When you fund internally and hold loans in portfolio, it means there is less of this product in the marketplace for Fannie Mae to finance through purchases or securitization. This makes it much more difficult for us to provide capital that tracks reported originations in the marketplace. Between 1993 and 1999, the subprime mortgage market grew from next to nothing to nearly 11 percent of the entire mortgage market. Subprime lending to African Americans grew even faster. By 1999, subprime lenders had boosted their overall share of the African-American market from just over 3 percent to nearly 22 percent.
Subprime lending is a crucial part of consumer finance.
At the same time, many borrowers in the subprime market could qualify for conventional credit at a much lower rate. Maybe they were not told. Or maybe a subprime lender did a better job making the borrower feel welcome. These two trends present a challenge to the flow of conventional mortgage funds to underserved families. This is a greater challenge for Fannie Mae.