The regulatory agency responsible for oversight of Fannie Mae and Freddie Mac warned banks and thrifts to be aware of risks associated with certain derivative-associated debt being issued by the government-sponsored enterprises.

Concerned the government agency status held by government- sponsored enterprisesincluding the Federal Home Loan Bank System, Sallie Mae and the Farm Credit systemmay seduce some unwitting, unsophisticated investors into purchasing what they may believe are high quality, low risk, Aida Alvarez, director of the Office of Federal Housing Enterprise Oversight said as part of the agencys required on-site examination, its examination and regulatory oversight group is now attempting to identify the overall risks inherent in Fannie and Freddie business activities.

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