The U.S. Department of Justice and the Department of Housing and Urban Development are calling for Fannie and Freddie to take a larger share of auto loans.
The departments have filed a lawsuit that seeks to compel the two largest auto lenders to increase the number of auto loan products they offer, from more than 4.6 billion to more than 5.4 billion.
Fannie and Fannie, along with Freddie Mac, are the largest auto lending institutions, with a combined $3.3 trillion in assets, according to data from the Department for Housing and Community Development.
Under the lawsuit, the Department has asked a federal court to force Fannie to increase its auto loan portfolio from 2.9 billion loans to 4.4 million loans, a request that is based on a range of assumptions.
In a filing with the court, the DOJ said Fannie should offer a total of 5.2 billion loans.
Fannie must offer a “net” of 4.8 billion loans, the department said.
If Fannie or Freddie does not meet the DOJ’s proposed minimums, the lawsuit said, it could “result in a loss of Fannie’s federal guarantee.”
The DOJ said it would seek a court order requiring Fannie in the next 90 days to offer a net of 4 billion loans for the entire portfolio, and to allow an additional 30 days for a final decision.
For example, if Fannie does not reach the DOJs minimums for auto loans, it will be obligated to provide loans to the entire auto loan industry.
If it does, the court could rule that Fannie is subject to an FHA program rule that would require it to take the maximum number of loans available to the industry.
If the court grants the DOJ a preliminary injunction, it would also allow the DOJ to seek additional relief for FHA-insured auto loan borrowers, the suit said.
Under the law, the FHA would be the only lender eligible to take more than 40 percent of all auto loans made to low-income borrowers, it said.
The DOJ has previously sued Fannie over the auto loan program.
FHA has previously rejected those requests.