McLEAN, Va. — Freddie Mac is putting an end to purchasing subprime mortgages that have a high likelihood of excessive payment shock and possible foreclosure.
Under the new plan, Freddie will only buy subprime adjustable-rate mortgages–and mortgage-related securities backed by these subprime loans–that qualify borrowers at the fully-indexed and fully-amortizing rate. The effort comes as Freddie moves to protect future borrowers from the payment shock that can occur when adjustable rate mortgages increase.
The company will limit the use of low-documentation underwriting for ARMs to help ensure that future borrowers have the income necessary to afford their homes. It will also strongly urge mortgage lenders collect escrow accounts for borrowers' taxes and insurance payments. It will implement the new investment requirements for mortgages originated on or after September 1, 2007, to avoid market disruptions.
Complete your profile to continue reading and get FREE access to CUTimes.com, part of your ALM digital membership.
Your access to unlimited CUTimes.com content isn’t changing.
Once you are an ALM digital member, you’ll receive:
- Critical CUTimes.com information including comprehensive product and service provider listings via the Marketplace Directory, CU Careers, resources from industry leaders, webcasts, and breaking news, analysis and more with our informative Newsletters.
- Exclusive discounts on ALM and CU Times events.
- Access to other award-winning ALM websites including Law.com and GlobeSt.com.
Already have an account? Sign In
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
