Like banks and thrifts, Fannie Mae and Freddie Mac are now bound by federal underwriting guidelines when they purchase subprime mortgages and private-label securitizations backed by subprime loans, according to the Office of Federal Housing Enterprise Oversight.OFHEO Director James Lockhart said the two government-sponsored enterprises have completed their implementation of the subprime guidance that federal banking regulators issued on June 29. The guidance requires lenders to qualify borrowers at the fully indexed rate and restricts stated-income loans and risk-layering features. Meanwhile, Treasury Under Secretary Robert Steel told a congressional panel last week that he is urging the two GSEs to develop loan products that can help refinance troubled subprime borrowers. He cited studies indicating that a large number of borrowers ended up in subprime loans when they could have qualified for a prime mortgage. "In those cases, the GSEs could help," Mr. Steel told the House Financial Services Committee. A Fannie Mae spokesman said, "Conversations are occurring. So we will see where they go."

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