Summary of findings
In our report Closing the Gap or Closing the Door, we ask
• How well does Fannie Mae serve the home
mortgage credit needs of ethnic and racial minority
borrowers in the Dallas/Fort Worth area?
• Is Fannie Mae satisfying its obligation
to lend in minority neighborhoods?
Our research shows that far from being a leader in serving
minorities and low- and moderate-income borrowers, the
majority of the single family mortgage loans Fannie Mae
purchases are directed at White and upper income families.
Furthermore, Fannie Mae’s poor performance engenders
neighborhood decline and disinvestment in inner city and
minority neighborhoods in Dallas and Fort Worth. This
contributes to the growing gap in White and minority
Fannie Mae is a major player in both the real estate
industry and the overall American economy. Congress directs
Fannie Mae to channel its resources into increasing the
availability and affordability of home ownership for low-,
moderate- and middle-income families. Congress further
directs the GSEs to promote access to mortgages in
underserved areas. The company’s business practices,
including its underwriting criteria and loan guidelines,
greatly influence Americans’ access to mortgage
credit. It is an indisputable fact that GSEs shape the
larger real estate market. Thus, Fannie Mae is very
important to American homeownership and the economic health
Fannie Mae exists as a secondary market for mortgage loans.
Lenders can increase their business in local communities by
making loans that they can sell to Fannie Mae. To sell a
loan to Fannie Mae a lender must qualify the home buyer
using Fannie Mae-designated criteria. Consequently, Fannie
Mae in many ways determines who qualifies for home loans.
In 2000, Fannie Mae purchased 31 percent of all of the
conventional conforming** home purchase and refinance loans
in Dallas/Fort Worth. Given that the company purchased
almost a third of all mortgages in the Metroplex, it is
important to examine what sort of borrower qualified for
these loans, and in which neighborhoods.
When reading this report, please keep in mind that our
analysis is a comparison between loans Fannie Mae purchased
and the total conventional loans originated in the
Metroplex. The report examines Fannie Mae’s volume of
the home mortgage market against the larger backdrop of the
entire home mortgage market in the area. For example, we
report that Fannie Mae’s share of mortgage loans to
African-American borrowers was only 16 percent. This means
that Fannie Mae only purchased 16 percent of the
conventional loans made to African-American borrowers. The
remaining 84 percent of the conventional mortgage loans
made to African-American borrowers were sold to other
secondary purchasers such as Freddie Mac or were held by
the originating lender.
It is important to keep in mind that if minority borrowers
cannot access prime mortgage credit through a Fannie Mae
purchased loan, the company founded specifically to enhance
that market, minorities may have no choice but to enter the
expensive and often exploitative subprime market. Subprime
loans can potentially cost individual borrowers more than
twice the cost of a Fannie Mae purchased loan. For this
reason, we devote a chapter in our report to subprime
How well does Fannie Mae serve ethnic and racial minority
Finding #1: Fannie Mae purchases a smaller
share of loans made to African-American and Hispanic
borrowers than similar loans made to White and
In 2000, Fannie Mae purchased 29 percent of the
conventional loans to White borrowers in the Dallas/Fort
Worth metropolitan area. Similarly, Fannie Mae dominates
the Asian-American market, purchasing 32 percent of
conventional mortgage loans originated to Asian borrowers
in the area (see Exhibit 1).
In sharp contrast, Fannie Mae’s market share of
conventional loans to Hispanic borrowers was only 19
percent or about one fifth of the market.
The company’s record with African-American borrowers
is even worse. Fannie Mae’s market share of
conventional loans originated to African-American borrowers
was only 16 percent, or roughly half the size of its market
share of loans originated to White borrowers.
How well does Fannie Mae serve low- and moderate-income
Finding #2: Fannie Mae purchases a
significantly greater percentage of loans made to upper
income borrowers than of loans to lower income borrowers.
As evidenced in Exhibit 2, Fannie Mae bought a substantial
share of the home loans made to upper income home buyers
and only a small share of the home loans made to lower
income home buyers. Specifically, Fannie Mae purchased 34
percent (more than one third) of the market share of
conventional loans to upper income borrowers. Conversely,
the company purchased only 19 percent, or one fifth, of the
conventional loans originated to low-income borrowers.
