May 4, 2004

Is Fannie Mae’s American Dreaming Killing You!

We’ve all seen the Fannie Mae TV commercials - compelling visuals of a beautiful American family standing by a white picket fence surrounding their first home as the narrator proudly acclaims, “At Fannie Mae, we’re in the American Dream Business.”

In launching the expanded American Dream Commitment in January of 2004, Fannie Mae Chairman and CEO Frank Raines reiterated a phrase from their mission statement: “Having a safe place to call home strengthens families, communities, and our nation as a whole. We are committed to the highest standards of safety and soundness”

But Fannie’s definition of a “safe place to call home” may be different from your own. For example, would you consider your house to be safe it was contaminated with dangerous levels of airborne radiation – an invisible and odorless toxic gas estimated to cause 21,000 American lung-cancer deaths every year?

Federal legislation intended to protect an unknowing public from deadly radon gas exposure was passed in 1988, yet the Department of Housing and Urban Development has ignored it for over 15 years, allowing applicants of FHA, VA and Fannie Mae insured mortgages to continue purchasing homes that have never been checked for the presence of indoor radon.

The Stewart McKinney Amendments to the 1988 Indoor Radon Abatement Act require the HUD to develop a plan to “assist the EPA in the development of measures to avoid and reduce radon contamination.” And the section of Code of Federal Regulations written for compliance with the National Environmental Policy Act states, "It is HUD policy that all property proposed for use in HUD programs be free of hazardous materials, contamination, toxic chemicals and gasses, and radioactive substances, where a hazard could affect the health and safety of occupants or conflict with the intended utilization of the property."

Accordingly, as part of Fannie Mae’s Residential Appraisal Report, the appraiser is required to answer the question, “Are there any apparent adverse environmental conditions (hazardous waste, toxic substances, etc) present in the improvements, on the site, or in the immediate vicinity of the subject property?” Appraisers routinely answer this question “no”, without ever conducting a radon test, even if the property is located in a county designated as “High Radon Potential” by the EPA’s Map of Radon Zones.

There is not even a requirement that applicants for government insured mortgages be told that radon is a Class-A carcinogen and the 2^nd leading cause of lung cancer, much less a requirement to test. They are however, required to have a termite inspection.

In May of 1991, Richard Hembra of the U.S. General Accounting Office (GAO) testified before the Senate Appropriations Committee stating, “HUD’s radon policy does not meet legislative requirements”. In December of 1992, GAO reported to a House Committee that HUD could easily assist EPA in reducing radon contamination as directed by the McKinney Amendments stating. “Because of the influence federal housing agencies and federally chartered secondary mortgage institutions have on the housing industry, requiring them to address radon could stimulate radon testing for the nation’s homes.”

GAO went on to report that, “Although these housing agencies and mortgage institutions have the authority to require disclosure or testing, some cited various reasons for not doing so. Some mortgage institution officials said they do not consider radon a mortgage risk. For example, Fannie Mae officials stated that the presence of radon has not resulted in any loan defaults.”

So the hard truth appears Fannie would only be concerned about the home occupants being exposed to dangerous radon contamination only if it could result in a loan default. (Sort of takes the “warm and fuzzies” out of the American Dream business, doesn’t it?)

Chairman Raines lists “Integrity” as one of his four principles of corporate governance. “To ensure trust in Fannie Mae,” states Raines, “Fannie Mae must be trustworthy. We strive to hold every individual at Fannie Mae -- from our Board of Directors to the Chairman and CEO to senior management to every employee -- to the highest standards of honesty, integrity and accountability. Integrity must be part of the Fannie Mae culture.”

There is little argument in the lending industry that Fannie Mae has grown to be so successful because they have a distinct advantage in the marketplace: the full faith and credit of the U.S. government to back their securities.

“In order to earn that competitive advantage”, says Dallas Jones, Chairman of the American Radon Policy Coalition, “the very least they can do is ensure the public health in the process. I see little integrity and accountability when the nation’s number one provider of federally insured mortgages fails to take an active role to address the most deadly issue in housing today, particularly since radon-induced lung cancer is so preventable.”

In the 15 years since the passage in the McKinney Amendments, 2½ million Americans have died of lung cancer. Over 17% of all lung cancers occur in non-smokers, the 5 year survival rate for lung cancer is less than 15% and lung cancer is by far, the number one cancer killer in America.

According to newly revised risk assessments for radon exposure, approximately 315,000 Americans (over the last 15 years) were victims of radon-induced lung cancer. Since public ignorance about radon generally prevents them from ever making a connection to their radon exposure, the non-smokers generally assume it was simply an unfortunate case of bad luck.

Thirty-eight year old Elizabeth Hoffmann of Milwaukee was diagnosed with lung cancer in late 2003. Neither Liz, nor her husband has ever smoked and she has no family history of lung cancer. Her oncologist, like so many, offered no explanation as to what could be the cause.

Searching for explanation, Elizabeth’s father came across radon information on the EPA website and tested the residence Liz and her husband had been living in since they were married 15 years ago. The house was seriously contaminated. With grit and determination, Liz now fights for her life through surgery, chemo and radiation therapies. For Liz and her family, their American dream has turned into a nightmare.