A new alliance of mortgage insurers and consumer lenders formed to monitor Fannie Mae and Freddie Mac criticized the mortgage market giants' foray into subprime territory last week.

By using their 33-to-1 debt-to-equity leverage, Fannie Mae and Freddie Mac in the short-term can underprice the competition in subprime and home-equity lending, said Gerald Friedman, chairman of the new group, FM Watch.

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