by Tanta on 4/17/2007 09:23:00 AM

According to CNN, Fannie and Freddie are preparing to take the workout-refinances of some of the subprime mess on the chin:

WASHINGTON (Reuters) -- Mortgage finance companies Fannie Mae and Freddie Mac have new programs to help troubled subprime borrowers avoid foreclosure, the companies' chiefs will say Tuesday, according to prepared testimony for a congressional hearing.

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. . .

According to the prepared testimony, Freddie Mac chief executive Richard Syron will offer services and products that will help troubled subprime borrowers ease into a mortgage that they can afford.

The company is "working on a major effort to develop more consumer-friendly subprime products that will provide stable financing alternatives going forward," Syron is due to tell the House Financial Services Committee. "These offerings will include 30-year and possibly 40-year fixed-rate mortgages and ARMs with reduced margins and longer fixed-rate periods.".

Dear reporters: You are aware, we hope, that Fannie and Freddie do not actually originate loans. They buy them from loan originators. The subprime loans to be refinanced into these new products could be on the books of a GSE seller/servicer, or they could be on the books of some ailing REIT or in some private-issue security. Are the originators of the refinance just middle-men making a quick buck on the deal, or are they bagholders getting a problem off their own books and onto the GSEs' books? How will the g-fee or the cash window price for the "HomeStay" loans work? Will the originator get to take its share of the cost here? Have the MIs been dragged onto the team yet? Inquiring minds want to know.