Fannie Mae Follows Freddie Mac In Changing Repurchasing Home Loan Criteria
SOURCE: CNN Money
The two government sponsored mortgage financers, who own or guarantee about two-fifths of the U.S. mortgage debt, have sold billions of dollars of special stock to boost their finances after posting alarming third-quarter losses. Fannie last month reported a third-quarter loss of $1.4 billion, while Freddie lost $2 billion in the same period.
Both companies have been a major source of funding in the home-loan market by buying up mortgages made by banks and other lenders. The loans would then be bundled and sold as securities for sale to investors.
Fanny Mae and Freddie Mac customarily repurchased most mortgages once they were 120 days past due. Freddie Mac said it will now purchase delinquent loans that are part of larger securities issued by the firm when the mortgages are at least 120 days past due, and either the mortgage has been modified, a foreclosure sale occurs, or the cost of payments to security holders exceeds the cost of holding the loans. It will also repurchase mortgages that are 24 months delinquent.
Brian Faith, a spokesman for Washington-based Fannie Mae (Charts), said late Monday, "We are undertaking the same steps."
Fannie Mae recently imposed a 0.25 percent fee on all new home loans it buys or guarantees, and both companies have begun adding surcharges on loans to borrowers with credit scores below 680 and who are borrowing more than 70 percent of the home's value.
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The two government sponsored mortgage financers, who own or guarantee about two-fifths of the U.S. mortgage debt, have sold billions of dollars of special stock to boost their finances after posting alarming third-quarter losses. Fannie last month reported a third-quarter loss of $1.4 billion, while Freddie lost $2 billion in the same period.
Both companies have been a major source of funding in the home-loan market by buying up mortgages made by banks and other lenders. The loans would then be bundled and sold as securities for sale to investors.
Fanny Mae and Freddie Mac customarily repurchased most mortgages once they were 120 days past due. Freddie Mac said it will now purchase delinquent loans that are part of larger securities issued by the firm when the mortgages are at least 120 days past due, and either the mortgage has been modified, a foreclosure sale occurs, or the cost of payments to security holders exceeds the cost of holding the loans. It will also repurchase mortgages that are 24 months delinquent.
Brian Faith, a spokesman for Washington-based Fannie Mae (Charts), said late Monday, "We are undertaking the same steps."
Fannie Mae recently imposed a 0.25 percent fee on all new home loans it buys or guarantees, and both companies have begun adding surcharges on loans to borrowers with credit scores below 680 and who are borrowing more than 70 percent of the home's value.
Read full report »
