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Fannie, Freddie to buy subprime loans

April 18, 2007 at 8:14 PM   |   Comments

WASHINGTON, April 18 (UPI) -- Fannie Mae and Freddie Mac will buy billions of dollars in subprime home mortgage loans, the U.S. mortgage finance companies said Wednesday.

Fannie Mae, the biggest provider of money for U.S. home loans, will spend "tens of billions of dollars" over several years buying subprime home mortgage loans, a spokesman told The Wall Street Journal Wednesday.

Freddie Mac Chairman Richard Syron said earlier Wednesday his company would purchase $20 billion in such loans to help borrowers and would-be home buyers hurt by the tightening of credit standards caused by the recent spike of defaults.

Freddie Mac's products, slated to be introduced mid-summer, will limit payment shock by offering reduced adjustable-rate margins, longer fixed-rate terms and longer reset periods, the finance company said.

Both companies were responding to congressional calls for them to help avert foreclosures among subprime borrowers.

Until now, the two companies rarely directly bought subprime mortgages, but did buy triple-A portions of securities backed by such loans that were packaged by Wall Street firms, the Journal said.

Freddie Mac, officially known as the Federal Home Loan Mortgage Corp., is the No. 2 money provider for U.S. home loans after Fannie Mae, the Federal National Mortgage Association.

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