Fannie and Freddie announce new subprime work-out loan products

Mortgage giants Fannie Mae and Freddie Mac are set to announce a new initiative to help stem the tide of subprime foreclosures, CNN is reporting.

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. …

Freddie Mac plans to make its new products available by mid-summer, Syron is due to say.

Testimony on this will be watched with extreme interest by us in the industry. Will this program be a backdoor way for lenders with bad loans to dump their problem children on the government? Will this just be one last commission check to mortgage brokers who refinance these people in to the HomeStay program?

This will be a very interesting proposition and one that will come under all sorts of scrutiny to be sure. We’ll be dialed in to the testimony as it becomes availalble. More here.