Fannie Mae Tightens Lending Standards

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 says it will require mortgage lenders to consider how high a borrower's mortgage payments might rise after teaser rates expires.

Fannie Mae also says it 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.