 

of loans originated in the conventional conforming market, which produces a “FreddieMac-to-market” ratio of 0.85 (14.3 divided by 16.8).56 Table 4 shows the trend in the 

“Freddie-Mac-to-market” ratio from 1992 to 2000 for each of the goals-qualifying 

categories. For the special affordable and low-mod categories, Freddie Mac’s 

performance relative to the market remained flat (at approximately 0.60 and 0.80, 

respectively) through 1997; by 1999, the ratio had risen to 0.74 for the special affordable 

category and 0.89 for the low-mod category. Freddie Mac continued to improve its 

performance during 2000, further closing its gap with the market -- the “Freddie-Mac-tomarket” ratio rose to 0.85 for the special affordable category and to 0.94 for the low-mod 

category. 

55 HMDA is the source of the GSE data reported in Table 4 for the year 1992; the loan-level data that the 

GSEs report to HUD are available only since 1993. The 1992 HMDA data on loans sold to the GSEs are 

reported in order to include a measure of GSE activity prior to the housing goals taking effect in 1993. As 

discussed in Scheessele (1998), HMDA data on loans sold to the GSEs typically account for only about 

four-fifths of their purchases. However, the undercoverage of GSE purchases was greater during 1992 as 

several mortgage bankers were not required to report under HMDA until 1993. Thus, the 1992 data (for 

the market as well as the GSEs) should be interpreted with some caution. Scheessele reported the 

following HMDA coverage rates for GSE purchases of home loans between 1993 and 1996: 75.3 percent 

for 1993, 80.4 percent for 1994, 85.7 percent for 1996, and 81.6 percent for 1996. He found that HMDA 

covered higher percentages of FHA-insured loans during this period: 87.8 percent for 1993, 88.0 percent 

for 1994, 89.5 percent for 1995, and 93.3 percent for 1996. 

56 Table 5 reports annual market percentages that exclude the effects of manufactured housing and 

subprime loans. The market percentage for 2000 drops slightly to 16.4 percent when all subprime loans 

are excluded from the market definition, thus not significantly changing Freddie Mac’s performance 

relative to the market. Excluding manufactured housing and small loans, on the other hand, reduces the 

special affordable market figure to 15.3 percent, which has the effect of raising the “Freddie-Mac-tomarket” ratio to 0.94. 

26 
 

 

 

Given these gains on the borrower-income categories, it is somewhat surprising 

that Freddie Mac did not make any progress closing its market gap in the underserved 

areas category; the “Freddie-Mac-to-market” ratio for underserved areas was the same in 

2000 (0.84) as it was in 1992 (0.84).57 

Fannie Mae Performance – Annual Data. With respect to purchasing affordable 

loans, Fannie Mae followed a different path during the 1990s than Freddie Mac. Fannie 

Mae improved its performance between 1992 and 1998 and made much more progress 

than Freddie Mac in closing the gap between its performance and the market's 

performance on the goal-qualifying categories examined here. In fact, by 1998, Fannie 

Mae's performance was close to that of the primary market for some important 

components of affordable lending. For example, in 1992, special affordable loans 

accounted for 6.3 percent of Fannie Mae's purchases and 10.4 percent of all loans 

originated in the conforming market, giving a "Fannie Mae-to-market" ratio of 0.61. By 

1998, this ratio had risen to 0.86, as special affordable loans had increased to 13.2 

percent of Fannie Mae's purchases and to 15.4 percent of market originations. 

A similar trend in market ratios can be observed for Fannie Mae on the 

underserved areas category. In 1992, underserved areas accounted for 18.3 percent of 

Fannie Mae's purchases and 22.2 percent of market originations, for a "Fannie Mae-tomarket" ratio of 0.82. By 1998, underserved areas accounted for 22.9 percent of Fannie 

Mae's purchases and 24.2 percent of market originations, for a higher "Fannie Mae-tomarket" ratio of 0.95. Freddie Mac, on the other hand, fell further behind the market 

during this period. In 1992, Freddie Mac had a slightly higher underserved areas 

percentage (18.6 percent) than Fannie Mae (18.3 percent). However, Freddie Mac's 

underserved areas percentage had only increased to 20.0 percent by 1998 (versus 22.9 

percent for Fannie Mae). Thus, the "Freddie Mac-to-market" ratio fell slightly from 0.84 

in 1992 to 0.83 in 1998. 

The year 1999 saw a shift in the above patterns, with Fannie Mae declining in 

overall performance while the share of goals-qualifying loans in the market increased. 

Between 1998 and 1999, the special affordable share of Fannie Mae’s business declined 

from 13.2 percent to 12.3 percent while this type of lending in the market increased from 

15.4 percent to 17.0 percent. Thus, the “Fannie-Mae-to-market” ratio for special 

affordable loans declined sharply from 0.86 in 1998 to 0.72 in 1999.58 The share of 

Fannie Mae’s purchases in underserved areas also declined, from 22.9 percent in 1998 to 

20.6 percent in 1999, which lowered the “Fannie-Mae-to-market” ratio from 0.95 to 0.82. 

After declining in 1999, Fannie Mae’s performance rebounded in 2000, 

particularly in the underserved areas category. Fannie Mae’s underserved areas percentage 

57 If manufactured housing and small loans are excluded from the market definition, the ratio was 0.87 in 

1992 and 0.86 in 2000 (see Table 5). 

58 If manufactured housing and small loans are excluded from the market definition, the ratio would be 

0.85 in 2000 (see Table 5). 

27 
 

 

 

jumped by three percentage points from 20.6 percent in 1999 to 23.6 percent in 2000. The 

2000 figure was similar to its level in 1997 but below Fannie Mae’s peak performances of 

24-25 percent during 1994 and 1995. Between 1999 and 2000, the “Fannie-Mae-tomarket” ratio for underserved areas also increased, from 0.82 to 0.89. As shown in Table 

4, the 2000 market ratio was below Fannie Mae’s market ratio in several earlier years, 

indicating that while Fannie Mae had closed its gap with the market during 2000, it 

remained with a larger market gap than in some earlier years (such as 1994-5 and 1997-

8). 

During 2000, Fannie Mae also improved its performance on the special affordable 

goal. Fannie Mae’s special affordable percentage increased by 0.7 percentage points from 

12.3 percent in 1999 to 13.0 percent in 2000. The 2000 figure was similar to its previous 

peak level (13.2 percent) in 1997. The “Fannie-Mae-to-market” ratio for special 

affordable loans increased from 0.73 in 1999 to 0.78 in 2000, with the latter figure 

remaining below Fannie Mae’s peak market ratio (0.86) in 1997. 

Changes in the “Fannie-Mae-to-Freddie-Mac” Performance Ratio. The 

above discussion documents shifts in the relative performance of Fannie Mae and Freddie 

Mac over the past few years. To highlight these changing patterns, Table 4 reports the 

ratio of Fannie Mae’s performance to Freddie Mac’s performance for each goals category 

for the years 1992 to 2000. As shown there, the “Fannie-Mae-to-Freddie-Mac” ratio for 

the special affordable category increased from approximately one in 1992 (indicating 

equal performance) to over 1.3 during the 1994-97 period, indicating that Fannie Mae 

clearly out-performed Freddie Mac during this period. Between 1997 and 2000, Freddie 

Mac substantially increased its special affordable share (from 9.0 percent to 14.3 

percent), causing the “Fannie-Mae-to-Freddie-Mac” ratio to fall from 1.30 in 1997 to 

0.90 in 2000 (indicating Freddie Mac had by-passed Fannie Mae). 

Prior to 2000, the “Fannie-Mae-to-Freddie-Mac” ratio for underserved areas 

followed a similar pattern to that outlined above for special affordable loans, but at a 

lower overall level – rising from about one in 1992 (indicating equal performance) to 

approximately 1.2 during the 1994-97 period, before dropping to slightly below one 

(0.97) in 1999. However, as discussed earlier, Fannie Mae increased its underserved 

areas percentage from 20.6 percent in 1999 to 23.6 percent in 2000; this raised the 

“Fannie-Mae-to-Freddie-Mac” ratio to 1.06. 

To conclude, the 1990s ended on a more encouraging note for Freddie Mac than 

for Fannie Mae. Fannie Mae ended the 1990s with a decline in affordable lending 

performance at the same time that Freddie Mac was improving and the share of goalsqualifying loans was increasing in the market. An encouraging sign for Freddie Mac was 

that its shares of special affordable and low-mod loans showed rather large increases 

between 1998 and 1999, while its underserved areas purchases showed modest increases. 

Fannie Mae, on the other hand, had experienced declines in all goals-qualifying 

categories between 1998 and 1999. 

28 
 

Both GSEs’ performance during 2000 was encouraging – Freddie Mac continued 

to improve, particularly with respect to the borrower-income categories, while Fannie 

Mae reversed its declining performance, particularly with respect to underserved areas. 

During 2000, Freddie Mac outperformed Fannie Mae on the special affordable and lowmod categories, while Fannie Mae purchased a higher percentage of loans in underserved 

areas. 

GSE Purchases of Seasoned Loans. One factor discussed in Appendix A which 

may partially account for the various shifts in performance between the GSEs is their 

purchases of seasoned (prior-year) loans. As shown in Table A.1 of that appendix, Fannie 

Mae followed a strategy of purchasing targeted seasoned loans between 1996 and 1998, 

and again in 2000 – all years when Fannie Mae improved its overall affordable lending 

performance. For example, consider Fannie Mae’s underserved areas performance 

during 2000, which was helped by its increased purchases of seasoned mortgages on 

properties located in underserved neighborhoods. Overall, the share of Fannie Mae's 

purchases of home loans in underserved areas increased from 20.6 percent in 1999 to 

23.6 percent in 2000. The underserved areas percentage for Fannie Mae's purchases of 

newly-originated mortgages was 22.6 percent in 2000; Fannie Mae obtained the higher 

overall percentage (23.6 percent) by purchasing seasoned loans with a particularly high 

concentration (26.7 percent) in underserved areas. Thus, Fannie Mae improved its 

overall performance in 2000 by supplementing its purchases of newly-originated 

mortgages with purchases of seasoned mortgages targeted to underserved neighborhoods. 

Fannie Mae followed such a seasoned loan strategy in 1997 and 1998 for both special 

affordable and underserved areas loans. 

As shown in Table A.1 of Appendix A, Freddie Mac also followed a strategy of 

purchasing seasoned special affordable loans during 2000. Freddie Mac’s improvement 

in special affordable purchases between 1999 and 2000 was partially due to its seasoned 

loan purchases, which had a high concentration of special affordable borrowers (17.6 

percent for prior-year loans versus 13.0 percent for Freddie Mac’s year 2000 purchases of 

current-year loans). Prior to 2000, Freddie Mac had not pursued such a strategy, or at 

least not to the same degree as Fannie Mae. During the 1997-99 period, Freddie Mac's 

purchases of prior-year mortgages and newly-originated mortgages had similar 

percentages of special affordable (and low-mod) borrowers.59 

59Over time, there have been small differentials between Freddie Mac's prior-year and newly-originated 

mortgages for the underserved areas category but they have been much smaller than the differentials for 

Fannie Mae. See Table A.1 in Appendix A. 

29 
IV. GSE Purchases of Total (Home Purchase and Refinance) Loans 

Section III examined the GSEs' acquisitions of home purchase loans, which is 

appropriate given the importance of the GSEs for expanding homeownership 

opportunities. To provide a complete picture of the GSEs' mortgage purchases in 

metropolitan areas, Tables 6 and 7 report the GSEs' purchases of all single-family-owner 

mortgages, including both home purchase loans and refinance loans. Shifting the analysis 

to consider total mortgages does not change the basic findings that both GSEs have 

improved their performance but they continue to lag the primary market in serving lowincome borrowers and underserved neighborhoods. 

Table 6 provides a long-run perspective on the GSEs’ performance. Between 

1993 and 2000, as well as during the more recent 1996-2000 period, each GSE’s 

performance has been about three-fourths of market performance for the special 

affordable category and eighty-five percent of market performance for the underserved 

areas category. For example, between 1993 and 2000, underserved areas accounted for 

22.7 percent of Fannie Mae's purchases and 22.3 percent of Freddie Mac’s purchases, 

compared with 26.1 percent for the conventional conforming market (without B&C 

loans). In the earlier discussion of home purchase loans, it was noted that Fannie Mae 

had outperformed Freddie Mac over the more recent 1996-2000; in the case of total 

loans, the performance of the two GSEs during this period is the same for special 

affordable loans and almost the same for underserved areas loans (22.7 percent for 

Fannie Mae versus 22.3 percent for Freddie Mac). 

Table 7 shows that both GSEs improved their overall performance between 1999 

and 2000. Freddie Mac increased its special affordable purchases from 13.3 percent of 

its single-family business in 1999 to 15.7 percent in 2000, thus continuing its high rate of 

improvement that started in 1997. While Fannie Mae also increased its special 

affordable purchases, its greatest improvement came in the underserved areas category, 

where it jumped from 21.8 percent in 1999 to 25.3 percent in 2000. In 2000, Freddie 

Mac’s performance was higher than Fannie Mae’s on the two-borrower income 

categories while Fannie Mae had a small advantage over Freddie Mac on the underserved 

areas category. 

Findings concerning the GSEs’ performance during the year 2000 relative to the 

overall (home purchase and refinance) market are similar to those discussed earlier for 

home purchase loans. Both Fannie Mae and Freddie Mac continue to lag the 

conventional conforming market in funding goals-qualifying loans. This can be seen 

from the “GSE-to-market (without B&C loans)” ratios reported in Table 7. In 2000, 

underserved areas accounted for 25.3 percent of Fannie Mae's purchases and 28.9 percent 

of loans originated in the non-B&C portion of the conventional conforming market, 

yielding a “Fannie-Mae-to-market” ratio of 0.88. As noted above, Fannie Mae’s year 

2000 performance was much better than its 1999 performance, which explains the sharp 

increase in its market ratio for underserved areas, from 0.81 in 1999 to 0.88 in 2000. 

The “Freddie-Mac-to-market” ratio (0.85) for underserved areas was significantly below 

one in 2000 and slightly below Fannie Mae’s market ratio. 

30 
 

In 2000, both GSEs also had market ratios below one in the special affordable 

category. The “Fannie-Mae-to-market” ratio for special affordable loans was 0.78, which 

was an increase from its 1999 market ratio (0.71), indicating that during 2000 Fannie 

Mae partially closed its performance gap relative to the market. However, Fannie Mae’s 

year 2000 market ratio remained below its peak ratio of 0.82 in 1997, indicating that 

Fannie Mae had fallen further behind the market between 1997 and 2000. The “FreddieMac-to-market” ratio (0.86) for special affordable loans was also below one but 

significantly higher than Fannie Mae’s special affordable market ratio. 

Subprime Loans. Table 5 in Section III showed that the goals-qualifying shares 

of the home purchase market do not change much when originations by subprime lenders 

are excluded from the analysis; the reason is that subprime lenders operate primarily in 

the refinance market. Therefore, in this section’s analysis of the total market (including 

refinance loans), one would expect the treatment of subprime lenders to significantly 

affect the market estimates and, indeed, that is the case. As shown in Table 7, excluding 

over 300 HMDA reporters that specialize in subprime lending reduced the goalqualifying shares of the total market during 2000 as follows: special affordable, from 

19.3 to 17.1 percent; low-mod, from 47.4 to 44.9 percent; and underserved areas, from 

30.3 to 27.3 percent. 

