The Impact of Secondary Market Guidelines on Affordable and Fair Lending: A Reconnaissance from the Front Lines

Two government-sponsored enterprises (GSEs) -- Fannie Mae & Freddie Mac -- play a dominant role in housing finance markets. As a result, the underwriting standards developed by the GSEs are widely used by lenders, & determine who qualifies for conventional mortgage finance. In recent years, Fannie Mae & Freddie Mac have altered their guidelines, allowed lenders to use credit scores, & introduced automated underwriting systems in order to identify & serve more creditworthy lower-income & minority borrowers. Are these changes making a difference? This paper presents the views & opinions of knowledgeable key informants in four cities who work with the GSEs' guidelines on a daily basis to answer this question. In general, these experts said that the GSEs have improved their service to lower-income & minority borrowers. But, many people also said that the GSEs could do better, especially since some lenders are taking even more aggressive steps to serve lower-income borrowers. We suggest that more information is needed in order to determine whether these critics of the GSEs are correct. 42 References. Adapted from the source document.