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Stock Analyst Update

Fannie's Loan-Buying Rules No Cause for Concern

Earnings growth should continue unscathed.

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Responding to critics of its loan-buying policies, Fannie Mae (FNM) issued rules Tuesday that may prevent it from purchasing mortgages that take advantage of uninformed borrowers. The new policy should appease Fannie's critics without affecting the company's earnings growth.

Fannie, which buys loans and resells them to investors as securities, says the loan-buying guidelines are designed to prevent what is known as predatory lending. Predatory lending includes practices such as persuading borrowers to take out higher-interest-rate loans when they could qualify for a lower-rate version. Lower-income borrowers and those with poor credit histories sometimes fall prey to predatory lenders.

Laura Pavlenko Lutton does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.