As explained earlier, the comparisons in this paper defined the market without the 

B&C portion of the subprime market. Industry observers estimate that A-minus loans 

account for 50-70 percent of all subprime loans while the more risky B&C loans account 

for the remaining 30-50 percent. Thus, one proxy (and the one used here) for excluding 

B&C loans originated by the specialized subprime lenders from the overall market 

benchmark might be to reduce the goal-qualifying percentages from the HMDA data by 

half the above differentials. As shown in Table 7, accounting for B&C loans in this 

manner reduces the year 2000 HMDA-reported goal-qualifying shares of the total 

conforming market as follows: special affordable, from 19.3 to 18.3 percent; low-mod, 

from 47.4 to 46.3 percent; and underserved areas, from 30.3 to 28.9 percent.60 

Obviously, the GSEs’ performance relative to the market will depend on which 

market definition is used. While this decision did not much impact the earlier analysis 

based on home purchase loans, it does affect the findings for this section’s analysis of 

total loans. For instance, defining the conventional conforming market in 2000 to 

exclude subprime loans, rather than only B&C loans, would increase Fannie Mae’s 

special affordable (underserved area) market ratio from 0.78 to 0.84 (0.88 to 0.93). 

Similarly, it would increase Freddie Mac’s special affordable (underserved areas) market 

ratio from 0.86 to 0.92 (0.85 to 0.91). Thus, except for Fannie Mae’s special affordable 

ratio, the market definition without subprime loans would increase the GSEs’ market 

ratios for the special affordable and underserved areas categories above 0.90, which is 

60 However, as discussed in Appendix D of HUD (2000b), much uncertainty exists about the size of the 

subprime market and its different components. More data and research are obviously needed on this 

growing sector of the mortgage market. 

31 
slightly higher than the 0.85 to 0.88 range of GSE-to-market ratios reported in Table 7 

for the market without B&C loans. For the broader-defined low-mod category, 

redefining the market to exclude subprime loans, rather than only B&C loans, would 

increase Fannie Mae’s (Freddie Mac’s) market ratio from 0.90 to 0.93 (0.94 to 0.97). 

32 
V. GSE Market Shares: Home Purchase Loans 

Section II drew a distinction between “distribution of business” and “market 

share” percentages. A "distribution of business" percentage measures the extent to which 

a mortgage industry sector focuses its business on a particular targeted group – that was 

the subject of Sections II-III. A “market share” percentage measures the share of loans 

with a particular borrower or neighborhood characteristic that is funded by a particular 

market sector (such as FHA or the GSEs). In other words, a “market share” percentage 

measures a sector’s share of all home loans originated for a particular targeted group. 

The “market share” of a sector depends not only on the degree to which that sector 

concentrates its business on a targeted group but also on the size (or overall mortgage 

volume) of the sector. If an industry sector has a large “market share” for a targeted 

group, then that sector is making an important contribution to meeting the credit needs of 

the group. 

Both “distribution of business” and “market share” data are important for 

evaluating the GSEs’ performance. In fact, given the large size of the GSEs, one would 

expect that a “market share” analysis would highlight their importance to the affordable 

lending market. As this section will document, the GSEs account for a significant share 

of the total (government as well as conventional conforming) market for home purchase 

loans. However, their market share for each of the affordable lending categories is much 

less than their share of the overall market, and they account for a very small share of the 

market for important groups such as minority first-time homebuyers. 

Subsection A uses HMDA and GSE data to estimate the GSEs’ share of home 

loans originated for low-income and minority borrowers and their neighborhoods. 

Subsection B summarizes other research that suggests the GSEs play a much smaller role 

in the affordable lending market than is suggested by subsection A’s analysis. The 

attempt to reconcile these different findings leads to an analysis of the downpayment 

characteristics of home loans purchased by the GSEs, followed in subsection C by a brief 

examination of the GSEs’ role in the important, first-time homebuyer market. While 

providing some interesting new findings, subsection C concludes that more work is 

needed in order to fully understand and assess the GSEs’ role in funding families who 

find it difficult to access mortgage credit. 

A. GSEs’ Share of Home Purchase Lending 

Table 8 reports market share estimates derived by combining HMDA and GSE 

loan-level data. To understand these estimates, first consider the GSE market share 

percentage for “All Home Purchase Loans” at the bottom of the table, which is 46-48 

percent. That market share percentage is interpreted as follows: 

33 
It is estimated that home loans acquired by Fannie Mae and Freddie Mac 

during the year 2000 totaled 46-48 percent of all home loans originated in 

metropolitan areas during 2000. 

It should be noted that “all home loans” refers to all government (FHA and VA) loans 

plus all conventional loans less than the conforming loan limit of $252,700; in other 

words, only “jumbo loans” are excluded from this analysis. The analysis is restricted to 

metropolitan areas because HMDA data (the source of the market estimates) are reliable 

only for metropolitan areas. B&C originations are included in the market data, since the 

purpose here is to gauge the GSEs’ role in the overall mortgage market. As discussed in 

Section III, excluding B&C loans, or even all subprime loans, would not materially affect 

this analysis of the home loan market since subprime loans are mainly for refinance 

purposes. Following the approach used in Section III, the GSE purchase data include 

their acquisitions of “prior-year” as well as “current-year” (i.e., 2000) mortgages, while 

the market data include only mortgages that were originated during 2000. Including all 

the GSE purchases, rather than just their purchases of “current-year” mortgages, provides 

a more comprehensive measure of the GSEs’ importance to the various market segments. 

This analysis below frequently combines purchases by Fannie Mae and Freddie Mac 

since previous sections have compared their performance relative to each other. 

The GSE market share percentage for “Low-Income Borrowers” at the top of 

Table 8 has a similar interpretation to that of “All Home Purchase Loans”: 

It is estimated that home loans for low-income borrowers acquired by 

Fannie Mae and Freddie Mac during the year 2000 totaled 34-37 percent 

of all home loans originated for low-income borrowers originated in 

metropolitan areas during 2000. 

According to the data in Table 8, the GSEs play an important role in the market 

for home loans. In addition to accounting for 46-48 percent of all newly-originated home 

loans during 2000, they accounted for a major portion of the market for the low-income 

and minority groups listed in Table 8. For example, purchases by Fannie Mae and 

Freddie Mac represented 34-37 percent of the low-income-borrower market and 35-37 

percent of the markets in high-minority census tracts and underserved areas. Thus, access 

to credit in these historically underserved markets depends importantly on the purchase 

activities of Fannie Mae and Freddie Mac. 

The data in Table 8 also show that the GSEs’ role in low-income and minority 

markets is significantly less than their role in the overall home loan market. As noted 

above, Fannie Mae and Freddie Mac account for 46-48 percent of all home loans but only 

35-37 percent of the loans financing properties in underserved areas. Their market share 

was even lower for loans to African-American and Hispanic borrowers -- 24-29 percent, 

which is approximately twenty percentage points less than their overall market share. 

34 
 

 

 

 

To provide some perspective, Table 8 includes market share estimates for FHA.61 

In 2000, FHA’s overall market share was less than half of the GSEs’ market share, as 

FHA insured only 19-20 percent of all home mortgages originated that year in 

metropolitan areas. However, FHA’s share of the underserved segments of the market is 

almost as high as the GSEs’ share, and in one case is actually higher by a rather wide 

margin. For instance, during 2000, FHA insured 28-30 percent of all mortgages 

originated in low-income census tracts, which is only four percentage points less than the 

GSEs’ market share in low-income census tracts. FHA's share of the market is 

particularly high for African-American and Hispanic borrowers. As shown in Table 8, it 

is estimated that FHA insured 37-38 percent of all home loans originated for these 

borrowers during 2000 – a figure much higher than the GSEs’ share of 24-29 percent.62 

While FHA’s overall market share was only two-fifths of the GSEs’ combined market 

share, FHA’s share of the market for loans to African-Americans and Hispanics was 

about 30-40 percent larger than the GSEs’ share of that market. 

B. Other Analyses of the GSEs’ Market Share 

There have been other analyses of the role of Fannie Mae and Freddie Mac in 

underserved markets. A 1996 Federal Reserve study went beyond the rather 

straightforward market share analysis described above to examine the degree to which 

different mortgage market institutions – depositories, private mortgage insurers, the 

GSEs and FHA – are taking on the credit risk associated with funding affordable 

mortgages.63 The authors of the study combined market share data of the type discussed 

above with downpayment information and data on projected foreclosure losses to arrive 

at an estimate of the credit risk assumed by each institution for several borrower groups. 

The Fed’s measure of credit support depends importantly on the provision of low 

downpayment loans to cash-constrained families. The Fed study found that conventional 

lenders provided only 22 percent of the credit support for African-American and 

Hispanic borrowers, compared with 11 percent for the Veterans Administration and 67 

percent for FHA. The dominant share for FHA reflects both FHA’s focus on insuring 

61 As explained in Section III, the GSEs’ affordable lending performance is evaluated relative to the 

conventional conforming market, as required by Congress in the 1992 GSE Act that established the 

housing goals. However, in this section examining the role of Fannie Mae and Freddie Mac in the overall 

market for home loans, it is insightful to contrast them with other major sectors of the market such as FHA. 

There is no intention here to imply that the GSEs should purchase the same types of loans that FHA 

insures. 

62 As explained in the notes to Table 8, this analysis uses HMDA data for the market and FHA figures. It 

is assumed that HMDA data cover 85-90 percent of all mortgage originations in metropolitan areas, and 

90-95 percent of FHA-insured loans in metropolitan areas. If it were assumed that HMDA data covered 

higher (lower) percentages of market and FHA loans, then the GSE market shares would increase 

(decline). Assuming that HMDA data cover more FHA loans than non-FHA loans tends to reduce the 

FHA market share. 

63 See Glenn B. Canner, Wayne Passmore, and Brian J. Surette, “Distribution of Credit Risk among 

Providers of Mortgages to Lower-Income and Minority Homebuyers” in Federal Reserve Bulletin, 82(12): 

1077-1102, December, 1996. 

35 
 

 

 

 

mortgages for these borrowers (see Tables 1 and 8) and the fact that most FHA-insured 

loans have less-than-five-percent downpayments. The shares of credit support for 

African-American and Hispanic borrowers provided by different conventional sectors 

were as follows: depositories (7 percent), private mortgage insurers (6 percent), and the 

GSEs (4 percent). The Fed study also reported very small credit-support roles for the 

GSEs in other market segments: lower-income borrowers (4 percent); lower-income 

census tracts (4 percent); and predominantly minority census tracts (5 percent) 

The conclusion of the Fed study concerning the minimal market role of Fannie 

Mae and Freddie Mac differs markedly from the findings presented in subsection A 

above. The Fed study reports a very minimal GSE role in targeted markets while our 

analysis reports a significant GSE role in targeted markets (although smaller than their 

role in the overall home loan market). The different findings are due to different 

methodologies. This paper focuses on purchase patterns while the earlier Fed study 

weighted other variables such as down payment and default characteristics in making 

their determinations.64 For instance, the small credit support role of the GSEs (4 percent 

for African-American and Hispanic borrowers) estimated by the Fed researchers is due to 

the GSEs’ low level of purchases of loans originated for African-American and Hispanic 

borrowers and to the fact that the GSEs mainly purchased high downpayment loans with 

little associated credit risk. For this reason, the GSEs’ purchases received little weight in 

the Fed’s methodology.65 

Downpayment Data. While this paper will not attempt to update the Fed study, 

information can be presented on the downpayment characteristics of the GSEs’ mortgage 

purchases, which will partially explain why the Fed’s analysis reaches different 

conclusions about the market role of the GSEs than those presented earlier in subsection 

A. Tables 9a and 9b report the loan-to-value (LTV) distribution of home purchase 

mortgages acquired by the GSEs between 1997 and 2000 – Table 9a presents summary 

data for the years, 1997 to 2000, while Table 9b presents more detailed information for 

the year 2000. In Table 9b, LTV data are provided for all home loans as well as for the 

three goals-qualifying categories (special affordable, low-mod, and underserved areas). 

Three points stand out. 

First, the GSEs (and particularly Freddie Mac) have recently been increasing their 

purchases of less-than-five-percent downpayment mortgages. Between 1997 and 2000, 

over-95-percent-LTV loans increased from 1.1 percent to 5.9 percent of Freddie Mac’s 

64 It should also be noted that the earlier Fed study was based on data compiled through 1995 while this 

paper updates GSE and market performance through 2000 and thus covers a period when the industry as a 

whole showed a greater emphasis on affordable lending programs. However, a repeat of the Fed study 

using 2000 data would probably yield the same overall patterns found by the Fed researchers using 1995 

data. 

65 FHA, on the other hand, insures mainly low downpayment mortgages and, as discussed earlier, accounts 

for a large share of the loans originated for African-American and Hispanic borrowers; thus, in the Fed’s 

methodology, FHA is recognized as providing most of the credit support for these borrowers. 

36 
 

 

 

 

purchases of home loans.66 High LTV loans increased at a more modest rate in Fannie 

Mae’s business, from 3.3 percent in 1997 to 4.3 percent in 2000. Second, the low 

downpayment share of goals-qualifying loans is even higher. In 2000, over-95-percentLTV loans accounted for 12.6 percent of Freddie Mac’s purchases of special affordable 

loans, 10.1 percent of low-mod loans, and 9.4 percent of underserved areas loans, 

compared with 5.9 percent of Freddie Mac’s purchases of all home loans. Third, and 

somewhat surprising, a noticeable pattern among goals-qualifying home loans purchased 

by the GSEs is the predominance of loans with high downpayments. For example, 55.2 

percent of special affordable home loans purchased by Fannie Mae during 2000 had a 

downpayment of at least 20 percent, a percentage that was only slightly lower that than 

the low-downpayment share (59.0 percent) of all Fannie Mae’s home loan purchases. 

Similarly, 53.1 percent of the home loans purchased by Fannie Mae in underserved areas 

during 2000 had a more than twenty percent downpayment, compared with 59.0 percent 

of all home loans purchased by Fannie Mae. 

The data in Tables 9a and 9b show a preponderance of high downpayment loans, 

even among lower-income borrowers and borrowers financing properties in underserved 

areas. This focus of the GSEs on high downpayment loans is one reason the Fed study 

concluded that they provide little credit support to the lower end of the mortgage market. 

Essentially, the rather significant low-income market shares reported for the GSEs in 

subsection A (see Table 8) would not receive much weight in the Fed’s analysis because 

the majority of the low-income loans purchased by the GSEs have a downpayment of 

over twenty percent. This tendency of the GSEs to purchase mainly high downpayment 

loans raises a question of their role in the first-time homebuyer market, a topic examined 

next. 

C. The GSEs’ Share of the First-Time Homebuyer Market 

The level of downpayment is particularly important for young families seeking 

their first homes. Given the high downpayments associated with GSE-purchased loans, it 

is informative to examine the GSEs’ role in the first-time homebuyer market, particularly 

in those market segments that serve families who find it difficult to raise cash for a large 

downpayment. This section uses data on homebuyers from the American Housing 

Survey to examine the GSEs’ role in the first-time homebuyer market for minorities. 

Table 10 provides data on the number of homebuyers between 1997 and 1999. 

