OFHEO: Higher Risk Taxing Fannie's Systems

Fannie Mae is becoming more involved in higher-risk loan products, but it needs additional staffing and better information systems to deal with the risks, according to the Office of Federal Housing Enterprises 2006 annual report."Systems permit adequate service to clients for traditional loan products, but their deficiencies impact the enterprise's ability to quickly introduce new products or enhancements," OFHEO says. At the same time, Fannie has new initiatives to become more involved in interest-only, subprime, alternative-A, and negative amortization loans, which are "currently about 20% of the book of business," the regulator said. OFHEO reported that Fannie's issuance of single-family mortgage-backed securities declined by 4.9% to $476.1 billion in 2006, but its purchases of single-family private-label securities increased by 16.5% to $48.1 billion. Freddie Mac's issuance of single-family MBS fell 9.4% to $359.1 billion in 2006, and its purchases of single-family private-label securities fell by 37.1% to $106.3 billion.