The government will propose new rules today requiring a private corporation, the Federal National Mortgage Association, to invest 30 percent of its funds in low-and moderate-income housing.
The rules would also require FNMA, which is known as Fannie Mae and is the nation's largest supplier of mortgage money, to invest 10 percent of its funds this year and 30 percent beginning next year in mortgages on urban properties.
FNMA said yesterday it does not know how much of its funds now go for low-and moderate-income mortgages, but that 25 percent of the mortgages it bought last year were in urban areas.
The government's action, announced yesterday by the Department of Housing and Urban Development, sets the stage for a potential court test of how far HUD can go in regulating the privately-run FNMA, which has several quasi-public aspects and a vast impact on the nation's mortgage market.
James E. Murray, senior vice president and general counsel of FNMA, said that "on the basis of a very preliminary reading" of the regulations, "we are concerned that the proposals exceed the Secretary's [HUD Secretary Patricia Robert Harris] statutory authority to regulate the Federal National Mortgage Association."
Beth Van Houten, a FNMA public information officer, added, "We don't want to end up in court, but unless there are substantial changes in the proposed regulations, we won't have any alternative."
The public has 30 days to comment on the new regulations, which are being published in today's Federal Register. A HUD official said it may take several months after the comment period for the department to issue final rules.
The administration's quarrel with Fannie Mae began last June when Harris told the Senate Banking Committee that the association, which purchases mortgages from mortgage bankers and savings and loan institutions, was concentrating on profits and avoiding inner city and low-income housing investments across the country.
Fannie Mae has argued that HUD is interfering with a shareholder-owned company that Congress set up in 1938 as a public corporation but turned into a private organization in 1970.
However, Harris said yesterday that "FNMA's programs and policies play an important role in determining the course of the housing industry in the United States. It is, therefore, vital that FNMA be sensitive to the public purposes for which it was created and that its programs and policies reflect these purposes while at the same time providing a reasonable economic return to the corporation."
HUD officials noted that the charter act of Congress setting up FNMA as a private but quasi-public entity gives the HUD Secretary power to require that "a reasonable portion" of its mortgage purchases "be related to the national goal of providing adequate housing for low and moderate-income families."
HUD officials said FNMA probably spends about 30 percent now on low-and moderate-income housing mortgages and should easily be able to meet the 30 percent requirement for mortgages in central cities and other metropolitan area cities by 1979.
"The new rules would give them a little shove to do more in the inner city, but it's a conservative shove," said one official.
Sen. William Proxmire (D-Wis.), chairman of the Senate Banking, Housing and Urban Affairs Committee, said he thinks the proposed regulations make sense. They're reasonable and moderate."
Rep. Henry S. Reuss (D-Wis.), chairman of the House Banking, Finance and Urban Affairs Committee, commented. "The law says that Mrs. Harris shall have 'general regulatory power over FNMA.' She is trying to be a law-abiding person, and I see nothing wrong with that."
FNMA has $34.2 billion in mortgages. Last year it bought $4.8 billion in mortgages and issues purchase commitments totaling $10.9 billion. Last month it bought $633.8 million in mortgages and made commitments of $1.4 billion.
Its authorized debt is now $37.9 billion and this week it asked for an additional$6 billion in borrowing authority through June 30.
"They've been expanding at a very rapid rate," said a high HUD official. "That explains our concern."