The homebuyer data is taken from a study by Vandenbroucke, Neal, and Bunce (VNB).67 

66 Notice that the 90-95 percent LTV category experienced a decline during this period, from 24.2 percent 

to 19.7 percent. Thus, the share for over-ten-percent downpayment loans in Freddie Mac’s purchases of 

home loans remained unchanged between 1997 and 2000 at approximately 25 percent. The share for overten-percent downpayment loans in Fannie Mae’s purchases actually declined between 1997 and 2000, from 

23.2 percent to 22.6 percent. 

67 David A. Vandenbroucke, Sue G. Neal, and Harold L. Bunce, “First-Time Homebuyers: Trends from the 

American Housing Survey”, November 2001, U.S. Housing Market Conditions, a quarterly publication of 

the Office of Policy Development and Research at HUD, pages 4-10. The American Housing Survey 

defines first-time homebuyers as buyers who have never owned a home. The FHA and GSE first-time 

37 
 

 

 

 

 

 

 

 

Using data on recent movers (i.e., families who have changed residence in the past year) 

from the American Housing Survey, VNB estimate that there were 15,812,888 purchases 

of homes between 1997 and 1999; approximately 41 percent (or 6,453,695) of these 

involved a first-time homebuyer.68 Also presented in Table 10 are the numbers of home 

purchase loans and first-time homebuyer loans acquired by Fannie Mae and Freddie Mac 

between 1997 and 1999.69 During this period, Fannie Mae acquired 3,369,239 home 

loans, representing 21.3 percent of all AHS-reported home purchases; and Freddie Mac 

acquired 2,309,650 home loans, representing 14.6 percent of all home purchases. 

Combined, the two GSEs’ mortgage acquisitions represented 35.9 percent of the home 

purchase market between 1997 and 1999.70 

homebuyer data discussed below are based on a more expansive definition – buyers who have not owned a 

home in the past three years. 

68 VNB present annual data on total home purchases and home purchases by first-time buyers for the years 

1991 to 1999. They discuss several caveats with the AHS estimates – for instance, in some years, home 

purchases as measured by the AHS declined while home purchases as measured by other data sources (e.g., 

HMDA) increased. In addition, the AHS home purchase data for separate minority groups (e.g., AfricanAmericans, Hispanics) sometimes exhibited shifts inconsistent with other sources. VNB, however, 

conclude that the homebuyer numbers are generally consistent with other data sources, particularly if the 

data are combined across categories and years, such as displayed in Table 10. Thus, the AHS data provide 

reasonable estimates of overall homebuyer activity. 

69 The GSE data reported in Table 10 were derived in several steps: (1) the home purchase numbers were 

obtained by adjusting the GSEs’ acquisitions of conventional home purchase loans originated for owneroccupied properties to reflect the GSEs’ share of any participations, so that the home purchase numbers 

reflect the amounts that the GSEs actually purchased; (2) the minority home purchase numbers were 

derived by re-allocating loans with missing race and ethnicity based on the race and ethnicity distribution 

of home purchase loans with non-missing race and ethnicity; (3) the overall first-time homebuyer numbers 

were obtained from the Census Tract File of the GSE Public Use Data Base; and (4) the minority first-time 

homebuyer numbers were obtained by multiplying (a) the race and ethnicity distribution of first-time 

homebuyer loans with non-missing race and ethnicity information, obtained from the Census Tract File of 

the Public Use Data Base (PUDB), by (b) the number of first-time homebuyer loans derived in (3). 

Because the first-time homebuyer data in (3) and (4) are obtained from the GSE PUDB, the data have not 

been adjusted for the GSEs’ participation shares and include any government (FHA) loans purchased by 

the GSEs between 1997 and 1999. In step (2), about 8 percent of the GSE purchases between 1997 and 

1999 had missing race and ethnicity data. It should also be noted that Table 10 follows the practice 

discussed in Section III of including the GSEs’ purchases of prior-year loans – thus, the GSE data in Table 

10 include their purchases during the 1997 to 1999 period of mortgages originated prior to 1997. As 

discussed later, Table 11 makes further adjustments in the GSE data to account for home purchase loans 

with missing first-time homebuyer information. 

70 Using market data from HMDA, HUD (2000b) estimated the GSEs’ share of the 1997 home loan market 

(below the conforming loan limit) in metropolitan areas to be 44 percent while Bunce (2000b) estimated 

the GSEs’ share of the 1999 market to be 41 percent. The AHS market data reported here differ from the 

HMDA market data in three important respects. First, the AHS data in Table 10 cover both metropolitan 

and non-metropolitan areas while the HMDA data covered only metropolitan areas. (Of course, in Table 

10, the GSE and FHA data also cover both metropolitan and non-metropolitan areas.) Second, the AHS 

data are drawn from a much smaller sample of recent movers than are HMDA data, which cover most 

mortgage transactions; the small size of the AHS sample is probably the reason for the inconsistencies 

noted by VNB. Third, and perhaps most importantly, the AHS data in Table 10 cover all home purchases 

including both those financed with a mortgage and those paid in cash. The GSEs’ market share would be 

larger if the AHS data included only those home purchases financed with a mortgage. VNB chose to 

38 
 

 

 

Between 1997 and 1999, Fannie Mae acquired 899,462 first-time homebuyer 

loans, representing 13.9 percent of the total first-time market; Freddie Mac acquired 

530,156 first-time homebuyer loans, representing 8.2 percent of that market. The GSEs’ 

combined purchases of first-time homebuyer loans represented 22.2 percent of all home 

purchases by first-timers – a market share significantly lower than their 35.9 percent 

share of all home purchases (both by first-time homebuyers and repeat homebuyers). 

Contrasting the first-time market with the repeat-buyer market further clarifies the nature 

of the GSEs’ purchases. As shown in Table 10, the GSEs’ purchases of repeathomebuyer loans represented 45.4 percent of all home purchases by repeat homebuyers 

between 1997 and 1999. Thus, the GSEs’ share of the repeat-homebuyer market was 

twice their share (22.2 percent) of the first-time homebuyer market. 

Table 10 reports the same information for FHA. First, one can calculate from 

Table 10 that first-time-homebuyer loans accounted for 81 percent of all home purchase 

loans insured by FHA, which is not surprising given FHA’s low downpayment 

requirements. By comparison, first-time-homebuyer loans accounted for only 25 percent 

of all home loans purchased by the GSEs.71 FHA’s greater focus on first-time 

homebuyers is also reflected in the market share data. While FHA-insured home loans 

represented only 15.5 percent of AHS-reported home purchases between 1997 and 1999, 

FHA-insured first-time-homebuyer loans represented 30.7 percent of AHS-reported home 

purchases by first-time homebuyers.72 The GSEs, on the other hand, accounted for a 

larger share (35.9 percent) of the overall home purchase market but a smaller share (22.2 

percent) of the first-time homebuyer market.73 

analyze total home purchases because they found some inconsistencies in the AHS data for homes 

purchased with a mortgage. Therefore, without further investigation, it would be problematic to use the 

AHS data on mortgaged home purchases. Still, expressing the GSE data as portion of all home purchases – 

both financed and not financed -- provides a reasonable measure of their role in funding the homebuyer 

market. It should be noted that the GSE and FHA data include Puerto Rico while the AHS data do not. 

71 As shown in Table 10, first-time homebuyers accounted for a larger percentage of Fannie Mae’s 

acquisitions of home loans than of Freddie Mac’s (26.7 percent versus 23.0 percent). Excluding GSEpurchased home loans with missing first-time homebuyer information increases the GSEs’ first-time 

homebuyer percentages by approximately three percentage points – Fannie Mae (30.0 percent), Freddie 

Mac (26.0 percent), and both GSEs (28.3 percent). 

72 The FHA numbers reported in Table 10 for 1997-99 are slightly higher than those reported by VNB; 

re-analyzing the data showed that FHA insured 2,458,889 home purchase loans between 1997 and 1999, 

rather than the 2,380,600 reported by VNB. Similar adjustments were found for the various sub-categories 

of FHA-insured loans. 

73 Because the AHS-reported market data in Table 10 include non-metropolitan areas, which have a large 

number of manufactured homes, the market data were recomputed excluding manufactured housing. The 

results are presented in Table B.1 of Appendix B. As shown there, the market shares for FHA and the 

GSEs increase when buyers of manufactured housing are excluded from the AHS data. For instance, the 

GSEs’ purchases represent 41.2 percent of all home purchases (instead of 35.9 percent) and 25.8 percent of 

home purchases by first-time homebuyers (instead of 22.1 percent). 

39 
 

 

Table 10 also reports home purchase and first-time homebuyer information for 

minorities. The low market shares for Fannie Mae and Freddie Mac in the minority firsttime homebuyer market are consistent with findings of the Fed study that the GSEs’ have 

played a limited role in providing credit support to certain segments of the underserved 

population. For instance, Fannie Mae’s loan acquisitions between 1997 and 1999 

represented 21.3 percent of all home purchases but only 11.6 percent of home purchases 

by African-American and Hispanic families, and just 6.9 percent of home purchases by 

African-American and Hispanic first-time homebuyers. Fannie Mae’s role in the market 

for first-time African-American and Hispanic homebuyers has been only one-third of its 

role in the overall home purchase market (6.9 percent versus 21.3 percent). Freddie 

Mac’s role in the market for first-time African-American and Hispanic homebuyers has 

been only one-fifth of its role in the overall home purchase market -- 2.9 percent for the 

African-American and Hispanic first-time market versus 14.6 percent for the overall 

home purchase market. The GSEs’ combined share of the market for first-time AfricanAmerican and Hispanic homebuyers was 9.9 percent, or only about one-fourth of their 

combined share (35.9 percent) of all home purchases. 

FHA, on the other hand, accounted for a much larger share of the minority firsttime homebuyer market than it did of the overall homebuyer market. The 663,559 loans 

insured by FHA between 1997 and 1999 for African-American and Hispanic first-time 

homebuyers were 38.4 percent of the 1,729,043 first-time African-American and 

Hispanic homebuyers during that period – a figure more than twice FHA’s share (15.5 

percent) of the overall homebuyer market.74 While FHA’s market share was about twofifths of the GSEs’ share of the overall home purchase market (15.5 percent versus 35.9 

percent), FHA’s market share was four times the GSEs’ share of the market for first-time 

African-American and Hispanic homebuyers (38.4 percent versus 9.9 percent). As noted 

above, this finding of a minor role of the GSEs in the first-time minority market is similar 

to the conclusion reached by the Fed researchers that the GSEs have provided little credit 

support to underserved borrower groups. Minority first-time homebuyers experience the 

most difficulty raising cash for a large downpayment; it appears that the GSEs’ focus on 

high downpayment loans may be limiting their role in serving this market. This is a topic 

that needs further study. 

Adjustments to the GSEs’ First-time Homebuyer Data. First-time homebuyer 

information was not available for about 12 percent of the GSE loans purchased between 

1997 and 1999. It is possible that a portion of these loans with missing information may 

be first-time homebuyer loans. In this case, the data reported in Table 10 would 

underestimate the GSEs’ role in the first-time homebuyer market. Unfortunately, without 

further analysis of the characteristics of these loans, it is not clear if any confidence could 

74 Similar comparisons have been obtained using FHA and market data from HMDA. HUD (2000b) 

estimated FHA’s share of the 1997 home loan market (below the conforming loan limit) in metropolitan 

areas to be 44 percent for African-American and Hispanic loans compared with 23 percent for all home 

loans. Bunce (2000b) estimated FHA’s share of the 1999 market to be 41-42 percent for AfricanAmerican and Hispanic loans compared with 21 percent for all home loans. See the earlier footnote for 

differences between the HMDA market data for mortgages and the AHS market data for homebuyers. 

40 
 

 

 

 

 

be placed in any procedure for designating the various loans as either a first-time or a 

repeat homebuyer loan. However, to gauge the potential effects on the GSE market 

shares, the loans with a missing first-time homebuyer indicator were re-allocated based 

on the first-time and repeat homebuyer percentages for the non-missing data. The results 

are reported in Table 11, which is the same as Table 10 except for higher first-time 

homebuyer numbers for Fannie Mae and Freddie Mac. While it is unclear whether this is 

a reasonable estimation method, Table 11 does highlight changes in the GSEs’ market 

shares under one method for estimating their total purchases of first-time homebuyer 

loans.75 

The combined GSE share of the first-time homebuyer market increases from 22.2 

percent (Table 10 without re-allocation) to 24.9 percent (Table 11 with re-allocation). 

The GSEs’ share of the African-American and Hispanic first-time homebuyer market 

increases from 9.9 percent in Table 10 to 11.1 percent in Table 11. While the GSEs’ 

market share is slightly higher, the findings noted above concerning the GSEs’ limited 

role in the minority first-time homebuyer market do not change as a result of reallocating the GSE data with missing first-time homebuyer status. 76 

75 The GSE data reported in Table 11 were derived in several steps: (1) and (2) are the same steps as 

explained earlier for Table 10; (3) the overall first-time homebuyer numbers were obtained by multiplying 

(a) the first-time homebuyer percentage (computed without missing data) reported by the GSEs in Table 9 

of their Annual Housing Activities Report by (b) the number of home purchase loans derived in step (1); 

and (4) the minority first-time homebuyer numbers were obtained by multiplying (a) the race and ethnicity 

distribution of first-time homebuyer loans with non-missing race and ethnicity information, obtained from 

the Census Tract File of the Public Use Data Base (PUDB), by (b) the number of first-time homebuyer 

loans derived in (3). 

76 Table B.1 in Appendix B reports the GSEs’ shares of the home purchase and first-time homebuyer 

markets when manufactured housing is excluded from the market definition. In this case, GSE purchases 

represent 25.8 percent (or 29.0 percent with re-allocation) of the overall first-time homebuyer market and 

11.4 percent (or 12.8 percent with re-allocation) of the first-time homebuyer market for African-American 

and Hispanic homebuyers. 

41 
 

 

 

 

 

 

Appendix A 

Technical Issues: Using HMDA Data to Measure the Characteristics of GSE 

Purchases and Mortgage Market Originations 

A. Two HMDA Issues 

This appendix discusses two issues concerning the use of HMDA data for 

measuring the GSEs' performance relative to the characteristics of mortgages originated 

in the primary market.77 The first issue concerns the reliability of HMDA data for 

measuring the borrower income and census tract characteristics of loans sold to the 

GSEs.78 Fannie Mae, in particular, contends that HMDA data understates the 

percentages of its business that qualify for the three housing goals. For this reason, 

Fannie Mae has questioned HUD's reliance on HMDA data for measuring its 

performance (Fannie Mae, 2000). As discussed below, HMDA data on loans sold to the 

GSEs do not include prior-year (seasoned) loans that are sold to the GSEs; since about 

one-fourth of GSE purchases involve seasoned loans, HMDA data will not provide an 

accurate measure of the goals-qualifying characteristics of the GSEs' total purchases 

when the characteristics of prior-year loans differ from those of current-year loans. 

