Mortgage finance giants Fannie Mae and Freddie Mac are abiding by rules that require them to avoid buying risky subprime loans, the companies' regulator said on Monday.
In late June, the federal bank regulators issued tighter standards on loans made to subprime borrowers with damaged credit. Several weeks later, the Office of Federal Housing Enterprise Oversight asked Fannie and Freddie to incorporate those standards on the home loans that it handles.
I commend the enterprises for their implementation of the directives, James Lockhart, the OFHEO director, said in a statement. OFHEO will continue to work with federal and state regulators, and with Fannie Mae and Freddie Mac, to ensure that the essential mortgage credit needs of borrowers are addressed in conformance with the guidances.
Fannie and Freddie hold approximately $170 billion of securities backed by subprime mortgages which have a strong investment rating, OFHEO said in a statement Monday. Those securities are not subject to the new guidelines because they were purchased before Fannie and Freddie were ordered to abide by the subprime rules, OFHEO said.
OFHEO asked Fannie and Freddie to comply with the new subprime rules no later than Sept. 13.