Subprime borrowers believe they have few mortgage options, according to the 2001 Fannie Mae National Housing Survey. Conducted by the research firm of pollsters Peter D. Hart and Robert Teeter, the survey of 1,001 randomly selected adults -- with an oversample of 303 credit-impaired homeowners -- has been conducted for Fannie Mae since 1992.

Fannie Mae is the nation's largest "secondary" lender. It buys loans which meet its standards from local lenders. The money local lenders receive can then be used to create more loans. Fannie Mae is believed to hold roughly one of every four mortgages nationwide.

Subprime loans are used primarily by credit-impaired borrowers who are unable to obtain financing with lower rates. Credit-impaired borrowers can include those with:

• A mortgage payment 60 days late in the last year or two.
• A bankruptcy
• A foreclosure in the past three years
• Or, if they have a mortgage, any two of the following:
  1. A repossession
  2. A collection
  3. Maxed-out credit cards
  4. Cash-only payroll
  5. No credit cards.

While borrowers with stronger credit histories feel more confident and satisfied than ever, those with subprime credit understand the process less and report general dissatisfaction. One finding that isn't too surprising: Only 11 percent of credit-impaired borrowers said their mortgage lender offered the best interest rate for which they qualified. Of the 45 percent who said their mortgage interest rate exceeded 10.5 percent, 81 percent said they were dissatisfied with their loan rate.

"The results raise several issues for the entire mortgage industry to address, and the central question is whether all consumers are enjoying their basic right to the lowest-cost mortgage for which they can qualify," said Fannie Mae Chairman and CEO Franklin D. Raines. "Answering this and other questions is critical if we are to close the homeownership gaps facing many groups in America."

The survey also showed where credit-impaired borrowers were most likely to obtain a mortgage -- they were nearly twice as likely as all homeowners to rely on mortgage brokers for a home mortgage -- 56 percent used a mortgage broker compared to 31 percent of all homeowners.

Forty-nine percent of credit-impaired borrowers who found a lender -- or vice versa -- through advertising or through a telephone or mail solicitation said that they are paying an interest rate of 10.5 percent or more. Forty-eight percent of this same group also reported loans with prepayment penalties, whereas only 43 percent who were referred by family or friends -- and only 35 percent of those who were referred from someone within the industry -- faced such penalties.