A second issue concerns the reliability of HMDA for measuring the percentage 

of goals-qualifying loans in the primary market. Both GSEs refer to findings from a study 

by Jim Berkovec and Peter Zorn concerning potential bias in HMDA data.79 Based on a 

comparison of the borrower and census tract characteristics between Freddie Macpurchased loans (from Freddie Mac’s own data) and loans identified in 1993 HMDA data 

as sold to Freddie Mac, Berkovec and Zorn conclude that HMDA data overstates the 

percentage of conventional conforming loans originated for lower-income borrowers and 

for properties located in underserved census tracts. If HMDA data overstates the 

percentage of goals-qualifying loans, then this paper’s market benchmarks (which are 

based on HMDA data) will also be overstated. The analysis below does not support the 

Berkovec and Zorn findings -- it appears that HMDA data do not overstate the share of 

goals-qualifying loans in the market, although more research on this issue is needed. 

The discussion in this appendix of the GSEs' purchases of prior-year and current77 The 1999 paper examined these issues using data between 1992 and 1999; this appendix updates that 

analysis to include 2000 data and incorporates some new analyses as well. 

78 It is important to emphasize that this appendix’s analysis of the reliability of HMDA data is being 

conducted at the nationwide level for metropolitan areas. HMDA’s reliability at the individual 

metropolitan area level is beyond the scope of this study. 

79 See Jim Berkovec and Peter Zorn, “How Complete is HMDA? HMDA Coverage of Freddie Mac 

Purchases,” The Journal of Real Estate Research, Vol. II, No. 1, Nov. 1, 1996. Also see Freddie Mac 

(2000) and Fannie Mae (2000). 

42 
 

 

 

year loans also highlights the strategy of purchasing goals-qualifying seasoned loans. 

The implications of this strategy for understanding recent shifts in the relative 

performance of Fannie Mae and Freddie Mac are discussed in Section D of this appendix. 

B. GSEs' Purchases of "Prior-Year" and "Current-Year" Mortgages 

Overview. As explained in Section III, there are two sources of loan-level 

information about the characteristics of mortgages purchased by the GSEs -- the GSEs 

themselves and HMDA data. The GSEs provide detailed data on their mortgage 

purchases to HUD on an annual basis. As part of their annual HMDA reporting 

responsibilities, lenders are required to indicate whether their new mortgage originations 

or the loans that they purchase (from affiliates and other institutions) are sold to Fannie 

Mae, Freddie Mac or some other entity. There have been numerous studies by HUD staff 

and other researchers that use HMDA data to compare the borrower and neighborhood 

characteristics of loans sold to the GSEs with the characteristics of all loans originated in 

the market (see Section I). One question is whether HMDA data, which is widely 

available to the public, provides an accurate measure of GSE performance, as compared 

with the GSEs' own data.80 Fannie Mae has argued that HMDA data understate its past 

performance, where performance is defined as the percentage of Fannie Mae’s mortgage 

purchases accounted for by one of the goal-qualifying categories such as underserved 

areas. As explained below, over the past five years, HMDA has provided rather reliable 

national-level information on the goals-qualifying percentages for the GSEs' purchases of 

"current-year" (i.e., newly-originated) loans, but not for their purchases of "prior-year" 

loans.81 

Discussion. In any given calendar year, the GSEs can purchase mortgages 

originated in that calendar year or mortgages originated in a prior calendar year. In 2000, 

for example, purchases of prior-year mortgages accounted for 30.4 percent of the singlefamily units financed by Fannie Mae's mortgage purchases and 32.9 percent of the singlefamily units financed by Freddie Mac's mortgage purchases.82 HMDA data provide 

information mainly on newly-originated mortgages that are sold to the GSEs—that is, 

80 For another discussion of this issue, see Randall M. Scheessele, HMDA Coverage of the Mortgage 

Market, Housing Finance Working Paper HF-007, Office of Policy Development and Research, 

Department of Housing and Urban Development, July 1998. Scheessele reports that HMDA data covered 

81.6 percent of the loans acquired by Fannie Mae and Freddie Mac in 1996. The main reason for the 

under-reporting of GSE acquisitions is a few large lenders failed to report the sale of a significant portion 

of their loan originations to the GSEs. Also see the analysis of HMDA coverage by Jim Berkovec and 

Peter Zorn. “Measuring the Market: Easier Said than Done,” Secondary Mortgage Markets. McLean 

VA: Freddie Mac (Winter 1996), pp. 18-21; as well as the Berkovec and Zorn study cited in the above 

footnote. 

81 Between 1993 and 1996, the GSEs' purchases of prior-year loans were not as targeted as they were after 

1996; thus, during this period, HMDA provided reasonable estimates of the goals-qualifying percentages 

of the GSEs' purchases of all (both current-year and prior-year) loans, with a few exceptions. 

82 Since 1993, the GSEs have increased their purchases of seasoned loans. See Manchester (August 1998 

and 2001). 

43 
 

 

HMDA data on loans sold to the GSEs will not include many of their purchases of prioryear loans.83 The implications of this for measuring GSE performance can be seen in 

Table A.1, which provides annual data on the borrower and census tract characteristics of 

GSE purchases, as measured by HMDA data and the GSEs' own data. Table A.1 is 

similar to Table 4 in the text except that it divides each of the GSEs' goals-qualifying 

percentages for a particular acquisition year into two components, the percentage for 

"prior-year" loans and the percentage for "current-year" loans. 

According to Fannie Mae's own data, 23.6 percent of its purchases during 2000 

were loans financing properties in underserved areas (see Table A.1). According to 

HMDA data (also reported in Table A.1), only 22.5 percent of Fannie Mae's purchases 

fell into the underserved areas category. In this case, the HMDA data underestimate the 

share of Fannie Mae's mortgage purchases in underserved areas. Similarly, Freddie Mac 

reports a very-low-income (VLI) percentage of 12.5 percent for its year 2000 purchases 

while HMDA reports only 11.6 percent. However, in the previous year, Freddie Mac 

reports a VLI percentage of 11.0 percent for its 1999 purchases while HMDA reports 

practically the same percentage, 11.2 percent. What explains these different patterns in 

the GSE and HMDA data? 

The reason that HMDA data underestimate the underserved areas percentage of 

Fannie Mae's 2000 purchases can be seen by disaggregating Fannie Mae's purchases 

during 2000 into their prior-year and current-year components. Table A.1 shows that the 

overall figure of 23.6 percent for underserved areas is a weighted average of 26.7 percent 

for Fannie Mae's purchases during 2000 of prior-year mortgages and 22.6 percent for its 

purchases of current-year purchases. The HMDA-reported figure of 22.5 percent for 

Fannie Mae’s year 2000 purchases is based mainly on newly-mortgaged (current-year) 

loans that lenders report as being sold to Fannie Mae. Therefore, the HMDA figure is 

similar in concept to the current-year percentage from the GSEs' own data. As Table A.1 

shows, the HMDA figures and the GSE current-year figures are practically the same in 

this case (about 22.5 percent). Thus, the relatively large share of underserved areas 

mortgages in Fannie Mae's year 2000 purchases of prior-year mortgages explains why 

Fannie Mae's own data show an overall (both prior-year and current-year) percentage of 

underserved areas loans that is higher than that reported in HMDA data. 

As shown in Table A.1, the same explanation applies to the GSE versus HMDA 

reporting discrepancy for Freddie Mac’s year 2000 purchases of very-low-income loans. 

But as noted above, the Freddie Mac and HMDA data provide about the same VLI 

percentage (11.0 percent and 11.2 percent, respectively) for 1999. This results because 

the VLI percentage for Freddie Mac's prior-year loans (11.3 percent) is similar to the VLI 

percentage for its current-year loans (10.9 percent). Thus, the VLI percentage of Freddie 

Mac's total loan purchases (11.0 percent) will be similar to the VLI percentage of its 

current-year loans, which is the same as the HMDA-based VLI percentage of Freddie 

Mac's purchases. With this understanding of basic differences between GSE-reported 

83 For a discussion of the impact of the GSEs’ seasoned mortgage purchases on HMDA data coverage, see 

Scheessele (1998), op. cit. 

44 
 

 

 

 

 

 

and HMDA-reported loan information, the next section examines issues that have arisen 

about the reliability of HMDA data. 

C. Three Findings About the Reliability of HMDA Data 

Table A.2 presents the same information as Table A.1, except that the data are 

aggregated for the years 1993-5, 1996-2000, and 1993-2000. A review of the data for the 

goals-qualifying categories in Tables A.1 and A.2 yields the following insights about the 

reliability of HMDA data at the national level for metropolitan areas. First, comparing 

HMDA-reported data on GSE purchases with GSE-reported current-year data suggests 

that, on average, HMDA data provided reasonable estimates of the goals-qualifying 

percentages for the GSEs' current-year purchases. For example, Fannie Mae reported 

that 11.7 percent of the current-year loans they purchased between 1996 and 2000 were 

for special affordable borrowers (see Table A.2). HMDA also reported that 11.7 percent 

of the loans sold to Fannie Mae between 1996 and 2000 were for special affordable 

borrowers. The corresponding numbers for Freddie Mac were 11.0 percent reported by 

them and 11.1 percent reported by HMDA. During the same period, both Fannie Mae and 

HMDA reported that approximately 21 percent of the current-year loans purchased by 

Fannie Mae financed properties in underserved areas; Freddie Mac reported that 20.1 

percent of the current-year loans it purchased financed properties in underserved areas, a 

figure slightly higher than the 19.0 percent that HMDA reported as underserved areas 

loans sold to Freddie Mac. The fact that the GSE and HMDA figures are similar suggests 

that the Berkovec and Zorn conclusions about HMDA being biased are wrong.84 For the 

most recent period (1996-2000), the small discrepancies that exist are consistent with 

HMDA being biased in a downward direction, not an upward direction as Berkovec and 

Zorn contend. 

Second, for some particular years, the GSEs' current-year data differ significantly 

from the HMDA-reported data on GSE purchases. For example, special affordable loans 

accounted for 12.1 percent of Fannie Mae's current-year purchases in 1998 compared 

with only 10.7 percent of Fannie Mae's special affordable purchases as reported by 

HMDA. Similarly, underserved areas accounted for 21.0 percent of Fannie Mae's 

current-year purchases compared with only 19.6 percent of Fannie Mae's underserved 

areas purchases as reported by HMDA. The same patterns exist for Freddie Mac's 1998 

data for the special affordable and underserved areas categories. Thus, 1998 HMDA data 

do not provide a reliable estimate at the national level of the goals-qualifying percentages 

for the GSEs' purchases of current-year loans. However, the bias is in the opposite 

direction to that predicted by Berkovec and Zorn. Consistent with the aggregate 1996-

2000 data, the 1998 data suggest that HMDA's goals-qualifying percentages are 

understated, not overstated. The data for 2000, on the other hand, show a mixture of 

results – in some cases the HMDA percentage is larger than the GSE “current year” 

84 The data in Table A.2 that support Berkovec and Zorn are the 1993-95 special affordable and low-mod 

data (particularly for Freddie Mac) that show HMDA over-reporting percentages by more than a half 

percentage point. Otherwise, the data in Table A.2, as well as Table A.1, do not present a picture of 

HMDA's having an upward bias in reporting targeted loans. 

45 
 

 

 

percentage (e.g., Fannie Mae’s special affordable purchases) while in other cases the 

HMDA percentage is smaller than the GSE “current year” percentage (e.g., Freddie 

Mac’s underserved areas purchases). 

Third, the HMDA-reported percentages through 1997 are actually rather close to 

Freddie-Mac-reported overall percentages because Freddie Mac's prior-year purchases 

often resembled their current-year originations (see Table A.1). Fannie Mae, on the other 

hand, was more apt to have a higher percentage of targeted loans in its prior-year 

purchases, which means that HMDA data were more likely to underestimate Fannie 

Mae's overall performance. However, this underestimation of the share of Fannie Mae’s 

goal-qualifying loans in HMDA data first arose in 1997, when Fannie Mae's purchases of 

prior-year loans were particularly targeted to affordable lending groups. For the years 

1993 to 1996, Fannie Mae’s prior-year loan purchases more closely resembled their 

current-year originations, which explains why HMDA data provide a reasonable estimate 

of the goals-qualifying percentages of Fannie Mae's overall purchases during this 

period.85 

To conclude, the data reported in Tables A.1 and A.2 do not support the Berkovec 

and Zorn findings. With respect to the goals-qualifying percentages of GSE purchases, 

comparing columns 2 and 4 in Table A.1 for Fannie Mae and columns 6 and 8 for 

Freddie Mac shows that the HMDA-reported goals-qualifying percentages for loans sold 

to the GSEs are not always larger than the corresponding current-year percentages 

reported by the GSEs. For the 1996-2000 period, the average HMDA-reported 

percentages are approximately the same as the GSE-reported percentages for the lowmod and special affordable categories and slightly lower for the underserved areas 

category -- yielding conclusions different from those drawn by Berkovec and Zorn with 

regard to bias in HMDA data. Thus, this more recent and complete (Fannie Mae data as 

well as Freddie Mac data) analysis does not support the Berkovec and Zorn findings that 

HMDA overstates the goals-qualifying percentages of the market. 

D. Fannie Mae's Strategy of Purchasing Seasoned Loans 

Table A.1 shows that an important source of the past differential in affordable 

lending between Fannie Mae and Freddie Mac concerns the purchase of prior-year loans. 

As shown there, the prior-year mortgages that Fannie Mae was purchasing, particularly 

through 1998, were much more likely to be loans for lower-income families and 

underserved areas than the newly-originated mortgages that they were purchasing. For 

example, 30.1 percent of Fannie Mae's 1997 purchases of prior-year mortgages were 

loans financing properties in underserved areas, compared with 20.8 percent of its 

85 Notice that while Fannie Mae’s 1998 purchases resembled their 1997 purchases with prior-year loans 

having higher goals-qualifying percentages than current-year loans, the pattern for 1999 was similar to that 

for 1993 to 1996 when there were smaller differentials between the goals-qualifying percentages of prioryear and current-year mortgages. In 2000, Fannie Mae’s data showed similar prior-year and current-year 

percentages for the borrower-income categories but much higher prior-year percentages for the 

underserved areas category. 

46 
purchases of newly-originated mortgages. These purchases of prior-year mortgages were 

one reason Fannie Mae improved its performance relative to the primary market, which 

includes only newly-originated mortgages. In 1997, 16.0 percent of its prior-year 

mortgages qualified for the Special Affordable Goal, compared with only 10.2 percent of 

its purchases of newly-originated loans. The same patterns are exhibited by the 1998 

data. For example, 17.9 percent of Fannie Mae's prior-year purchases during 1998 

qualified for the Special Affordable Goal, compared with only 12.1 percent of its 

purchases of newly-originated loans. Through 1998, Fannie Mae seemed to be 

purchasing affordable loans that were originated by portfolio lenders in previous years. 

In 1999, on the other hand, there was little difference between the goals-qualifying 

percentages for Fannie Mae’s prior-year and its current-year purchases – and, as 

explained in Section III, 1998 was the year Freddie Mac caught up with Fannie Mae in 

purchasing goals-qualifying home mortgages. In 2000, Fannie Mae’s purchases of prioryear loans were somewhat more targeted to underserved areas than its purchases of 

current-year loans; however, its purchases of low-mod and special affordable loans 

during 2000 followed the pattern established in 1999, with little difference in the 

borrower income distribution between prior-year and current-year loans. 

