Fannie Mae chairman and chief executive Franklin Raines is warning that the use of interest-only and zero-downpayment loans are fueling a housing price bubble in certain California and New England markets.In a recent speech before the Economic Club of Washington, D.C., Mr. Raines said there is evidence of a bubble in these two markets, blaming IO and zero-down loans for fueling housing speculation. (Mr. Raines' comments were first reported by the Washington Post and could not be confirmed by MortgageWire's deadline on Monday.) Over the past few months, some mortgage lenders have privately expressed concerns about price bubbles in certain seashore markets, in particular the New Jersey shore, and some New England resort areas, citing an increase in the use of interest-only mortgages.

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