Letter from Armando Falcon, Jr., Director, Office of Federal Housing Enterprise Oversight

June 2, 2000

Honorable Phil Gramm
Committee on Banking, Housing, & Urban Affairs
United States Senate
Washington, D.C. 20510

Dear Mr. Chairman:

In response to your recent letter concerning the Office of Federal Housing Enterprise Oversight's (OFHEO's) ongoing efforts to address the issue of predatory lending and your request for data related to the subject, I am pleased to provide the following information.

First, there is no definition under federal law of the term "predatory lending." Therefore, OFHEO does not have a definition of this term within its statute or regulations. However, OFHEO has also undertaken, in coordination with the other federal regulators, to create a common definition and to gain new information on predatory practices. In the increasingly integrated mortgage loan market, uniform federal standards and supervisory policies are essential, We have, there Core, joined in and are working closely with an interagency talk force that has undertaken to develop and recommend consistent regulatory approaches to these issues among the various participating agencies.

In addition, the Enterprises we regulate, Fannie Mae and Freddie Mac, have adopted standards designed to deny access to funding where predatory practices are detected. I have enclosed copies of these recently announced policies.

As the safety and soundness regulator of the Enterprises, OFHEO examines to ensure implementation and enforcement of those policies. In addition, we examine for potential credit and reputational risks that may be associated with activities which are commonly held to be predatory. Although not exhaustive, examples of then risks include:

Second, in the absence of a statutory definition of predatory lending, OFHEO does not maintain a loan-level database on the type of information that would be descriptive of predatory lending. We cannot, therefore, provide you with any specific instances of support of predatory lending by either Enterprise.

Committee continues its review, OFHEO would be pleased to assist you in any manner you deem appropriate. If I can be of any further assistance, please do not hesitate to contact me directly at (202) 414-3801 or Alan Brubaker, Associate Director for External Rclations at (202) 414-3799.


Armando Falcon, Jr.