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Second Verse, Same as the First

An old adversary takes new aim at Fannie Mae

May 22, 2003


Secondary-lending giant Fannie Mae fielded an opening salvo from a watchdog group this week.

The attack by FM Policy Focus may seem familiar to the government-sponsored enterprise (GSE), because the group has been after Fannie for years, under their previous name, FM Watch.

The group has recently issued a spate of announcements, including its name change and the appointment of a new chairman, former Oklahoma congressman J.C. Watts.

In its latest charge against Fannie, FM Policy Focus has shifted their aim to the U.S. Department of Housing and Urban Development (HUD). Previously, FM's complaints were directed toward the Office of Federal Housing Enterprise Oversight (OFHEO). This regulatory agency is responsible for insuring the financial safety and soundness of both Fannie and Freddie Mac. HUD has a separate oversight arm to regulate new programs and mission statment compliance from the GSEs.

Tuesday, FM Policy Focus publically petitioned HUD to shut down Fannie's PaymentPower loan program.

In the press release, FM described PaymentPower as a program which would allow a borrower to skip up to ten payments over the life of a mortgage. Information on the program was not available on Fannie's website, although PaymentPower was listed as one of the GSE's trademarks.

FM Policy Focus called the program a type of primary lending, which Fannie, under the rules of its charter, is not allowed to make. The group also characterized the program as "anti-consumer" based on FM's analysis of eventual interest charges incurred in the use of the program.

Additionally, FM charges that the program should have been reviewed and approved by HUD prior to its availability.

Chairman Watts notes in the statement that banks must submit to regulatory authority and approval when they wish to initiate new loan programs. For Fannie, "There is no regulatory oversight and that's a problem," he said.

A spokesperson for Fannie Mae said that HUD has been and is aware of the pilot program and has not expressed any reservations.

Chuck Greener, senior vice president at Fannie Mae, called the complaints from FM Policy Focus "laughable."

"It is startling that the FM Watch companies would choose to attack an initiative that allows more Americans to get into their homes and stay in those homes," he said.

Anne Lineberry is MortgageDaily.com's editor. She previously worked as an online editor/producer for DallasNews.com and on the Metropolitan desk for the print edition of The Dallas Morning News. Email Anne at [email protected]

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