Mortgage Financing Giants, Fannie Mae and Freddie Mac, are anticipating rough seas ahead for the next four years with the presidential re-election of George W. Bush.

A report published in the Nov. 2 Federal Register by the U.S. Department of Housing and Urban Development (HUD) showed that these two financial giants were not assisting enough minorities and first-time buyers. The report showed that whereas private, conventional market banks and other lenders devoted 38 percent of their mortgage financings to first-time buyers between 1999 and 2002, Fannie and Freddie devoted only 27 percent of their purchases to first-time buyers during the same period. Additionally, Fannie and Freddie devoted only 6.2 percent of their financings to minority first-timers during 1999-2002, while private sector lenders devoted 10.6 percent.

There were also other damning reports as HUD also accused Freddie Mac of double counting nearly 45,000 units against its goals in 2002. The units, according to HUD, had already been counted by Freddie towards its 2001 goals.

The most prominent note made by HUD was the heavy federal subsidies given to Fannie and Freddy. Public duties are required when companies are given federal subsidies stemming from their congressional charters. These duties required the corporations to lead the mortgage market in financing low and moderate households' home purchases, even if the net economic returns from such loans are less than their returns on other activities.

Consequently, both companies were given tough new demands by the Bush Adminstration to devote signficantly more financing efforts and money towards mortgages for low and moderate-income home buyers.

Both Fannie and Freddie say the Bush administration goals are too high: 56 percent of all mortgage purchases must go to low and moderate-income home buyers by 2008, up from their current 52 percent in 2005. Both firms say that such expectations could harm their abilities to serve other sectors of the market. However, private sector critics of Fannie and Freddie argue that such limitations would be offset by private lenders who compete for the same global capital markets funding pools that Fannie and Freddie use.

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