Fannie, Freddie meet subprime rules, regulator says

Baltimore Business Journal report:

Mortgage financers Fannie Mae and Freddie Mac have implemented new federal guidelines regarding the purchase of risky subprime loans, according to the regulator for the two companies.

Last month, the Office of Federal Housing Enterprise Oversight directed D.C.-based Fannie Mae and McLean, Va.-based Freddie Mac to apply tighter standards for buying subprime loans, which are made to borrowers with shaky credit.

The oversight office had requested that nontraditional and subprime loans purchased by the two companies comply with the new guidelines for subprime lending no later than Sept. 13.

Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) hold about $370 billion in private-label securities, almost all of which carry the highest investment-grade rating. About $170 billion of those securities are backed by subprime mortgages, according to the regulator.

So,45.9% is subprime mortgages.Yet,we have Senators who want Fannie and Freddie to buy even more subprime mortgages.Is something wrong here? Fannie,recently,has had to restate earnings because of its' shifty balance sheet.Now we are told that Fannie needs even more exposure to subprime mortgages.Are Senators Dodd and Schumer willing to put the taxpayers on the hook if Fannie and Freddie need to be bailed out because their subprime mortgage holdings don't pan out over the long run?