Housing Finance Working Paper Series

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This study examines the borrower and neighborhood characteristics of single-family mortgages purchased by Fannie Mae and Freddie Mac, the two major Government Sponsored Enterprises (GSEs) in the conventional secondary market. The purpose of the study is to determine whether Fannie Mae and Freddie Mac lead or lag the overall conventional conforming mortgage market in funding loans for low-income borrowers and other groups who historically have not been well served by the mortgage market. This study is the third in a series of working papers examining the affordable lending performance of the GSEs. There are two main findings. First, while both GSEs have improved their affordable lending performance since 1992, they continue to lag the conventional conforming market in funding mortgages for lower-income borrowers and for properties located in low-income and high-minority census tracts (i.e., underserved areas). Second, Fannie Mae has traditionally out-performed Freddie Mac in purchasing loans for lower-income borrowers and underserved neighborhoods; however, the relative performance of the two GSEs has recently shifted, as Freddie Mac’s performance slightly surpassed Fannie Mae’s during 1999.