Freddie Mac has not pursued a strategy of purchasing seasoned targeted loans, or 

at least not to the same degree as Fannie Mae. During 1997 and 1998, Freddie Mac's 

purchases of prior-year mortgages and its purchases of newly-originated mortgages had 

similar percentages of special affordable and low- and moderate-income borrowers. As 

Table A.1 shows, there is a small differential between Freddie Mac's prior-year and 

newly-originated mortgages for the underserved areas category but it is much smaller 

than the differential for Fannie Mae. Thus, during 1997 and 1998, Freddie Mac’s 

purchases of prior-year mortgages were less likely than Fannie Mae’s to qualify for the 

housing goals, and this was one reason Freddie Mac’s overall affordable lending 

performance was below Fannie Mae's during those years. Again in 1999, there was little 

difference between the goals-qualifying percentages for Freddie Mac’s prior-year and its 

current-year purchases. However, in 2000, Freddie Mac seemed to be following a 

targeted purchase strategy with respect to seasoned special affordable loans; the special 

affordable share of Freddie Mac’s prior-year loans (17.6 percent) was substantially 

higher than the special affordable share of current-year loans (13.0 percent). 

47 
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Paper No. HF-005. Office of Policy Development and Research, U.S. 

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Canner, Glenn B., Wayne Passmore, and Brian J. Surette. 1996. “Distribution of Credit 

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Office of Policy Development and Research. 2000. “FHA’s Impact on Homeownership 

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Housing and Urban Development, (November). 

Scheessele, Randall M. 1998. HMDA Coverage of the Mortgage Market. Working 

Paper No. HF-007. Office of Policy Development and Research, U.S. Department 

of Housing and Urban Development, (July). 

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Schwartz, Alex. 1998. "From Confrontation to Collaboration? Banks, Community 

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U.S. Department of Housing and Urban Development. 2000a. Economic Analysis for the 

Secretary of HUD’s Final Rule on HUD’s Regulation of The Federal National 

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_______. 2000b. HUD’s Regulation of The Federal National Mortgage Association 

(Fannie Mae) and The Federal Home Loan Mortgage Corporation (Freddie 

Mac): Final Rule. 24 CFR Part 81, (October 30, 2000). 

51 
_______. 2000c. Unequal Burden: Income and Racial Disparities in Subprime Lending 

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Vandenbroucke, David A., Sue G. Neal, and Harold L. Bunce. 2001. “First-Time 

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Research at HUD, November: 4-10. 

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52 
 

 

 

 

 

Housing Finance 

W O R K I N G P A P E R S E R I E S1 

HF-013 The GSEs’ Funding of Affordable Loans: A 2000 Update, by Harold Bunce,April 

2002. 

This study compares the borrower and neighborhood characteristics of single-family mortgages 

purchased by Fannie Mae and Freddie Mac between 1992 and 2000 with the characteristics of 

loans originated in the primary market during the same time period. The study finds that both 

Fannie Mae and Freddie Mac improved their affordable lending performance during the 1990s, 

but they continued in the year 2000 to underperform the conventional conforming market in 

funding mortgages for lower-income borrowers and for properties located in low-income and 

high-minority census tracts (i.e., underserved areas). Furthermore, the GSEs account for a 

significant share of the total market for home purchase loans, but their market share for each of 

the affordable lending categories is much less than their share of the overall market, and they 

contribute only a small share of funding in important market segments such as the market 

serving first-time minority homebuyers. The GSEs’ small market share in the first-time 

homebuyer market could be due to the preponderance of high (over-20-percent) downpayment 

loans in their mortgage purchases, although further study is needed to fully explain the reasons 

for their limited role in these markets. 

HF-012 The GSEs’ Funding of Affordable Loans: A 1999 Update, by Harold Bunce, 

December 2000. 

This study examines the borrower and neighborhood characteristics of single-family mortgages 

purchased by Fannie Mae and Freddie Mac, the two major Government Sponsored Enterprises 

(GSEs) in the conventional secondary market. The purpose of the study is to determine whether 

Fannie Mae and Freddie Mac lead or lag the overall conventional conforming mortgage market 

in funding loans for low-income borrowers and other groups who historically have not been well 

served by the mortgage market. This study is the third in a series of working papers examining 

the affordable lending performance of the GSEs. There are two main findings. First, while both 

GSEs have improved their affordable lending performance since 1992, they continue to lag the 

conventional conforming market in funding mortgages for lower-income borrowers and for 

properties located in low-income and high-minority census tracts (i.e., underserved areas). 

Second, Fannie Mae has traditionally out-performed Freddie Mac in purchasing loans for lowerincome borrowers and underserved neighborhoods; however, the relative performance of the two 

GSEs has recently shifted, as Freddie Mac’s performance slightly surpassed Fannie Mae’s 

during 1999. 

HF-011 An Analysis of GSE Purchases of Mortgages for African-American Borrowers and 

Their Neighborhoods, by Harold Bunce, November 2000. 

This study examines the record of Fannie Mae and Freddie Mac in providing mortgage funds for 

African-American borrowers and their neighborhoods. The study has four main findings. First, 

1

 For more information about any of the Housing Finance Working Paper Series, please contact the authors by 

calling (202) 401-0388 or (202) 708-1455 (TTY) or by writing to the author(s) at: U.S. Department of Housing 

and Urban Development, Office of Policy Development and Research, 451 7th Street, SW, Washington, DC 

20410. Additional information on housing finance topics also may be found by visiting 

http://www.huduser.org. 
 

 

 

 

 

Fannie Mae has traditionally out-performed Freddie Mac in purchasing loans for AfricanAmerican borrowers and their neighborhoods; however, between 1997 and 1999, there was a 

shift in the relative performance of the two GSEs, as Fannie Mae’s performance declined and 

Freddie Mac’s performance increased. Second, both GSEs lag the conventional conforming 

market in funding mortgages for African-American borrowers and their neighborhoods. Third, 

the GSEs' shares of mortgage originations for both upper-income and lower-income AfricanAmerican borrowers appear low. The GSEs' market shares for loans to upper-income AfricanAmerican borrowers are similar to their market shares for loans to very low-income White 

borrowers. Finally, the market share data reported in this paper illustrate the relatively small role 

that the GSEs play in funding loans for African-American borrowers in the overall (conventional and 

government) mortgage market. 

HF-010 The Property Owners and Managers Survey and the Multifamily Housing Finance 

System, by William Segal, September 2000. 

The HUD Property Owners and Managers Survey (POMS) can be utilized to analyze a number 

of policy issues relating to financing for rental properties. In this paper, adjustment techniques 

to correct for the effects of data truncation are developed and are applied to derive estimates of 

number of units per property, the size of the multifamily mortgage stock, and the magnitude of 

annual mortgage origination volume, a critical parameter for benchmarking the performance of 

Fannie Mae and Freddie Mac. Mortgage origination volume for 1995 is estimated using both a 

“hot-deck” and a regression-based imputation approach. Results from the internal POMS file at 

the Census Bureau as well from the public-use version of the file are included here. Advantages 

and shortcomings of POMS in relation to a number of other multifamily data sources are noted, 

as are possible directions for future research. 

HF-009 1998 HMDA Highlights, by Randall M. Scheessele, October 1999. 

This paper describes home purchase and refinance mortgage market trends at the national level 

using HMDA data on mortgage denials and originations from 1998 and earlier. An important 

contribution of the paper is the recognition of manufactured home and subprime lenders that 

report to HMDA and their effect on mortgage market trends. The paper provides a list of 21 

lenders that specialize in manufactured home lending and 200 lenders that specialize in subprime 

lending. The paper finds that manufacture home loan applications and their increasing denial 

rates were the primary reason for the increasing conventional denial rat since 1993. The paper 

also finds that conventional prime home purchase lending to minority and lower-income 

borrowers increased substantially between 1993 and 1994 but growth in lending to these groups 

since 1994 was attributable to growth in FHA, manufactured home, and subprime lending. 

HF-008 Do FHA Multifamily Mortgage Insurance Programs Provide Affordable Housing 

and Serve Underserved Areas? An Analysis of FHA’s Fiscal Year 1997 Book of 

Business and Comparison with the GSEs, by Edward J. Szymanoski and Susan J. 

Donahue, October 1999. 

This paper analyzes the rent affordability of about 67,500 unassisted multifamily units, which 

were insured by FHA during Fiscal Year 1997, and the proportion of these units located in 

underserved areas. In addition, the paper also compares FHA’s 1997 multifamily loans 

purchased by Fannie Mae and Freddie Mac (the government-sponsored enterprises, or GSEs) in 

regard to rent affordability and proportion of units located in underserved areas. The analysis 

shows that FHA is providing a substantial amount of modest cost rental housing and serving 

underserved areas with its unassisted multifamily mortgage insurance programs. About 95 
percent of the FHA units in this study (including new construction and existing housing) were 

affordable at 100 percent of area median income, and over 40 percent were affordable at 60 

percent of area median income. About 40 percent of the FHA units in the study were located in 

underserved areas. In drawing comparison between FHA and the GSEs, the paper first notes the 

differences as well as similarities between the multifamily programs of these respective 

agencies- for example, FHA offers higher loan-to-value ratios, lower debt service coverage 

ratios, and longer fixed-rate mortgage terms than do the GSEs. These underwriting differences 

notwithstanding, FHA’s affordability and underserved area percentages for FY 1997 were very 

similar to those of comparable Fannie Mae and Freddie Mac mortgage purchases. 

HF-007 HMDA Coverage of the Mortgage Market, by Randall M. Scheessele, July 1998. 

This paper examines the coverage of HMDA data by taking advantage of loan-level data 

reported to HUD on mortgages insured by FHA and mortgages purchased by the GSEs. The 

FHA and GSE databases provide an accurate standard against which HMDA data on FHA and 

GSE loans can be measured. The results of this paper provide background for using HMDA data 

to estimate the market share of loans for FHA and the GSEs by reporting HMDA coverage rates 

for FHA originations and GSE acquisitions of mortgages for 1993 through 1996. The paper 

finds that HMDA data under-reports GSE acquisitions mainly because a few large lenders fail to 

correctly report the sale of a significant number of their loans to the GSEs. Notwithstanding 

coverage issues, HMDA data continues to be the most comprehensive data base for measuring 

primary and secondary mortgage market activity. 

HF-006 Characteristics of Mortgages Purchased by Fannie Mae and Freddie Mac: 1996-97 

Update, by Paul B. Manchester, August 1998. 

This paper (an update of HF-003) examines the mortgages purchased by Fannie Mae and Freddie 

Mac, the two major Government-Sponsored Enterprises (GSEs) in the conventional secondary 

mortgage market. The analyses focus on detailed borrower, locational, and loan characteristics of 

such mortgages in the 1996-97 period. In general, the report is based on the loan-level data that 

the GSEs submit annually to the Department. The paper finds that the GSEs generally increased 

their performance on the goals established by HUD in 1995 and that they surpassed all of their 

1996-97 goals, with Fannie Mae’s performance exceeding Freddie Mac’s performance on each 

of the goals in both years. 

HF-005 The GSEs’ Funding of Affordable Loans: 1996 Update, by Harold L. Bunce and 

Randall M. Scheessele, July 1998. 

This paper (an update of HF-001) examines the borrower and neighborhood characteristics of 

(GSEs) in the conventional secondary mortgage market. The analysis is based on Home 

Mortgage Disclosure Act (HMDA) data on home purchase loans originated in metropolitan areas 

between 1992 and 1996. The GSEs' mortgage purchases are compared to all mortgages 

originated in the conventional conforming loan market, including originations retained in 

portfolio by banks and thrift institutions. The paper finds that there continues to be room for 

further increases in purchases of affordable loans by Fannie Mae and, especially, Freddie Mac. 

HF-004	 The GSEs’ Purchases of Single-Family Rental Property Mortgages, by Theresa R. 

DiVenti, March 1998. 

This paper examines the single-family rental mortgages purchased by Fannie Mae and Freddie 

Mac, the two major Government-Sponsored Enterprises (GSEs) in the conventional secondary 
 

mortgage market. These properties are the “mom and pop shops” of the rental market, meaning 

they are small and largely individually owned and managed. To date there has been little 

research on this segment of the rental market. This analysis looks at neighborhood, affordability, 

borrower, and financial characteristics of the GSEs’ mortgage purchases. The study finds that, 

while single-family rental properties are a small portion of the GSEs’ overall business, they are a 

large and important segment of the rental stock for lower income families. 

HF-003 Characteristics of Mortgages Purchased by Fannie Mae and Freddie Mac, 1993-95, 

by Paul B. Manchester, Sue George Neal, and Harold L. Bunce, March 1998. 

This paper examines the mortgages purchased by Fannie Mae and Freddie Mac, the two major 

Government-Sponsored Enterprises (GSEs) in the conventional secondary mortgage market. The 

analyses focus on detailed borrower, locational, and loan characteristics of such mortgages in the 

“1993-95 transition period,” established by Congress in the Federal Housing Enterprises 

Financial Safety and Soundness Act of 1992. In general, the report is based on the loan-level 

data that the GSEs submit annually to the Department. The paper finds that although there were 

significant increases between 1993 and 1995 in the GSEs’ funding of loans for groups 

traditionally underserved by the mortgage market, their support is generally less than that 

provided by portfolio lenders. 

HF-002 The Multifamily Secondary Mortgage Market: The Role of GovernmentSponsored Enterprises, by William Segal and Edward J. Szymanoski, March 1997. 

This paper examines the performance of Fannie Mae and Freddie Mac in enhancing the liquidity 

and efficiency of the affordable segment of the multifamily mortgage market. The paper focuses 

specifically on the period since 1993, when HUD established affordable housing goals for these 

two Government-Sponsored Enterprises (GSEs). A private secondary mortgage market has 

developed to address the finance needs of higher end properties; yet a comparable market for 

mortgages on properties affordable to lower-income families lags in development. Placed within 

a wider market context, it is found that the GSEs have been cautious in their affordable 

multifamily transactions. It is concluded that the GSEs have the potential to do more to enhance 

the affordable segment of the multifamily mortgage market. 

HF-001 The GSEs’ Funding of Affordable Loans, by Harold L. Bunce and Randall M. 

Scheessele, December 1996. 

