BEGINNING JAN. 1, FANNIE MAE AND FREDDIE Mac must increase their purchases of mortgages for low- and moderate-income families and within underserved communities, according to a rule issued by HUD last November.

HUD has set such goals since 1992 for Fannie and Freddie, two government-sponsored enterprises (GSEs) that support the secondary mortgage market by buying mortgages from primary lenders. The new goals require the companies to allocate 52 percent of their purchases to mortgages that serve low- and moderate-income home buyers in 2005 and 56 percent by 2008. HUD estimates the GSEs will need to purchase an additional 400,000 goal-qualifying loans to meet the targets.

The rule also sets goals for the next three years for Fannie's and Freddie's purchases of mortgages deemed “special affordable”—those made for low-income families living in low-income areas—and loans in “underserved areas,” which HUD sets according to median income and the percentage of minority population.

Both GSEs opposed raising the goals—they had been required to buy 50 percent low- and moderate-income loans—and when HUD released the final rule, they expressed concern that it will be difficult to meet the targets during years of large refinancing volume. HUD was considering that particular concern through another public comment period, which was scheduled to close Dec. 17. HUD may choose to issue a separate rule based on those comments, says John Weicher, assistant secretary for housing and federal housing commissioner.