When the final accounting was completed and penalties assessed, Freddie Mac and Fannie Mae both managed to beat their 2004 goals for funding mortgages for low-income housing and underserved areas.

The government-sponsored enterprises (GSEs) must meet annual goals for funding mortgages for affordable single-family and multifamily housing. The goals are set and monitored by the Department of Housing and Urban Development (HUD), which released the final 2004 tallies in December 2005.

The numbers show the GSEs met their 2004 goals and were well-positioned to meet higher 2005 goals. HUD raised the housing goals for the two GSEs for 2005. For example, the Low- and Moderate-Income Goal increased from 50% of loans issued to 52%, and they are scheduled to reach 56% by 2008. The other goals were also raised. (See Affordable Housing Finance, January 2005, page 19.)

Freddie Mac had additional hurdles to clear because it was penalized for the way it reported its purchase of some securities that HUD had not pre-approved. HUD also complained that Freddie Mac had not gotten the department’s agreement before devising a formula for counting the credits.

As a penalty, HUD reduced Freddie’s reported transactions by the following amounts: 1.6 percentage points in the Low- and Moderate-Income Goal category; 2.1 points in the Special Affordable Housing Goal; and 2.1 points in the Underserved Areas Goal. HUD also applied a 50% partial credit to the mortgages purchased under the contested securities, which wiped nearly $2 billion from Freddie Mac’s Special Affordable Multifamily Subgoal performance to $7.77 billion, from $9.76 billion.

HUD also reduced Freddie’s reported performance figures by 0.9 percentage points for the Low- and Moderate-Income Goal and 0.3 points for the Special Affordable Housing Goal. These reductions were made because of errors in the way Freddie Mac reported its financing of properties with one to four units.

Despite those handicaps, Freddie Mac still handily beat its goals. The percentage of loans Freddie Mac made to low- and moderate-income projects was 51.6%; the goal was 50%. It scored 32.3% against a goal of 31% for loans to underserved areas; 22.7% against a goal of 20% for “special affordable” loans (for units occupied by very low income and low-income households); and $7.77 billion against a goal of $2.11 billion for a “special affordable” multifamily subgoal.

Fannie Mae beat its goals, too, mostly by similar margins (see table). Fannie Mae was not assessed penalties in its scoring.

Affordable housing goals

Housing Goal

Goal Target (2004)


Fannie Mae Freddie Mac
Low- and moderate-income 50% 53.4% 51.6%
Underserved areas 31 33.5 32.3
Special affordable 20 23.6 22.7   
Special affordable multifamily subgoal (Fannie)  $2.85 billion $7.3 billion
Special affordable multifamily subgoal (Freddie) $2.11 billion   $7.7 billion
Source: Department of Housing and Urban Development