This paper examines the borrower and neighborhood characteristics of mortgages purchased by 

Fannie Mae and Freddie Mac, the two major Government-Sponsored Enterprises (GSEs) in the 

conventional secondary mortgage market. The GSEs' mortgage purchases are compared to all 

mortgages originated in the conventional conforming loan market, including originations 

retained in portfolio by banks and thrift institutions. The analysis is based on Home Mortgage 

Disclosure Act (HMDA) data on home purchase loans originated in metropolitan areas between 

1992 and 1995. The paper finds that there is room for further increases in purchases of 

affordable loans by Fannie Mae and, especially, Freddie Mac. 
H:\TS\_HF WORKING PAPER\HF-014\TABLES 1-6.XLS Table A 

Table A 

Annual Trends in GSE Purchases and Single-Family Lending in Metropolitan Are

Goal-Qualifying Home Purchase Mortgages 1992 and 1997-2000

Conventional 

Ratio of Conforming Market 

Fannie Mae Freddie Mac Fannie Mae to Originations Ratio of 

Goals-Qualifying Category Purchases Purchases Freddie Mac (W/O B&C) Fannie 

Special Affordable Borrower 

1992 6.3 %* 6.5 % 0.97 10.4 % 

1997 11.7 9.0 1.30 15.2 

1998 13.2 11.3 1.17 15.4 1999 12.3 12.5 0.98 17.0 2000 13.0 14.3 0.91 16.8 

Less Than Area Median Income Borrower 

1992 29.2 28.7 1.02 34.4 

1997 37.6 34.1 1.10 42.5 1998 40.4 36.9 1.09 42.8 1999 39.3 40.0 0.98 44.8 2000 40.0 41.7 0.96 44.4 

Underserved Areas 

1992 18.3 18.6 0.98 22.2 

1997 23.5 19.9 1.18 24.9 1998 22.9 20.0 1.15 24.2 1999 20.6 21.2 0.97 25.2 2000 23.6 22.2 1.06 26.4 

Source: See Table 4 in text. Special affordable includes very low-income borrowers plus low-income borrowers living in low-income cenincome (low-income) is defined as income less than or equal to 60 (80) percent of area median income. An underserved area is defined as median income at or below 90 percent of the area median income; or a census tract with median income at or below 120 percent of the meminority population of 30 percent or greater. Data with missing values are excluded. * Interpreted as follows: in 1992, 6.3 percent of home purchase loans acquired by Fannie Mae were special affordable loans (as defined a
H:\TS\_HF WORKING PAPER\HF-014\TABLES 1-6.XLS Table B 

Table B 

Annual Trends in GSE Purchases and Single-Family Lending in Metropolitan A

Goal-Qualifying Home Purchase and Refinance Mortgages, 1997-2000

Conventional 

Ratio of Conforming Market 

Fannie Mae Freddie Mac Fannie Mae to Originations Ratio o

Goals-Qualifying Category Purchases Purchases Freddie Mac (W/O B&C) Fanni

Special Affordable Borrower 

1997 11.5 9.9 1.16 15.6 

1998 11.1 10.9 1.02 13.5 

1999 12.3 13.3 0.92 17.3 2000 14.3 15.7 0.91 18.3 

Less Than Area Median Income Borrower 

1997 37.5 35.7 1.05 42.9 1998 37.1 36.4 1.02 39.9 1999 38.8 40.7 0.95 45.1 2000 41.6 43.5 0.96 46.3 

Underserved Areas 

1997 23.6 21.5 1.10 26.7 1998 21.2 20.9 1.01 23.6 1999 21.8 23.5 0.93 26.9 2000 25.3 24.7 1.02 28.9 

Source: See Table 7 in text. Special affordable includes very low-income borrowers plus low-income borrowers living in low-income -income (low-income) is defined as income less than or equal to 60 (80) percent of area median income. An underserved area is definemedian income at or below 90 percent of the area median income; or a census tract with median income at or below 120 percent of the a minority population of 30 percent or greater. Data with missing values are excluded. 
Table 1 

Affordable Lending Shares for Major Sectors of the Mortgage Market in Metropolitan Areas
 

Home Purchase Mortgages, 1997-2000
 

Conventional Conforming Market

Depositories Conforming Market 

Borrower Characteristics Total Market FHA Freddie Mac Fannie Mae Both GSEs Total Portfolio Total W/O B&C 2 

Low-Income: 

1997 32.1 % 47.6 %1 19.2 % 22.6 % 21.2 % 26.0 % 29.2 % 27.3 % 27.3 % 

1998 32.3 49.1 22.3 25.0 23.9 26.4 29.1 27.8 27.6 

1999 34.4 49.5 24.5 24.3 24.4 29.2 28.5 30.1 29.8 

2000 33.8 48.7 27.1 24.9 25.9 29.7 28.7 29.8 29.4 

African American: 

1997 7.8 14.4 3.2 4.5 4.0 4.4 4.7 5.1 4.9 

1998 7.4 14.2 3.2 3.8 3.6 4.1 4.8 4.9 4.6 

1999 7.9 14.6 3.5 3.4 3.4 4.7 4.7 5.4 5.0 

2000 8.3 15.5 4.3 4.1 4.2 5.4 5.0 5.9 5.4 

Hispanic: 

1997 8.7 17.8 5.1 6.3 5.8 5.2 5.1 5.9 5.8 

1998 8.6 18.6 4.7 6.0 5.5 5.3 5.5 6.1 5.9 

1999 9.7 19.3 5.5 6.0 5.8 6.5 6.6 7.1 6.9 

2000 10.9 20.7 6.6 8.0 7.3 7.9 7.7 8.3 8.1 

Minority: 

1997 21.4 35.8 14.0 17.7 16.2 15.3 14.6 16.5 16.3 

1998 21.0 36.5 13.1 16.3 15.0 15.0 15.2 16.6 16.1 

1999 23.4 37.7 14.9 17.3 16.3 17.7 17.3 19.0 18.4 

2000 25.4 40.2 17.4 20.1 18.9 20.4 19.6 21.2 20.4 

Neighborhood Characteristics 

Low-Income Tract: 

1997 12.8 % 19.1 % 7.9 % 9.5 % 8.9 % 10.2 % 12.0 % 10.9 10.8 % 

1998 12.3 18.7 7.9 9.4 8.8 9.8 12.1 10.7 10.4 

1999 12.7 18.2 8.4 8.1 8.2 10.8 11.6 11.3 10.9 

2000 13.4 19.2 9.1 9.6 9.4 11.9 12.4 12.0 11.5 

High-Minority Tract: 

1997 17.3 27.1 11.4 15.3 13.8 12.5 12.2 14.1 13.9 

1998 16.9 27.0 10.8 14.0 12.7 12.2 12.6 14.1 13.6 

1999 17.5 26.0 12.3 12.7 12.5 13.9 13.5 15.1 14.6 

2000 18.5 26.5 12.7 15.1 14.1 15.7 14.9 16.4 15.8 

High African-American Tract: 

1997 5.8 9.6 3.0 4.8 4.1 4.1 4.7 4.6 4.5 

1998 5.5 9.2 3.2 3.8 3.6 3.9 4.7 4.5 4.3 

1999 5.7 8.9 3.4 3.0 3.2 4.3 4.4 4.8 4.4 

2000 6.0 9.4 3.8 3.6 3.7 5.0 4.8 5.1 4.8 

Underserved Areas: 

1997 29.1 41.3 19.9 23.5 22.1 23.6 26.3 25.2 24.9 

1998 28.2 41.2 20.0 22.9 21.7 22.7 26.1 24.6 24.2 

1999 29.1 40.5 21.2 20.6 20.9 24.6 25.6 25.8 25.2 

2000 30.3 42.1 22.2 23.6 23.0 26.7 27.1 27.1 26.4 

Notes: All the data are for home purchase mortgages. The FHA, depositories, and market percentages are derived from 1997, 1998, 1999 and 2000 HMDA data. 

The GSE percentages are derived from the loan-level data that Fannie Mae and Freddie Mac provide to HUD. The GSE data include conventional home loans 

purchased during 1997, 1998, 1999 and 2000; thus, these data include their purchases of seasoned loans (i.e., mortgages originated prior to 1997 or 1998 or 1999 

or 2000) as well as their purchases of mortgages originated during 1997, 1998,1999 and 2000. The "Total Market" combines the government sector (FHA and 

VA loans) and the conventional conforming market. Thus, it includes all loans except "jumbo" loans above the conforming loan limit which was $252,700 in 2000. 

"Total Depositories" data are loans originated by HMDA reporters regulated by FDIC, OTS, OCC, FRB, and The National Credit Union Administration; they consist mainly of 

banks, thrifts, and their subsidieries. The "Portfolio Depositories" data refer to new originations that are not sold by banks and thrift institutions during 1997-2000 and 

thus are retained in depository portfolios. The HMDA data for low-income borrowers exclude mortgages with a loan-to-borrower-income ratio greater than six. 

1

 Each percentage represents the share of a sector's portfolio accounted for by the borrower or neighborhood characteristic. For example, 47.5 percent of 

FHA-insured home loans were loans for low-income borrowers. 

2 HMDA-based market shares that have been adjusted to exclude the B&C portion of the subprime market. It should be recognized that there exists some uncertainty regarding 

the number of B&C loans in the HMDA data. The adjustment assumes that the B&C loans represent one-half of the subprime market. The adjustment for home purchase loans is 

small because subprime (B&C) loans are mainly refinance loans. 
Table 2 

Affordable Lending Shares for Major Sectors of the Mortgage Market in Metropolitan Areas 

Home Purchase and Refinance Mortgages, 1997-2000
 

Conventional Conforming Market

Depositories Conforming Market 

Borrower Characteristics Total Market FHA Freddie Mac Fannie Mae Both GSEs Total Portfolio Total W/O B&C 2 

Low-Income: 

1997 31.1 % 47.1 %1 20.5 % 22.3 % 21.6 % 26.0 % 28.0 % 28.1 % 27.4 % 

1998 28.0 48.2 21.6 22.2 21.9 24.0 26.2 25.7 24.8 

1999 33.2 49.0 25.2 23.9 24.4 29.3 28.1 30.9 29.8 

2000 34.4 48.6 28.6 26.4 27.4 31.4 29.0 32.1 31.0 

African American: 

1997 8.0 14.2 3.2 4.1 3.7 4.8 4.8 6.3 5.6 

1998 6.5 13.7 3.0 3.1 3.0 3.9 4.4 5.0 4.3 

1999 8.0 14.8 3.7 3.4 3.5 5.4 5.1 6.5 5.7 

2000 8.9 15.6 4.7 4.4 4.5 6.6 5.8 7.4 6.5 

Hispanic: 

1997 7.4 17.8 4.8 5.7 5.3 4.7 4.6 5.4 5.3 

1998 6.7 17.2 4.4 4.8 4.6 4.4 4.5 5.2 5.0 

1999 8.6 18.7 5.6 5.6 5.6 6.1 6.1 6.8 6.7 

2000 10.2 20.4 6.7 7.9 7.4 7.6 7.2 8.3 8.1 

Minority: 

1997 20.1 35.6 13.1 16.2 14.9 14.4 13.4 16.7 16.0 

1998 18.0 34.8 12.2 13.8 13.1 13.2 13.1 15.3 14.5 

1999 21.8 37.3 15.1 16.3 15.8 16.9 16.1 19.0 18.0 

2000 24.7 40.0 17.3 19.4 18.4 20.2 18.6 21.7 20.6 

Neighborhood Characteristics 

Low-Income Tract: 

1997 13.6 % 18.9 % 8.6 % 9.5 % 9.1 % 10.9 % 11.9 % 12.7 % 11.9 % 

1998 11.5 17.4 8.1 8.2 8.1 9.5 10.9 10.7 10.0 

1999 13.4 17.9 9.2 8.5 8.8 11.8 12.0 12.8 11.9 

2000 14.7 19.2 10.4 10.5 10.5 13.5 13.1 14.0 13.1 

High-Minority Tract: 

1997 17.8 27.5 11.8 14.9 13.7 13.0 12.2 15.9 14.9 

1998 16.2 27.2 11.5 12.9 12.3 12.2 12.2 14.5 13.6 

1999 18.3 26.6 14.2 13.6 13.8 15.0 13.8 17.0 15.9 

2000 19.5 26.8 14.3 15.8 15.1 17.0 15.4 18.3 17.2 

High African-American Tract: 

1997 7.1 9.7 3.5 4.5 4.1 4.9 5.1 6.6 5.9 

1998 5.8 9.1 3.6 3.3 3.4 4.2 4.7 5.3 4.6 

1999 6.9 9.3 4.0 3.5 3.7 5.6 5.1 6.6 5.7 

2000 7.5 9.6 4.9 4.3 4.6 6.6 5.6 7.2 6.3 

Underserved Areas: 

1997 30.0 41.1 21.5 23.6 22.8 25.0 26.5 27.8 26.7 

1998 26.8 39.9 20.9 21.2 21.1 22.6 25.0 24.8 23.7 

1999 30.0 40.4 23.5 21.8 22.5 26.4 26.6 28.2 26.9 

2000 32.0 42.2 24.7 25.3 25.0 29.2 28.5 30.3 28.9 

Notes: The FHA, depositories, and market percentages are derived from 1997-2000 HMDA data. The GSE percentages are derived from the loan-level data that 

Fannie Mae and Freddie Mac provide to HUD. The GSE data include conventional loans purchased during 1997, 1998, 1999, and 2000; thus, these data include 

their purchases of seasoned loans (i.e., mortgages originated prior to 1997 or 1998 or 1999 or 2000) as well as their purchases of mortgages originated during 

1997, 1998, 1999, and 2000. The "Total Market" combines the government sector (FHA and VA loans) and the conventional conforming market. Thus, it 

includes all loans except "jumbo" loans above the conforming loan limit which was $252,700 in 2000. "Total Depositories" data are loans originated by HMDA reporters 

regulated by FDIC, OTS, OCC, FRB, and The National Credit Union Administration; they consist mainly of banks, thrifts, and their subsidieries. The "Portfolio Depositories" 

data refer to new originations that are not sold by banks and thrift institutions during 1997-2000 and thus are retained in depository portfolios. The HMDA data for 

low-income borrowers exclude mortgages with a loan-to-borrower-income ratio greater than six. 

1

 Each percentage represents the share of a sector's portfolio accounted for by the borrower or neighborhood characteristic. For example, 47.1 percent of 

 FHA-insured home loans were loans for low-income borrowers. It should be noted that due to FHA's streamline refinance program, borrower income data were 

not available for almost 70 percent of FHA's refinance loans. 

