Fannie Mae: Unafraid of National, Florida Bad Credit Mortgage Market

What, us worry?

That’s the basic stance taken by Fannie Mae.

The mortgage finance giant said it will reduce its operating expenses to $2 billion a year as it wraps up its financial restatements, and sees little risk exposure to subprime loans the company said Tuesday.

“Our expectation that we will reduce in 2008 our normalized expenses” to approximately $2 billion per year relies on an end to Fannie Mae’s work on restatements, the company said in a filing with the U.S. Securities and Exchange Commission.

The company said it sees little exposure to subprime Florida home loans - made to borrowers with weaker credit - that have been troubling the mortgage market and expects little impact from new regulatory rules on so-called non-traditional, exotic mortgages.

Roughly 0.2 percent of the company’s single-family “mortgage credit book” consisted of subprime loans at the end of last year, the company stated in its 12B-25 form with the SEC. That’s not very much. It helps to explain why bad credit Florida mortgage business is not a worry for the company.

At the end of last year, roughly 2 percent of that same book of business involved mortgage-related securities backed by subprime loans issued by companies other than Fannie Mae or Freddie Mac, the company said.

“We believe our credit exposure to the subprime mortgage loans underlying the private-label mortgage-related securities in our portfolio is limited because we have focused our purchases on the highest-rated tranches of these securities to date,” thee company stated.