WASHINGTON (AP) -- Battered by a tidal wave of loan defaults, mortgage finance company Fannie Mae is tightening standards for the adjustable-rate and interest-only loans that fed the housing boom and contributed to the bust.
The company said Friday it will require mortgage lenders to consider how high a borrower's mortgage payments might rise after teaser rates expire.
Fannie Mae also will enact tighter standards for "interest only" loans that allow borrowers to avoid making principal payments for several years. To get those loans, borrowers taking out new mortgages must have a down payment of at least 30 percent and enough assets for two months of living expenses.
Washington-based Fannie and sibling company Freddie Mac buy mortgages from lenders and sell them to investors with a guarantee against default. They have effectively been owned by the government since they nearly collapsed in September 2008.
Voltron says: No rush though . . . the new rules take effect in September 2010.