Freddie Mac to Securitize Formerly Delinquent Loans

Previously delinquent loans that FreddiernMac was required by contract to repurchase from its Mortgage ParticipationrnCertificate (PC) pools are about to return to the secondary market.  The company announced this morning that thernloans from those repurchased pools which are now current and performing will bernsecuritized and sold.</p

The loans, those from the pools thatrnhave returned to current status and have been performing for a minimum of four monthsrnwithout being modified, will be packed in pools that will be identified with arnnew “R”prefix.  The program is expectedrnto begin this month with the first group of loans selected from among thosernthat have been performing for at least 12 months at the time ofrnsecuritization.  Freddie Mac said thatrnthese PCs may back new Freddie Mac Real Estate Mortgage Investment Conduitsrn(REMIC) and Giant securities in the future.</p

Freddie Mac announced in February 2010rnthat it was repurchasing an estimated $71 billion of delinquent loans from thernPC pools, a requirement that was triggered by a change in accounting standards forrntransfers of financial assets.  Therncompany said then that the cost of purchasing most delinquent loans from PCs andrnholding them in portfolio would be less than the cost of continued guaranteernpayments to security holders.  At thatrntime, quoting figures as of December 31, 2009, the company said thatrnrepurchases would consist of: </p<ul class="unIndentedList"<li258,500rnloans in its fixed-rate PC pools that were 120+ days delinquent. Unpaidrnprincipal totaled $49.8 billion</li<li72,894rnloans in its adjustable-rate pools that were 120+ days delinquent. Unpaidrnprincipal totaled $19.1 billion.</li</ul

Fannie Maernalso repurchased a significant number of these assets.</p

“By securitizing mortgage loans that were delinquent but reinstated tornperforming status, Freddie Mac will provide additional needed liquidity to thernmarket using our traditional mortgage security vehicles,” said MarkrnHanson, Freddie Mac vice president, Securitization and Cash Execution. “Thisrnnew avenue for securitization also will provide more flexibility for FreddiernMac to manage its mortgage-related investment portfolio.”

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