Fannie to Expand Subprime Activities?

Fannie Mae's chief operating officer told investors Wednesday that the company's low loss rate on high-risk home loans suggests that the secondary giant can expand further into the market for riskier home loans.Pointing out that Fannie Mae's credit losses have recently averaged less than half a basis point, vice chairman and COO Timothy Howard said the credit loss rate on Fannie Mae's portfolio of riskier loans is "substantially less" than the loss rate on the rest of its book of business, reflecting strong underwriting, pricing, and risk-sharing on riskier loan products. He said that trend "points to our ability to expand further" into the subprime mortgage market. However, he said credit losses are unsustainably low, and that a normal credit loss rate is "probably more in the range of two or three basis points." Fannie Mae can be found online at http://www.fanniemae.com.