Congresswoman Jan Schakowsky, Ninth District, IL


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HUD Pulls Plug on Fair Housing Study of GSEs' AU Systems

 

National Mortgage News

 

Nov. 10, 2003


The Department of Housing and Urban Development is burying a study that was supposed to determine if the automated underwriting systems developed by Fannie Mae and Freddie Mac discriminate against minority homebuyers.

But a Democratic congresswoman is taking HUD to task for refusing to release the report, while making copies available to Fannie and Freddie.

Housing secretary Mel Martinez told Dow Jones Newswires that he has problems with the methodology HUD researchers used in conducting the study.

The AU study was started in 2000 when Andrew Cuomo was secretary of HUD.

In addition, secretary Martinez told the wire service he has concerns about the release of proprietary information the two government-sponsored enterprises provided HUD, which is now outdated.

A HUD spokesman confirmed that the secretary has problems with the study and it will not be released. "It is a closed matter as far as we are concerned," he said.

In response to the wire story, Rep. Jan Schakowsky, D-Ill., sent a letter to the HUD secretary, reminding him that she asked for a copy of the study two years ago.

"I have deep concerns about your decision to allow the companies you regulate to view the report before providing it to Congress or the public," she says in a letter to secretary
Martinez.

"This action is both surprising and questionable. Certainly, it makes no sense to deny Congress and the public access to this report now," Rep. Schakowsky says in the Oct. 30 letter.

HUD officials declined to comment on the letter last week.

"Releasing the report would serve to inform Congress and the public as to whether these systems work in a nondiscriminatory fashion," the congresswoman said.

Release of the HUD study was expected this spring and it was expected to have an impact on a class-action lawsuit that alleges Fannie Mae's AU system - Desktop Underwriter- discriminates against minority applicants.

Fannie disputes the allegations and claims Desktop Underwriter complies with fair lending laws.

The case, Safiyyah Rahmaan v. Fannie Mae, is in discovery right now. But the plaintiff's attorney, Barry Weprin, said his case does not hinge on the HUD report.

"We are fairly confident that an objective look will show that their impact is discriminatory," he said. Mr. Weprin is a partner at Milberg, Weiss in
New York.

A separate class-action lawsuit filed against Freddie Mac claims that its AU system - Loan Prospector - actually generates credit reports. And Freddie is in violation of the Fair Credit Reporting Act by prohibiting lenders from sharing those credit reports with borrowers.