Housing Finance Working Paper Series

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This study examines the record of Fannie Mae and Freddie Mac in providing mortgage funds for African-American borrowers and their neighborhoods. The study has four main findings. First, Fannie Mae has traditionally out-performed Freddie Mac in purchasing loans for African-American borrowers and their neighborhoods; however, between 1997 and 1999, there was a shift in the relative performance of the two GSEs, as Fannie Mae’s performance declined and Freddie Mac’s performance increased. Second, both GSEs lag the conventional conforming market in funding mortgages for African-American borrowers and their neighborhoods. Third, the GSEs' shares of mortgage originations for both upper-income and lower-income African-American borrowers appear low. The GSEs' market shares for loans to upper-income African-American borrowers are similar to their market shares for loans to very low-income White borrowers. Finally, the market share data reported in this paper illustrate the relatively small role that the GSEs play in funding loans for African-American borrowers in the overall (conventional and government) mortgage market.