Fannie Mae Shrugs Off Concern Over Subprime, Bad Credit Mortgage Market

So, Freddie Mac plans on stepping up efforts to restrict bad credit home loan qualifications? That’s understandable.

But it’s not a step that the other national home mortgage finance giant, Fannie Mae, feels is required. The companu will reduce its operating expenses to $2 billion a year as it wraps up its financial restatements, but sees little risk exposure to subprime loans the company said Tuesday.

“Our expectation that we will reduce in 2008 our normalized expenses” to approximately $2 billion per year relies on an end to Fannie Mae’s work on restatements, the company said in a filing with the U.S. Securities and Exchange Commission.

The company said it sees little exposure to subprime, bad credit home loans - made to borrowers with weaker payment histories - that have been troubling the mortgage market and expects little impact from new regulatory rules on so-called non-traditional mortgages.

Roughly 0.2 percent of the company’s single-family “mortgage credit book” consisted of subprime loans at the end of last year, the company stated in its 12B-25 form with the SEC.

At the end of last year, roughly 2 percent of that same book of business involved mortgage-related securities backed by subprime home mortgage loans issued by companies other than Fannie Mae or Freddie Mac, the company said.

“We believe our credit exposure to the subprime mortgage loans underlying the private-label mortgage-related securities in our portfolio is limited because we have focused our purchases on the highest-rated tranches of these securities to date,” thee company stated.

SOURCE: CNN Money