2 HMDA-based market shares that have been adjusted to exclude the B&C portion of the subprime market. It should be recognized that there exists some uncertainty regarding 

the number of B&C loans in the HMDA data. The adjustment assumes that the B&C loans represent one-half of the subprime market. 
H:\TS\_HF WORKING PAPER\HF-014\TABLES 1-6.XLS Table 3 

Table 3 

GSE Purchases and Single-Family Lending in Metropolitan Areas

Goal-Qualifying Home Purchase Mortgages, 1993-2000

Conform

Borrower and Tract Depository 

Characteristics Fannie Mae Freddie Mac Total Portfolio Total W/O 

 Very Low-Income 1993-2000 

9.8 % 8.9 % 12.9 % 14.3 % 13.1 % 

 1993-1995 

8.1 6.6 12.3 14.4 11.6 

 1996-2000 

10.5 9.9 13.2 14.4 13.8 

 Special Affordable 1993-2000 

11.5 % 10.4 % 15.1 % 16.8 % 15.4 % 

 1993-1995 

9.9 7.9 14.6 17.0 13.8 

 1996-2000 

12.2 11.4 15.4 16.6 16.2 

Less than Area Median Income

 1993-2000 

38.1 % 36.1 % 42.4 % 43.1 % 42.8 % 

 1993-1995 

36.3 32.4 41.8 44.0 40.8 

 1996-2000 

39.0 37.6 42.6 42.6 43.7 

 Underserved Areas 1993-2000 

22.7 % 20.3 % 24.3 26.3 25.1 % 

 1993-1995 

22.9 19.4 24.1 26.8 24.0 

 1996-2000 

22.6 20.7 24.4 26.0 25.6 

Source: The Fannie Mae and Freddie Mac data include information on all their purchases of home loans and are from the loan-level dathat they provide to HUD. All mortgages are conventional conforming mortgages. The Depository and Conforming Market data are frHMDA; loans with a loan-to-income ratio greater than six are excluded from the borrower income calculations. "Total Depositories" dare loans originated by HMDA reporters regulated by FDIC, OTS, OCC, FRB, and the National Credit Union Administration; they comainly of banks, thrifts, and their subsidieries. The "Depository Portfolio" data refer to new originations that are not sold by banks and thrift institutions during 1997-2000 and thus are retained in depository portfolios. "Conforming Market W/O B&C" data are the averagmarket percentages after deducting loan estimates of B&C loans (see text for explanation). The "Conforming Market W/O Mfg Homedata exclude loans less than $15,000 and loans from lenders that primarily originate manufactured housing loans. Special affordable invery low-income borrowers and low-income borrowers in low-income census tracts. Data with missing values are excluded. 
H:\TS\_HF WORKING PAPER\HF-014\TABLES 1-6.XLS Table 4 05/03/2002 12:52 PM 

Table 4 

Annual Trends in GSE Purchases and Single-Family Lending in Metropolitan Areas
 

Goal-Qualifying Home Purchase Mortgages, 1992-2000
 

Ratio of 

Fannie Mae to Ratio of GSE to Market (W/O B&C) 

Very Low-Income Fannie Mae Freddie Mac Freddie Mac Conforming Market Fannie Mae Freddie Mac 

Total W/O B&C 

1992 5.2 % 5.3 % 0.98 8.7 % 8.7 % 0.60 0.61 

1993 6.7 6.0 1.12 10.8 10.8 0.62 0.56 

1994 8.7 6.7 1.30 11.9 11.9 0.73 0.56 

1995 9.3 7.0 1.33 12.0 12.0 0.78 0.58 

1996 8.5 7.4 1.15 12.7 12.7 0.67 0.58 

1997 9.9 7.6 1.30 13.0 13.0 0.76 0.58 

1998 11.4 9.9 1.15 13.3 13.2 0.86 0.75 

1999 10.8 11.0 0.98 15.0 14.7 0.73 0.75 

2000 11.3 12.5 0.90 14.7 14.4 0.78 0.87 

Special Affordable 

1992 6.3 6.5 0.97 10.4 10.4 0.61 0.63 

1993 8.1 7.2 1.13 12.6 12.6 0.64 0.57 

1994 10.6 8.0 1.33 14.1 14.1 0.75 0.57 

1995 11.2 8.3 1.35 14.4 14.4 0.78 0.58 

1996 10.3 8.7 1.18 15.0 15.0 0.69 0.58 

1997 11.7 9.0 1.30 15.3 15.2 0.77 0.59 

1998 13.2 11.3 1.17 15.6 15.4 0.86 0.73 

1999 12.3 12.5 0.98 17.3 17.0 0.72 0.74 

2000 13.0 14.3 0.91 17.1 16.8 0.77 0.85 

Less Than Area Median Income 

1992 29.2 28.7 1.02 34.4 34.4 0.85 0.83 

1993 33.2 31.6 1.05 38.9 38.9 0.85 0.81 

1994 38.3 33.2 1.15 41.8 41.8 0.92 0.79 

1995 37.8 32.4 1.17 41.4 41.4 0.91 0.78 

1996 36.5 33.2 1.10 42.2 42.2 0.86 0.79 

1997 37.6 34.1 1.10 42.5 42.5 0.88 0.80 

1998 40.4 36.9 1.09 43.0 42.8 0.94 0.86 

1999 39.3 40.0 0.98 45.2 44.8 0.88 0.89 

2000 40.0 41.7 0.96 44.8 44.4 0.90 0.94 

Underserved Areas 

1992 18.3 18.6 0.98 22.2 22.2 0.82 0.84 

1993 20.3 18.4 1.10 21.9 21.9 0.93 0.84 

1994 24.3 19.7 1.23 24.4 24.3 1.00 0.81 

1995 24.7 20.1 1.23 25.5 25.4 0.97 0.79 

1996 22.3 19.7 1.13 25.0 24.9 0.90 0.79 

1997 23.5 19.9 1.18 25.2 24.9 0.94 0.80 

1998 22.9 20.0 1.15 24.6 24.2 0.95 0.83 

1999 20.6 21.2 0.97 25.8 25.2 0.82 0.84 

2000 23.6 22.2 1.06 27.1 26.4 0.89 0.84 

Source: The Fannie Mae and Freddie Mac percentages for 1993 to 2000 are from the loan-level mortgage purchase data that they provide to HUD; the 1992 GSE 

data are from HMDA. All mortgages are conventional conforming home purchase mortgages. The Conforming Market data are from HMDA; see text for an 

explanation of the market adjustment for B&C loans. Loans with a loan-to-income-ratio greater than six are excluded from the borrower income calculations. 

Special affordable includes very low-income borrowers and low-income borrowers living in low-income census tracts. Data with missing values are excluded. 
H:\TS\_HF WORKING PAPER\HF-014\TABLES 1-6.XLS Table 5 

Table 5 

Annual Trends in GSE Purchases and Single-Family Lending in Metropolitan Areas

Goal-Qualifying Home Purchase Mortgages, 1992-2000

Various Market Definitions

Conventional Conforming Market Originations 

W/O Loans W/O Mfg W/O W/O 

Fannie Mae Freddie Mac Total W/O Mfg Less and Less Than Subprime B&C 

Very Low-Income Purchases Purchases Market Loans Only Than $15K $15K Loans Loans Loans 

1992 5.2 % 5.3 % 8.7 % 8.3 % 7.9 % 7.6 % 8.7 % 8.7 % 

1993 6.7 6.0 10.8 10.2 10.0 9.6 10.8 10.8 

1994 8.7 6.7 11.9 11.3 11.2 10.7 11.9 11.9 

1995 9.3 7.0 12.0 11.1 11.3 10.5 12.0 12.0 

1996 8.5 7.4 12.7 11.5 12.0 10.8 12.7 12.7 

1997 9.9 7.6 13.0 11.7 12.4 11.0 13.0 13.0 

1998 11.4 9.9 13.3 11.7 12.8 11.4 13.2 13.2 

1999 10.8 11.0 15.0 13.1 14.5 12.9 14.5 14.7 

2000 11.3 12.5 14.7 13.3 14.1 13.0 14.1 14.4 

Special Affordable 

1992 6.3 6.5 10.4 10.0 9.5 9.3 10.4 10.4 

1993 8.1 7.2 12.6 11.9 11.8 11.3 12.6 12.6 

1994 10.6 8.0 14.1 13.4 13.4 12.8 14.1 14.1 

1995 11.2 8.3 14.4 13.3 13.6 12.7 14.4 14.4 

1996 10.3 8.7 15.0 13.5 14.2 12.8 15.0 15.0 

1997 11.7 9.0 15.3 13.6 14.6 13.0 15.3 15.2 

1998 13.2 11.3 15.6 13.7 15.0 13.4 15.2 15.4 

1999 12.3 12.5 17.3 15.3 16.8 15.0 16.7 17.0 

2000 13.0 14.3 17.1 15.6 16.5 15.3 16.4 16.8 

Less Than Area Median Income 

1992 29.2 28.7 34.4 33.8 33.4 33.0 34.4 34.4 

1993 33.2 31.6 38.9 38.0 38.1 37.4 38.9 38.9 

1994 38.3 33.2 41.8 40.9 41.1 40.3 41.8 41.8 

1995 37.8 32.4 41.4 39.9 40.5 39.2 41.3 41.3 

1996 36.5 33.2 42.2 40.3 41.1 39.4 42.2 42.2 

1997 37.6 34.1 42.5 40.4 41.8 39.6 42.4 42.5 

1998 40.4 36.9 43.0 40.7 42.5 40.3 42.7 42.8 

1999 39.3 40.0 45.2 42.9 44.7 42.5 44.4 44.8 

2000 40.0 41.7 44.8 43.0 44.1 42.6 43.9 44.4 

Underserved Areas 

1992 18.3 18.6 22.2 21.9 21.7 21.5 22.1 22.2 

1993 20.3 18.4 21.9 21.5 21.5 21.1 21.8 21.9 

1994 24.3 19.7 24.4 23.9 24.0 23.5 24.3 24.3 

1995 24.7 20.1 25.5 24.7 25.0 24.2 25.3 25.4 

1996 22.3 19.7 25.0 23.8 24.5 23.1 24.8 24.9 

1997 23.5 19.9 25.2 24.0 24.8 23.3 24.7 24.9 

1998 22.9 20.0 24.6 23.1 24.3 22.8 23.6 24.2 

1999 20.6 21.2 25.8 24.4 25.5 24.1 24.6 25.2 

2000 23.6 22.2 27.1 26.1 26.8 25.8 25.6 26.4 

Source: The Fannie Mae and Freddie Mac percentages for 1993 to 2000 are based on the loan-level mortgage purchase data that they provide to HUD; the 1992 GSE data are from HMDA. All mortgages are conventional conforming home purchase mortgages. The Conforming Market data are from HMDA; loans with a loan-to-income-ratio greater than six are excluded from all borrower income calculations. See the text for an explanation of the adjustments for manufactured housing (mfg), subprime, and B&C loans. Special affordable includes very low-income borrowers and low-income borrowers living in low-income census tracts. Data with missing values are excluded. 
H:\TS\_HF WORKING PAPER\HF-014\TABLES 1-6.XLS Table 6 

Table 6 

GSE Purchases and Single-Family Lending in Metropolitan Areas

Goal-Qualifying Home Purchase and Refinance Mortgages, 1993-2000

Conventional Conforming Market Ratio of G

Borrower and Tract W/O Characteristics Fannie Mae Freddie Mac Total B&C Loans Fannie 

Special Affordable

 1993-2000 

10.6 % 10.3 % 15.0 % 14.3 % 0

 1993-1995 

8.3 7.1 11.6 11.4 0

 1996-2000 

11.9 11.9 16.5 15.7 0

Less than Area Median Income

 1993-2000 

36.4 % 36.6 % 41.7 % 40.9 % 0

 1993-1995 

32.8 30.7 32.0 36.8 0

 1996-2000 

38.3 38.2 44.0 43.0 0

Underserved Areas

 1993-2000 

22.4 % 21.6 % 26.1 % 25.2 % 0

 1993-1995 

22.0 20.4 23.5 23.2 0

 1996-2000 

22.7 22.3 27.3 26.1 0

Source: The Fannie Mae and Freddie Mac data include information on all their single-family-owner mortgage purchases from tthey provide to HUD. All mortgages are conventional conforming mortgages. "Conventional Conforming Market" data are from loan-to-income ratio greater than six are excluded from the borrower income calculations. The numbers in the "W/O B&C Loanaverage market percentages after deducting B&C loans from the adjacent "Total" market column (see text for explanation). Speincludes very low-income borrowers and low-income borrowers in low-income census tracts. Data with missing values are exclu
H:\TS\_HF WORKING PAPER\HF-014\TABLES 1-6.XLS Table 7 

Table 7 

Annual Trends in GSE Purchases and Single-Family Lending in Metropolitan Areas 

Goal-Qualifying Home Purchase and Refinance Mortgages, 1996-2000 

Various Market Definitions 

Conventional Conforming Market Originations 

Ratio of W/O Mfg W/O 

Fannie Mae Freddie Mac Fannie Mae Total and Less Than Subprime W/O B&C 

Purchases Purchases to Freddie Mac Market $15K Loans Loans Loans 

Special Affordable 

1996 10.4 9.3 1.12 15.3 13.7 14.4 14.8 

1997 11.5 9.9 1.16 16.4 14.9 14.8 15.6 

1998 11.1 10.9 1.02 14.2 13.3 12.6 13.5 

1999 12.3 13.3 0.93 18.3 17.0 16.1 17.3 

2000 14.3 15.7 0.91 19.3 18.0 17.1 18.3 

Less Than Area Median Income 

1996 36.6 34.5 1.06 42.4 40.5 41.4 41.9 

1997 37.5 35.7 1.05 43.7 41.8 41.9 42.9 

1998 37.1 36.4 1.02 40.9 39.7 38.9 39.9 

1999 38.8 40.7 0.95 46.3 44.7 43.7 45.1 

2000 41.6 43.5 0.96 47.4 45.8 44.9 46.3 

Underserved Areas 

1996 23.0 20.9 1.10 26.7 25.3 25.3 26.0 

1997 23.6 21.5 1.10 27.8 26.6 25.5 26.7 

1998 21.2 20.9 1.01 24.8 23.9 22.4 23.6 

1999 21.8 23.5 0.93 28.2 27.3 25.4 26.9 

2000 25.3 24.7 1.02 30.3 29.4 27.3 28.9 

Source: The Fannie Mae and Freddie Mac percentages are based on the loan-level data that they provide to HUD. All mortgages are conventional conforming mortgages. The Conventional Conforming Market data are from HMDA; loans with a loan-to-income-ratio greater than six are excluded from all borrower incfor an explanation of the adjustments for manufactured housing (Mfg), subprime, and B&C loans. Special affordable includes very low-income borrowers and living in low-income census tracts. Data with missing values are excluded. 
Table 8 

GSE Purchases and FHA-Insured Loans As Shares of 

Home Purchase Mortgages Originated 

in Metropolitan Areas During 2000
 

FHA-Insured GSE Purchases 

Low-Income Borrowers 

African-American and

 Hispanic Borrowers 

28% 1 

37-38% 

34-37% 

24-29% 

Low-Income Tracts 

High Minority Tracts 

28-30% 

28-29% 

32-34% 

35-37% 

Underserved Areas2 27-29% 35-37% 

All Home Purchase Loans 19-20% 46-48% 

Source: 2000 HMDA data and 2000 GSE data. 

Notes: The FHA figures (first column) refer to percentages of all newly-mortgaged home 

purchase mortgage loans (except jumbo loans above the conforming loan limit of $252,700) 

in metropolitan areas that were insured by FHA during 2000, as reported by HMDA. The GSE 

figures (second column) are defined differently-- they include GSE purchases in metropolitan 

areas during 2000 of both 2000 and prior-year conventional mortgage originations. (About 26 

percent of the GSEs' year 2000 purchases of home loans were originated prior to 2000.) The first 

FHA (second GSE) figure for the borrower and race variables are calculated by reallocating 

missing GSE and conventional market data for these variables. FHA data had only a few 

missing cases. As with the FHA data, the GSE purchases are expressed as a percentage of the 

total market in metropolitan areas. In this table, the "total market" includes all (government and 

conventional) home purchase mortgages originated in metropolitan areas during 2000 that were 

below the conforming loan limit of $252,700. The range in percentages also reflects varying 

assumptions about HMDA's coverage of FHA loans (90-95 percent range) and market loans 

(85-90 percent range) in metropolitan areas. Lower coverage assumptions would increase the 

FHA and market totals and reduce the GSE market share. Assuming HMDA has better 

coverage of FHA-insured loans than non-FHA-insured loans lowers the FHA percentages 

for all borrower and neighborhood categories. 

1 That is, it is estimated that FHA insured 28 percent of all home purchase loans that were 

originated for low-income borrowers in metropolitan areas during 2000. 