Finding #3: Fannie Mae’s market share of
loans to African-American borrowers is lower than to Whites
regardless of the borrower’s income.
For all ethnic groups, Fannie Mae’s market share
increases with each step up the income ladder. The greater
the borrower’s income, the more likely they are to
have a Fannie Mae purchased loan. Thus, the data reveal the
company’s preference for loans originated to upper
income borrowers over those originated to lower income
borrowers (see Exhibit 3).
At every income level, Fannie Mae’s market share for
African-American and Hispanic borrowers is dramatically
lower than for White borrowers at comparable income levels.
Fannie Mae has a 22 percent market share of conventional
loans originated to low-income White borrowers, and only a
19 percent market share of conventional loans originated to
upper income African-American borrowers.
These figures demonstrate that discrepancies in Fannie
Mae’s market share cannot be dismissed as an issue of
minority borrowers’ incomes or ability to repay.
Is Fannie Mae leading the lending industry in serving
Finding #4: Fannie Mae has a smaller market
share in minority neighborhoods than in White
Exhibit 4 (page 6) shows Fannie Mae’s market share is
inversely related to the number of minorities living in the
census tract. Fannie Mae has a relatively small market
share — 16 percent — in neighborhoods that are
at least 75 percent minority, and a significantly higher
market share — 34 percent — in neighborhoods
with a White population of at least 85 percent.
Fannie Mae’s failure to adequately invest in minority
neighborhoods has dire negative consequences for these
neighborhoods. Families seeking to buy homes and refinance
loans in these communities are increasing forced to rely on
Finding #5: Subprime lenders fill the market
gap left by Fannie Mae’s underservice to
African-American, Hispanic and low-income borrowers and
Fannie Mae’s role in providing access to prime
mortgage loans to minority and low- and moderate-income
borrowers is especially important in light of the dramatic
rise in subprime lending across Texas.
Subprime lenders market their home purchase and refinance
loans to the same borrowers that are underserved by Fannie
Mae in Dallas/Fort Worth. Subprime lenders account for 36
percent of conventional home purchase and refinance
mortgage loans originated to African-American borrowers, as
compared with Fannie Mae’s market share of only 16
By comparing Exhibit 5 with Exhibit 3 on the preceding
page, it is clear that subprime lenders’ market share
among African-American and Hispanic borrowers is virtually
a mirror opposite of Fannie Mae’s market share.
In summary, five of the report’s major findings
regarding Fannie Mae’s activities in Dallas/Fort
Worth in 2000 are:
1. Fannie Mae purchases a smaller share of loans made to
African-American and Hispanic borrowers than similar loans
made to White and Asian-American borrowers.
2. Fannie Mae purchases a significantly greater percentage
of loans made to upper income borrowers than loans made to
lower income borrowers.
3. Fannie Mae’s market share of loans to
African-American borrowers is lower than its share of loans
to White borrowers, regardless of the borrower’s
4. Fannie Mae has a smaller market share in minority
neighborhoods than in White neighborhoods.
5. Subprime lenders fill the market gap left by Fannie
Mae’s underservice to African-American, Hispanic and
low-income borrowers and underserved neighborhoods.
Congress has voiced concern about an “information
vacuum” with regard to the low- and moderate-income
and minority lending record of Fannie Mae and Freddie Mac.
In this report, we attempt to fill that vacuum.
This report raises profound questions about the value of
Fannie Mae’s contribution to the local lending market
as well as its compliance with its obligations to the
American people as defined by Congress.
The report can be downloaded.
For more information, or to receive a copy of the full
report and video summary on CD-ROM, please e-mail
* The Black homeownership rate in Dallas fell from 37%
to 36% from 1990-2000, the Hispanic rate was unchanged
(34%) and White rate rose from 50% to 53%.
** Conforming loans are loans in amounts below the loan
limit ceiling set by Congress for loan purchases by GSEs
including Fannie Mae. Conventional loans are loans other
than FHA, Veterans Administration and USDA Rural
Development insured loans.