WASHINGTON - Mortgage finance companies Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) have new programs to help troubled subprime borrowers avoid foreclosure, the companies' chiefs will say Tuesday, according to prepared testimony for a congressional hearing.
Daniel Mudd, Fannie's Chief Executive Officer, will unveil a new effort called "HomeStay" when he testifies Tuesday before a congressional panel to discuss the subprime lending crisis, according to text of his prepared remarks obtained by Reuters.
The program will offer troubled borrowers "a range of workout solutions," looser credit requirements and ways to shed subprime mortgages before payments spike, according to prepared testimony to be presented to a House Financial Services Committee discussing the subprime mortgage crisis.
Subprime mortgages made homeownership affordable for many borrowers who had spotty credit histories. The low early payments of those adjustable-rate mortgage (ARM) loans, though, often climb sharply within a few years and subprime mortgage delinquencies have risen in recent months.
According to the prepared testimony, Freddie Mac chief executive Richard Syron will offer services and products that will help troubled subprime borrowers ease into a mortgage that they can afford.
The company is "working on a major effort to develop more consumer-friendly subprime products that will provide stable financing alternatives going forward," Syron is due to tell the House Financial Services Committee. "These offerings will include 30-year and possibly 40-year fixed-rate mortgages and ARMs with reduced margins and longer fixed-rate periods."
Freddie Mac plans to make its new products available by mid-summer, Syron is due to say.
Fannie Mae and Freddie Mac are government-sponsored enterprises that hold federal charters to promote affordable home ownership.
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