Homeownership Mission Vulnerable After Rescue

Beginning next year, Fannie Mae and Freddie Mac were to have paid the government 4.2 cents every time they bought $100 in new loans. The government could still collect those fees, but now that's just bookkeeping. Fannie Mae and Freddie Mac are on the government's tab.

A spokesman for the Department of Housing and Urban Development, which will administer the refinancing program, said the department was committed to starting the program Oct. 1.

The second obligation is an affordable-housing trust fund, a pot of money long sought by housing advocates that will be distributed to states to support the creation and preservation of low-cost housing.

The money was to come from the 4.2-cent fee: As the refinancing program winds down, funding would be diverted to the housing trust fund, beginning in 2010. Advocates say they think Fannie Mae and Freddie Mac will be back on solid ground before then but are also eager for Congress to designate other sources of funding.

"We're optimistic," said Sheila Crowley, president of the National Low Income Housing Coalition. She cited the strong support of Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee, for the trust fund. Frank's office acknowledged that support but noted that Lockhart has the power to suspend contributions in the financial interest of the companies.

Some advocates see reason for concern about the administration's intentions. They note the decision by regulators in April not to punish Fannie Mae and Freddie Mac for failing to meet their affordable-housing goals in 2007.

The companies' regulator at the time, the Department of Housing and Urban Development, accepted the companies' argument that they were ailing financially and therefore unable to meet the goals. The advocates worry the government will put the companies' financial health ahead of policy goals.

But a vocal part of the affordable-housing community has long criticized the two companies for failing to support affordable-housing programs. They note that Fannie Mae and Freddie Mac chose to invest in subprime mortgages -- loans that often allowed people to buy homes they could not afford -- rather than truly affordable mortgages.

"They have not really done affordable housing. That's been the problem," said Judith Kennedy, chief executive of the National Association of Affordable Housing Lenders. "If they had done legitimate affordable housing, they wouldn't be in this mess."

Other advocates see the takeover as an opportunity for Fannie Mae and Freddie Mac to push a systematic restructuring of loans for distressed homeowners. It could be an opportunity for Fannie Mae and Freddie Mac to set an example, said Bruce Marks, chief executive of the Neighborhood Assistance Corp. of America. "That means [Treasury Secretary Henry] Paulson doesn't need to be begging servicers to restructure. Now we can do it through Fannie and Freddie, and that will become the national standard," Marks said.

The companies have funded nonprofit groups, something an arm of the government may be less likely to do.

NACA received $3 million from Fannie Mae last year and $500,000 from Freddie Mac, helping the Boston-based nonprofit hire more housing counselors. Consumer Credit Counseling Service of Greater Atlanta received a $250,000 grant from Fannie Mae this year for outreach efforts after noting that a disproportionate number of Hispanic homeowners were facing foreclosure.

The issue is a particular concern for the District because Fannie Mae is headquartered here and has long focused its affordable-housing efforts on its home town. Now the concern is that the District has lost its largest Fortune 500 company, replaced by one more federal agency.

"We do not have many sources to make up for what Fannie Mae has done here," said Del. Eleanor Holmes Norton (D-D.C.). "We are not a corporate headquarters city, to say the very least."