Fannie Mae's new effort to underwrite A-minus loans is being greeted with mixed emotions by lenders who are already lending to borrowers with slightly impaired credit.

Last week Franklin D. Raines, Fannie Mae's chairman and chief executive officer, unveiled the Timely Payment Rewards mortgage, which is designed to help people with bruised credit obtain loans that qualify for purchase by Fannie Mae. He said the new mortgage would let borrowers pay 2 percentage points less than they would typically have to for a subprime loan. After making two years of on-time payments, borrowers would be guaranteed a 1-percentage-point rate decline but would also be free to refinance. The new product is available only through lenders that use Fannie Mae's automated underwriting system, Desktop Underwriter, for originating loans.

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