California industry appointments update - 6/13/2007 – NMP Skip to main content

California industry appointments update - 6/13/2007

National Mortgage Professional
Jun 12, 2007

Freddie Mac announces $20 billion sub-prime commitmentMortgagePress.comfixed-rate, hybrid adjustable-rate mortgage, sub-prime issue Freddie Mac has announced that it will purchase $20 billion in fixed-rate and hybrid adjustable-rate mortgage (ARM) products that will provide lenders with more choices to offer sub-prime borrowers. The products, currently under development by the company and slated to be introduced by mid-summer, will limit payment shock by offering reduced adjustable-rate margins, longer fixed-rate terms and longer reset periods. The $20 billion commitment was made on April 18 by Freddie Mac Chairman and CEO Richard F. Syron at the Homeownership Preservation Summit, which was convened by Sen. Christopher J. Dodd and attended by Sen. Richard Shelby. "We appreciate Sen. Dodd's ongoing leadership in addressing the sub-prime issue. The problems facing borrowers in this segment of the market are of deep concern to Freddie Mac," said Syron. "Two months ago, we announced several pro-borrower steps, including the enhanced underwriting standards and more consumer-friendly mortgage products for borrowers with impaired credit. Today, we're again ramping up our commitment through this $20 billion pledge to assist families caught up in the sub-prime crisis and to make the market more stable and transparent for all borrowers." The commitment follows Freddie Mac's recent announcement that it would cease buying sub-prime mortgages that have a high likelihood of excessive payment shock and foreclosure. Among other things, the company will require that sub-prime ARMs - and mortgage-related securities backed by these sub-prime loans - qualify borrowers at the fully indexed and fully amortizing rate. The company also will limit the use of low-documentation products in combination with these loans, require that loans be underwritten to include taxes and insurance, and strongly recommend that the sub-prime industry collect escrows for taxes and insurance, as is the norm in the prime sector. For more information, visit www.freddiemac.com.
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