Fannie Mae announced today that it would no longer purchase or securitize any mortgages deemed “subprime” according to New York’s recently passed mortgage bill.
The move follows similar action by mortgage financier Freddie Mac, leaving high cost loans in the state with little place to turn.
“Over the past few years, Fannie Mae and its lender partners have worked together to expand affordable homeownership opportunities, promote responsible lending practices, and combat predatory lending,” Fannie Mae said in a lender announcement.
“Fannie Mae will not purchase or securitize any mortgage loan that meets the definition of a subprime home loan under New York law, regardless of whether any provision of the law is preempted by federal law with respect to a particular mortgage or for a particular originator.”
Senate Bill 8143-A imposes the new restrictions on “subprime home loans” effective on or after September 1, 2008.
Any mortgage lender who continues to originate “subprime home loans” in the state of New York after that date will be expected to have a process in place so loans are not accidentally delivered to Fannie Mae.
Fannie and Freddie lost more than a combined $3 billion in the second quarter, much of it thanks to non-traditional loans (Alt-A loans, subprime), which the pair seems to be stamping out.