Fannie Steps Up Subprime Reviews

Fannie Mae is "stepping up" its pre-purchase reviews of subprime mortgage pools to make sure it is not helping predatory lenders, according to a Fannie Mae attorney."It is very important to Fannie Mae that we are not providing liquidity that will go to predatory lenders who are ripping off consumers," deputy general counsel Jon Seward told a National Community Reinvestment Coalition meeting. Fannie will be sampling a statistically significant number of loans in each pool to make sure the loans are in compliance with its predatory lending guidelines. Fannie is planning to issue expanded guidelines in a few weeks. "To the extent that the loans do not comply, we will kick them out," Mr. Seward said. "Or if it exceeds our tolerance, we won't go forward with that deal." The new predatory lending guidelines are expected to ban mandatory arbitration, limit the duration of payment penalties to three years, and ban balloon loans with a term of less than seven years.