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Fannie Mae's American Dream Commitment: We too have a dream

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In 1967, Dr. Martin Luther King, Jr., said, "[H]alf of all Negroes live in substandard housing. And Negroes have half the income of Whites. ... [W]e are likely to find that the problems of housing, education, instead of preceding the elimination of poverty, will themselves be affected if poverty is first abolished.

The poor, transformed into purchasers, will do a great deal on their own to alter housing decay. Negroes, who have a double disability, will have a greater effect on discrimination when they have the additional weapon of cash to use in their struggle."
With the 50th anniversary of the Brown v. Board of Education decision that marked the beginning of the end of racial apartheid in America, minority Americans still have not achieved parity in housing or wealth.

Dr. King was arguing that poverty had to be abolished first before there could be parity in housing. And of course, to a great extent he is correct: families need a decent income and some money in the bank to get a mortgage.

But we at Fannie Mae (FNM/NYSE), the nation’s largest source of home mortgage funds, also stand for the converse proposition: If we can bend the housing finance system to transform the poor into home purchasers, if we can help underserved families apply the income and savings they do have, then we can get more minority families into homes -- and they can start to build equity wealth.

Today, while the U.S. homeownership rate has reached an all-time high of 68 percent, and 75 percent for White Americans, only 49 percent of minorities own their homes. If there were racial parity in homeownership, we calculate that three million more African American families would own their homes -- and would have $760 billion more in home equity wealth. For example, a $100,000 home purchased in 1990 that appreciated the national average of 4-5 percent per year would now be worth $172,000 -- yielding a $72,000 gain in equity wealth, tax free.

To do our part to close the racial gaps in homeownership and wealth, Fannie Mae has just expanded our American Dream Commitment plan. Under this plan, launched in 2000, we pledged to provide $2 trillion in housing capital for 18 million minority and underserved families by the end of the decade. Since then, following three extraordinary years for the housing industry, we have already hit the $2 trillion mark. This is on top of the $1 trillion we provided to 10 million underserved families from 1994 to 2000.

Now Fannie Mae is renewing and deepening our American Dream Commitment plan, starting with an emphasis on first-time homebuyers. Fannie Mae will create 6 million first-time homeowners (including 1.8 million minority homeowners) over the next ten years, and help boost the minority homeownership rate to 55 percent. We are not satisfied with 55 percent; ultimately our goal is to erase the racial gap in homeownership.

The Harvard Joint Center for Housing Studies has projected that it would take until the year 2020 for the minority homeownership rate to reach 54.4 percent. We are going take it farther six years earlier.

Over the past ten years, the $3 trillion in commitments Fannie Mae has made and met have transformed us into a company where underserved families are the core of our business and our future. Now that we have the capital, the tools and a wide range of committed housing partners, Fannie Mae is pushing to do more with bold ideas and big plans to really move the minority homeownership rate.

At Fannie Mae, we have a dream too -- that all Americans will have equal access to the American Dream of homeownership. By striving for our dream, we can help to achieve Dr. King’s as well.

Franklin D. Raines is Chairman and CEO of Fannie Mae

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