Why do Black and Brown borrowers have such a small share of the Fannie Mae and Freddie Mac loan portfolio?

In 2020, 3.06% of loans purchased by Fannie Mae were for Black borrowers and 8.03% were Hispanic borrowers. In comparison, 65.61 % were for white borrowers1. For Freddie Mac in 2020, 3.28% of loans purchased were to Black borrowers and 6.77% to Hispanic borrowers. Compare that to 64.62% of loans were for white borrowers2. This poor performance with Black and Hispanic borrowers is an ongoing problem in meeting an important market opportunity and addressing the racial homeownership gap.  Compare these numbers with FHA-insured mortgages, wherein 2020, 12.74% of FHA loans went to Black borrowers, 17.29% of loans went to Hispanic borrowers and 50.11% went to white  borrowers3. Fannie Mae and Freddie Mac do not do a good job lending to people with lower downpayments and lower credit scores. But Black and Brown borrowers are more likely than white borrowers to have a lower downpayment and a lower credit score.  Black and Brown borrowers coming from lower wealth communities are not be able to save as many funds for a downpayment. Their families are typically lower in wealth and have less ability to gift downpayment contributions to help with the purchase. They are also more likely to be rent-burdened, paying a higher proportion of their income for rent and, as a result, having greater difficulty saving downpayment funds.   At the same time, Fannie Mae and Freddie maintain very high credit score averages. The average credit score in the Fannie Mae portfolio is 7514. For Freddie Mac, the average credit score is 7595. Compare that to the average credit score of Black households, which is 677, and for Hispanic households, 701. White average credit scores are 7346. Over 50% of white people have FICO scores above [...]