The $930,000 Tudor house Jeffrey and Lisa Stegman bought on nearly two acres in Cincinnati in 2001 probably isn't what lawmakers had in mind when they ordered government-sponsored housing giants Fannie Mae and Freddie Mac to help disadvantaged home buyers.

But Freddie Mac, according to a rival financial services industry group, eventually bought the Stegmans' $275,000 mortgage. And because their house was located within a census tract that met the Department of Housing and Urban Development definition of an "underserved area," and because they put down $655,000 cash and thus didn't need a jumbo mortgage, their loan qualified for credit toward the companies' affordable housing goals.

Jeffrey Stegman, chief executive of a manufacturing company, was surprised at the notion that his loan could be counted toward the quotas. "[It's] a loophole . . . and I think that's terrible," he said.

Actually, it's not a loophole -- it's federal housing policy in action. The Stegmans' stately Tudor may be an extreme example, but it illustrates the tensions inherent in a system that looks to two profit-driven companies to help low-income and minority home buyers.

As wholesalers for the mortgage industry, Fannie and Freddie borrow money from investors to buy mortgages from lenders. They also repackage mortgages into securities for sale to investors, adding their guarantee that investors will receive the promised principal and interest. They charge lenders a fee for that service.

They have become two of the nation's largest financial institutions, with combined profits of $12.8 billion last year. Through their decisions as to what kinds of mortgages they will purchase or securitize, they exert enormous influence on the mortgage industry and the borrowing options available to consumers.

The government has conferred tax exemptions and other advantages on Freddie and Fannie so they will provide a steady flow of funds to mortgage lenders. Government sponsorship has saved the companies billions, chiefly by helping them borrow money more cheaply, the Congressional Budget Office has said. In the early 1990s, lawmakers demanded that the companies use their advantages to meet specific affordable housing quotas as well.

HUD is now reexamining the mechanics of the system, proposing to raise its goals for Fannie and Freddie. The companies are strongly opposing the proposed new goals. During a comment period that closed recently, they argued that the department was making unrealistic demands that could force them to curtail funding for borrowers who don't count toward the goals.

Failure to meet the goals is not likely to cost the companies much in fines, compared with the scale of their operations. But it could bring a public-relations black eye that they would prefer to avoid, particularly against the backdrop of the Bush administration's ongoing struggle to tighten regulation of the two mortgage giants.

In their advertising, Fannie and Freddie emphasize that they help people buy houses. "Our public mission, and our defining goal, is to help more families achieve the American Dream of homeownership," Fannie Mae says on its Web site. "No company in America is more committed to expanding minority homeownership," the company says.

But HUD paints a different picture. "Both [Fannie and Freddie] are weak in serving first-time homebuyers of any race," the department said in a recent briefing paper. The companies "are particularly weak in serving African-American and Hispanic first-time homebuyers."

HUD says it is trying to force Fannie and Freddie to catch up with the rest of the mortgage market.

Within the universe of mortgages that the firms are eligible to buy -- currently up to and including $333,7000 -- loans to first-time home buyers accounted for 37.6 percent of total loans from 1999 through 2001, but only 26.5 percent of loans purchased by Fannie and Freddie, HUD said. During the same period, loans to African American and Hispanic first-time buyers accounted for 6.9 percent of the total, but only 4 percent of those purchased by Fannie and 3.4 percent of those purchased by Freddie, HUD said.

Fannie and Freddie disputed HUD's analysis. Fannie officials said that it has increased purchases of loans for first-time buyers since 1991 and has pledged to increase them further. HUD's own numbers show that, in 2002, by at least one way of measuring, Fannie surpassed the mortgage market in several categories of loans for people buying houses (as opposed to refinancing). Those categories included underserved areas, low-income borrowers and minorities.

FM Policy Focus, a group of financial and housing industry trade associations whose interests often put them at odds with Fannie and Freddie, accused the government-sponsored firms of gaming the system to get affordable housing credits for expensive homes. The group, which identified the Stegmans' house in a study on that issue earlier this year, said in a comment letter that loans of $100,000 or less accounted for 51 percent of total mortgages in so-called underserved areas in 2002, but only 42 percent of the loans purchased by Fannie and Freddie.

Within underserved areas, the loans the companies bought were mainly from moderate or high-income borrowers, HUD said in a report on its proposed rule.

For companies trying to generate profits for shareholders and executives, taking on loans from consumers with the lowest incomes or weakest credit histories is not necessarily the safest or most attractive course.

Freddie Mac spokeswoman Sharon McHale said Freddie does not deliberately try to skim the most expensive homes or the most affluent borrowers in underserved areas. But "it may be a residual effect of our credit policies that we're getting those loans," she said. The company has higher credit standards than some lenders, and that "would mean that we would be tending to purchase the higher quality loans," McHale said.

The company's standards address such factors as the credit history of the borrower, the debts of the borrower in relation to his or her income, and the size of the loan in relation to the value of the property, McHale said.

McHale would not comment on individual mortgages such as the Stegmans'. But if a loan met HUD's criteria, the company would count it toward the affordable housing goals, McHale said.

Freddie chief executive Richard F. Syron said in a recent interview that his company used to focus more on its bottom line than on its mandate to promote housing for low- and middle-income buyers. The company regarded the affordable housing requirement as a "tax" on what was otherwise "a profit-maximizing organization," he said.

Last year, faced with what Fannie chairman and chief executive Franklin D. Raines described as rising defaults on mortgages for mobile homes, Fannie Mae announced that it was tightening funding for mobile-home loans. The company later compromised under criticism from lawmakers such as Rep. Barney Frank (D-Mass.), ranking Democrat on the House Financial Services Committee, who complained that Fannie's actions could deprive consumers of an affordable housing option.

In some instances, Fannie and Freddie have gone to extraordinary lengths to earn affordable housing credits. For example, last year, Freddie acquired $6 billion of apartment building loans from Washington Mutual, a big lender. The deal "contributes significantly to the corporation's ability to meet the 2003 affordable housing goals," Freddie said in an October news release.

Washington Mutual reported that it retained control of the loans and had the right to undo the deal, keeping a $100 million fee that Freddie paid for the transaction.

HUD has been reviewing that deal and others by Freddie and Fannie to determine if they should count toward the affordable housing quotas.

Apartment building loans were especially attractive to Fannie and Freddie because they qualified for bonus points. In 2000, Freddie successfully lobbied HUD and Congress for the ability to earn extra bonus points, but all the various extra credit provisions lapsed at the end of last year.

Fannie and Freddie have at times used a strategy of buying loans that lenders issued in prior years instead of newly issued loans, HUD says. Buying older loans can entail less risk because by then the borrowers have a proven payment record.

If either company ever fell short of the goals, something that has happened once, the main repercussion would be a public relations black eye, according to John C. Weicher, assistant secretary of HUD.

The companies could not be fined for simply failing to meet the goals. They could be fined $25,000 per day if, after falling short, they failed to submit a plan for coming into compliance, according to John P. Kennedy, a HUD associate general counsel. They could be fined $10,000 per day if, after they submitted a plan, HUD determined that they were not making a good-faith effort to carry it out.

The fines are "not terribly significant in terms of the net worth of the companies," Kennedy said.

The Stegmans' home on two acres in the heart of Cincinnati is in an "underserved" area.