Last fall, during the global economic crisis that dried up most sources of credit and jacked up interest rates on jumbo loans, Fannie Mae was able to pump billions of dollars into the conventional mortgage market and keep its rates at historic lows. Since unlike a Fannie Mae mortgage these loans have a direct government guarantee, you'd think they would be cheaper than a Fannie Mae mortgage. Then you have subprime mortgages, a market segment that has grown over 300 percent during the nineties. This is an organization that is explicit in saying the reason they're opposed to Fannie Mae is because they believe we shouldn't be lowering costs in the subprime market. We appreciate their candor.
Subprime loans play an important role in housing finance.
My father relied on them. They're the only way many families with short, nontraditional or imperfect credit histories can get into a home. But subprime loans are also among the costliest in the market - much higher than jumbo rates. Many advocates and regulators are also concerned about predatory lenders in the subprime market, who offer elderly or low-income families home equity loans with abusive terms. We have recently offered a new product in this market that is much more consumer friendly.