2 Metropolitan census tracts with (1) median income less than or equal to 90 percent of 

area median income (AMI) or (2) minority concentration greater than or equal to 30 percent 

and tract median income less than or equal to 120 percent of AMI. 
H:\TS\_HF WORKING PAPER\HF-014\TABLES 1-6.XLS Table 9a 

Table 9a 

Loan-to-Value Distribution for 

GSE Home Purchase Loans, 

1997-2000 

Fannie Mae 

Number of Mortgages Percent of Total 

LTV Ratio 1997 1998 1999 2000 1997 1998 1999 

0-80% 534,685 681,789 629,425 711,178 56.6% 52.3% 53.3% 

80-90% 173,786 239,579 189,471 189,021 18.4% 18.4% 16.0% 

90-95% 188,041 289,999 253,117 219,891 19.9% 22.2% 21.4% 

95% and Over 31,539 53,491 48,337 51,855 3.3% 4.1% 4.1% 

Missing 17,130 39,941 60,810 32,847 1.8% 3.1% 5.1% 

Total Loans 945,181 1,304,799 1,181,160 1,204,792 100.0% 100.0% 100.0% 

Freddie Mac 

Number of Mortgages Percent of Total 

LTV Ratio 1997 1998 1999 2000 1997 1998 1999 

0-80% 339,526 456,975 474,156 525,455 56.3% 53.8% 55.9% 

80-90% 110,745 154,230 137,117 136,968 18.4% 18.2% 16.2% 

90-95% 146,293 204,804 184,971 181,996 24.2% 24.1% 21.8% 

95% and Over 6,456 22,203 43,601 54,543 1.1% 2.6% 5.1% 

Missing 364 11,107 8,767 24,134 0.1% 1.3% 1.0% 

Total Loans 603,384 849,319 848,612 923,096 100.0% 100.0% 100.0% 

Note: Includes home purchase mortgages financing owner-occupied one-unit properties. 
H:\TS\_HF WORKING PAPER\HF-014\TABLES 1-6.XLS Table 9b 

Table 9b 

Loan-to-Value Characteristics of 

GSEs' Home Purchase Mortgages Meeting the Housing Goals, 2000

Fannie Mae 

LTV Ratio Special Affordable Low-Mod Underserved Areas All Hom

0-80% 71,551 55.2% 238,394 56.3% 143,493 53.1% 711,17

80-90% 17,156 13.2% 66,609 15.7% 46,889 17.4% 189,02

90-95% 23,365 18.0% 86,254 20.4% 60,023 22.2% 219,89

95% and Over 10,907 8.4% 31,243 7.4% 19,442 7.2% 51,855 

Missing 6,560 5.1% 819 0.2% 311 0.1% 32,847 

Total Loans 129,539 100.0% 423,319 100.0% 270,158 100.0% 1,204,792 

Freddie Mac 

LTV Ratio Special Affordable Low-Mod Underserved Areas All Hom

0-80% 61,646 52.4% 180,823 52.4% 93,898 47.4% 525,455 

80-90% 14,497 12.3% 48,653 14.1% 31,061 15.7% 136,96

90-95% 20,570 17.5% 69,304 20.1% 48,831 24.6% 181,996 

95% and Over 14,838 12.6% 34,777 10.1% 18,608 9.4% 54,543 

Missing 6,089 5.2% 11,688 3.4% 5,820 2.9% 24,134 

Total Loans 117,640 100.0% 345,245 100.0% 198,218 100.0% 923,096 

Note: Includes home purchase mortgages financing owner-occupied one-unit properties. 
H:\TS\_HF WORKING PAPER\HF-014\TABLES 1-6.XLS Table A.1 

Table A.1 

Annual Trends in GSE Purchases and Single-Family Lending in Metropolitan Areas

Goal-Qualifying Home Purchase Mortgages, 1992-2000

Fannie Mae Data HMDA Data Freddie Mac Data HMDA Data Conf

Prior Current for Prior Current for 

Very Low-Income Year Year All Fannie Mae Year Year All Freddie Mac All 

1992 5.2 % 5.3 % 8.7 % 

1993 6.5 % 6.7 % 6.7 % 7.4 4.2 % 6.2 % 6.0 % 6.6 10.8 

1994 7.9 8.9 8.7 9.4 6.4 6.8 6.7 7.8 11.9 

1995 11.2 8.9 9.3 8.5 7.7 6.8 7.0 7.5 12.0 

1996 8.8 8.4 8.5 8.7 7.2 7.4 7.4 8.0 12.7 

1997 13.4 8.7 9.9 8.8 7.5 7.6 7.6 8.0 13.0 

1998 15.1 10.5 11.4 9.2 10.1 9.8 9.9 8.4 13.3 

1999 10.4 10.9 10.8 10.9 11.3 10.9 11.0 11.2 15.0 

2000 11.4 11.3 11.3 11.8 15.3 11.4 12.5 11.6 14.7 

Special Affordable 

1992 6.3 6.5 10.4 

1993 8.2 8.1 8.1 8.8 5.1 7.4 7.2 7.8 12.6 

1994 9.5 10.8 10.6 11.4 7.6 8.1 8.0 9.2 14.1 

1995 13.2 10.8 11.2 10.5 9.1 8.2 8.3 8.9 14.4 1996 10.6 10.2 10.3 10.5 8.4 8.7 8.7 9.4 15.0 1997 16.0 10.2 11.7 10.5 9.2 9.0 9.0 9.4 15.3 1998 17.9 12.1 13.2 10.7 11.8 11.2 11.3 9.7 15.6 

1999 12.1 12.4 12.3 12.5 12.9 12.5 12.5 12.6 17.3 

2000 13.4 13.0 13.0 13.7 17.6 13.0 14.3 13.3 17.1 

Less Than Area Median Income 

1992 29.2 28.7 34.4 

1993 30.4 33.5 33.2 35.0 24.9 32.1 31.6 32.3 38.9 

1994 35.6 38.9 38.3 40.1 31.5 33.6 33.2 35.6 41.8 

1995 38.6 37.7 37.8 37.1 33.6 32.1 32.4 33.9 41.4 

1996 35.5 36.8 36.5 37.7 31.8 33.5 33.2 35.3 42.2 

1997 41.1 36.4 37.6 37.5 33.7 34.2 34.1 35.4 42.5 

1998 45.3 39.2 40.4 38.1 36.1 37.0 36.9 36.2 43.0 

1999 37.5 39.9 39.3 40.2 38.7 40.3 40.0 41.0 45.2 

2000 39.1 40.3 40.0 42.0 46.4 39.9 41.7 41.3 44.8 

Underserved Areas 

1992 18.3 18.6 22.2 

1993 23.8 19.4 20.3 18.2 19.5 18.2 18.4 17.6 21.9 

1994 26.6 23.6 24.3 22.5 21.0 19.4 19.7 19.2 24.4 

1995 27.4 23.9 24.7 22.8 22.6 19.4 20.1 19.1 25.5 

1996 23.4 21.9 22.3 21.6 22.3 19.1 19.7 19.0 25.0 

1997 30.1 20.8 23.5 21.0 22.2 19.3 19.9 18.6 25.2 

1998 28.4 21.0 22.9 19.6 22.0 19.5 20.0 17.4 24.6 

1999 22.0 20.2 20.6 20.3 23.4 20.6 21.2 19.3 25.8 

2000 26.7 22.6 23.6 22.5 23.9 21.4 22.2 20.9 27.1 

Source: The Fannie Mae and Freddie Mac data for their purchases of "Prior Year" mortgages, "Current Year" mortgages, and "All" mortgages are from the loan-level data that they to HUD. All mortgages are conventional conforming home purchase mortgages. The "HMDA Data for (GSE)" are those mortgages that lenders report (in HMDA) as being sold to tThe Conforming Market data are from HMDA; see text for an explanation of the market adjustment for B&C loans. Loans with a loan-to-income-ratio greater than six are excluded the borrower income calculations. Special affordable includes very low-income borrowers and low-income borrowers living in low-income census tracts. Data with missing values are excluded. 
H:\TS\_HF WORKING PAPER\HF-014\TABLES 1-6.XLS Table B.1 05/03/2002 4:19 PM 

Appendix B
 

Table B.1
 

GSEs' Role in Homebuyer Market, 1997-1999
 

(Market Without Manufactured Homes)
 

Without Re-Allocation of Missing GSE With Re-Allocation of Missing GSE

First-Time Homebuyer Information First-Time Homebuyer Information 

All Homebuyers Number Percent Share Number Percent Share 

Fannie Mae Purchases 3,369,239 24.5 % 3,369,239 24.5 %

 Freddie Mac Purchases 2,309,650 16.8 2,309,650 16.8

 Both GSEs 5,678,889 41.2 5,678,889 41.2

 FHA-Insured Loans 2,458,889 17.8 2,458,889 17.8

 Homebuyer Market 13,778,795 13,778,795 

All First-Time Homebuyers

 Fannie Mae Purchases 899,462 16.2 % 1,009,867 18.2 %

 Freddie Mac Purchases 530,156 9.6 599,837 10.8

 Both GSEs 1,429,618 25.8 1,609,704 29.0

 FHA-Insured Loans 1,980,500 35.7 1,980,500 35.7

 Homebuyer Market 5,549,256 5,549,256 

All Repeat Homebuyers

 Fannie Mae Purchases 2,469,777 30.0 % 2,359,372 28.7 %

 Freddie Mac Purchases 1,779,494 21.6 1,709,813 20.8

 Both GSEs 4,249,271 51.6 4,069,185 49.4

 FHA-Insured Loans 478,389 5.8 478,389 5.8

 Homebuyer Market 8,229,539 8,229,539 

African-American and 

Hispanic Homebuyers

 Fannie Mae Purchases 316,708 13.1 % 316,708 13.1 %

 Freddie Mac Purchases 180,153 7.5 180,153 7.5

 Both GSEs 496,861 20.6 496,861 20.6

 FHA-Insured Loans 773,386 32.0 773,386 32.0

 Homebuyer Market 2,416,583 2,416,583 

African-American and Hispanic 

First-Time Homebuyers

 Fannie Mae Purchases 119,795 8.0 % 134,500 9.0 %

 Freddie Mac Purchases 50,701 3.4 57,365 3.8

 Both GSEs 170,496 11.4 191,865 12.8

 FHA-Insured Loans 663,559 44.4 663,559 44.4

 Homebuyer Market 1,493,492 1,493,492 

Minority Homebuyers

 Fannie Mae Purchases 535,709 17.5 % 535,709 17.5 %

 Freddie Mac Purchases 297,945 9.7 297,945 9.7

 Both GSEs 833,654 27.2 833,654 27.2

 FHA-Insured Loans 907,256 29.6 907,256 29.6

 Homebuyer Market 3,063,023 3,063,023 

Minority First-Time 

Homebuyers

 Fannie Mae Purchases 198,618 10.7 % 222,998 12.0 %

 Freddie Mac Purchases 91,221 4.9 103,211 5.6

 Both GSEs 289,839 15.6 326,209 17.6

 FHA-Insured Loans 772,635 41.6 772,635 41.6

 Homebuyer Market 1,855,818 1,855,818 

Source: GSE home purchase data are from the loan-level data they report to HUD. The GSE first-time 

homebuyer data are from the census tract file of the Public Use Data Base; the GSE data in the second 

set of columns are increased to account for missing first-time homebuyer information (see text). Missing 

race and ethnicity data for first-time homebuyers are re-allocated based on the race and ethnicity 

percentage distribution of the non-missing data. FHA data are from FHA. The market data for homebuyers 

are from the American Housing Survey; in this table, the AHS data excluded homebuyers purchasing 

manufactured housing. 

 11/27/01 
H:\TS\_HF WORKING PAPER\HF-014\TABLES 1-6.XLS Table A.2 

Table A.2 

HMDA Versus GSE Reportting of GSE Loan Characteristics 

Single-Family-Owner Home Loans in Metropolitan Areas, 1993-2000 

Fannie Mae Freddie M

Borrower and Tract Characteristics 

Very Low-Income

 1993-2000 

9.4 % 9.5 % 1.01 % 8.7 % 

 1993-1995 

8.0 8.4 1.05 6.6 

 1996-2000 

10.1 10.0 0.99 9.6 

Special Affordable

 1993-2000 

11.1 % 11.2 % 1.01 % 10.1 % 

 1993-1995 

9.8 10.2 1.04 7.9 

 1996-2000 

11.7 11.7 1.00 11.0 

Less than Area Median Income

 1993-2000 

38.0 % 38.6 % 1.02 % 35.8 % 

 1993-1995 

36.4 37.2 1.02 32.6 

 1996-2000 

38.7 39.3 1.02 37.2 

Underserved Areas

 1993-2000 

21.6 % 21.0 % 0.97 % 19.7 % 

 1993-1995 

22.1 21.1 0.95 19.0 

 1996-2000 

21.3 21.0 0.99 20.1 

Current-Year Loan 

Purchases 

GSE-Reported 

GSE Purc

Current-Year Loan 

GSE-Reported 

Purchases 

HMDA-Reported 

GSE Purchases 

HMDA-Reported/ HMDA-Re

GSE Reported 

Source: The Fannie Mae and Freddie Mac "current year" data include information on their purchases of home loans originated in the same year tThe data are from the loan-level data that they provide to HUD. All mortgages are conventional conforming mortgages. The "HMDA-Reported" on conventional conforming loans sold to the GSEs as reported by lenders in HMDA. Loans with a loan-to-income ratio greater than six are excluincome calculations. Special affordable includes very low-income borrowers and low-income borrowers in low-income census tracts. Data with m
g 

Mortgages by Goals-Qualifying Category, 1997-2000
 

11.7 

9.0 

15.2 

13.2 

11.3 

15.4 

12.3 12.5 

17.0 

13.0 

14.3 

16.8 

0 

2 

4 

6 

8 

10 

12 

14 

16 

18 

Fannie Mae Freddie Mac Conventional Conforming 

Market (W/O B&C) 

1997 1998 1999 2000 

23.5 

19.9 

24.9 

22.9 

20.0 

24.2 

20.6 21.2 

25.2 

23.6 

22.2 

26.4 

0 

5 

10 

15 

20 

25 

30 

Special Affordable Borrowers 

Underserved Areas 

Percent 

Share 

Percent 

Share 

Fannie Mae Freddie Mac Conventional Conforming 

Market (W/O B&C) 

1997 1998 1999 2000 

Source: Table A. Home purchase loans in metropolitan areas. 
Figure B
 

GSEs’ Share of Homebuyer Markets, 1997-99
 

36% 

10-11% 

22-25% 

0% 

5% 

10% 

15% 

20% 

25% 

30% 

35% 

40% 

GSE Percent Share 

All Homebuyers First-Time Homebuyers First-Time African-American 

and Hispanic Homebuyers 

Source: Tables 10 and 11. 
g 

Mortgages for African-American Borrowers, 1997-2000
 

4.5 

3.2 

4.9 

3.8 

3.2 

4.6 

3.4 3.5 

5.0 

4.1 

4.3 

5.4 

0 

1 

2 

3 

4 

5 

6 

Percent 

Share 

Fannie Mae Freddie Mac Conventional Conforming 

Market (W/O B&C) 

1997 1998 1999 2000 

Figure D
 

The Share of Mortgages for African-American and Hispanic

Borrowers by Major Sector of the Mortgage Market, 2000
 40 

35 

Percent 

Share 

15 

20 

25 

30 

10 

0 

5 

19.2 

36.2 

11.5 

12.7 13.5 

Total Market FHA GSEs Depositories Conventional 

Conforming
 

Market (W/O
 

B&C)
 

Source: Table 1. Home purchase loans in metropolitan areas.