Fannie Mae in Bigger Trouble than Imagined?

The New York Times reports today on Airing the Depth of Troubles at Fannie Mae.

• The hole at Fannie Mae may be even deeper than feared.

• a number of analysts fear that Fannie Mae’s vast holdings of risky home mortgages, some of which they say are designated as safer loans, are deteriorating rapidly along with the housing market.

• Of particular concern is how Fannie Mae accounts for subprime mortgages and so-called Alt-A home loans, which are technically a rung above subprime. Some critics say that Fannie Mae defines these loans loosely, which could expose the company to new, gaping losses.

• In a recent statement, Fannie Mae said it classified loans as subprime if they had been originated by lenders specializing in subprime mortgages or by subprime divisions of large lenders. Amy Bonitatibus, a spokeswoman for the company, declined to comment on Monday on whether its nonsubprime categories contained subprime loans, saying only that “we believe that credit scores alone do not provide sufficient information to determine whether a loan should be classified as subprime.”

There's a lot about Fannie Mae and its sister, Freddie Mac, that will continue to be revealed in the days, weeks and months ahead. Some of it will not be pleasant.

Stephen M. Flatow

Vested Title Inc., 648 Newark Avenue, P.O. Box 6453, Jersey City, NJ 07306.
Tel 201-656-9220. Fax 201-656-4506. E-mail vti@vested.com

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