The primary mission of the Department of Housing and Urban Development (HUD), says its web site, “is to increase homeownership, support community development and increase access to affordable housing free from discrimination.” But in 1992, Congress also gave HUD the responsibility of overseeing and regulating Fannie Mae and Freddie Mac, the “government-sponsored enterprises” (GSEs) that buy mortgages from banks.
The purpose of the GSEs is to provide banks with the same kind of assurance about the mortgage market that the Federal Deposit Insurance Corporation is supposed to provide for bank depositors. They are supposed to be for-profit corporations, but with the implicit backing of the federal government, Congress worried that they might take inappropriate risks. HUD oversight was supposed to guard against that.
But the political reality is that secretaries of HUD don’t get rewarded for announcing that Fannie Mae didn’t go bankrupt again this year. Instead, they are pressured by Congress to announce that homeownership rates — especially for historically disadvantaged people such as blacks — are rising.
