The Aug. 8 Business article "Fear of What Fannie May Do" hit upon something: There is a dispute going on in the mortgage industry. It's over money.
Fannie Mae is committed to lowering homeownership costs for consumers. Earlier this year we reduced mortgage insurance requirements and costs to home buyers, saving consumers millions of dollars. Naturally, mortgage insurers want to keep coverage requirements and premiums as high as possible. Since they can't make this happen in the business realm, they are hiring lobbyists and fighting it out in Washington.
Don't be fooled. The issue is not about public policy. It's about whether mortgage insurers and their allies can use the Washington lobbying process to make more money for themselves. That's why we call them the Coalition for Higher Mortgage Costs.
The article also revealed a second issue. At a time when both Republicans and Democrats seek ways to meet public needs with private capital -- rather than taxpayer-financed government mandates -- Fannie Mae already raises private capital to finance mortgages.
Last year, in order to finance $400 billion in affordable mortgages to serve more than 4 million families, we needed $2.6 billion of new capital. We got it from profits. Last year our pretax profits were distributed in the following way: 29 percent for income taxes, 49 percent for capital and 22 percent for dividends to our shareholders.
Our capital keeps mortgage rates low, finances our pledge to invest $1 trillion to meet the housing needs of 10 million underserved families and finances $300 billion in community development plans with dozens of cities across the country, including $1 billion here in the District. Anybody who suggests that Fannie Mae can serve more families by earning less profit has it upside down. Our profits create the capital that allows us to serve more families.
Many innovations we have introduced were initially viewed as radical by the industry but eventually became the status quo. Today's controversies will pass too; some the article mentioned are already outdated. For example, thousands of mortgage banks use Fannie Mae underwriting software hundreds of times a day to serve home buyers more efficiently. Most of the industry knows of my pledge that Fannie Mae will not originate mortgages. And Fannie Mae has embraced the new housing goals set by HUD Secretary Andrew Cuomo as part of our affordable housing mission.
If you want to see the difference we make for consumers, check out the Mortgage Rate Chart in Saturday's Post Real Estate section. Notice that the interest rate in the first column -- the mortgages we buy -- is lower than in the second column? A fraction of a percentage point may not seem like much, but right now, a mortgage in the Fannie Mae column saves home buyers as much as $20,000 over the life of their loans.
Fannie Mae's efforts to cut home-buying costs will not always please those who benefit financially from high costs of the status quo. But for us, we have one mission: helping more families become homeowners or obtain decent rental housing. If that is controversial, so be it.
The writer is chairman and chief executive officer of Fannie Mae.