Federal Home Loan Mortgage Corp (OTCBB:FMCC), popularly known as Freddie Mac is planning to start selling notes associated with defaulted home mortgages, according to a report from Bloomberg based on information from an individual familiar with the issue.
Last month, Freddie Mac (OTCBB:FMCC) announced that it started creating bonds supported by certain performing modified mortgage loans in its mortgage-related investment portfolio. The government controlled mortgage financier already completed $1 billion worth of securitization, and emphasized that its policy is to purchase delinquent loans and hold them as mortgage-related investments. Freddie Mac stated that the previously delinquent mortgages started to perform again without modification.
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Freddie Mac Engages Credit Suisse To Assist
According to Bloomberg, Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) engaged the services of Credit Suisse Group AG (ADR) (NYSE:CS) to manage its first mortgage-risk sharing transaction. The mortgage giant plans to meet potential investors in Boston, Chicago, New York, and London starting next week. The source of the information requested anonymity because the terms of the agreement were not yet determined.
The report noted that Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC)’s plan to offer notes is a clear demonstration that the Federal Housing Finance Agency (FHFA) is focused on reducing the role of the government controlled financiers (includes Fannie Mae) in the residential mortgage market. Both companies represent more 85 percent of government-backed loans.
Different entities including insurers, bond buyers, hedge funds, and real investment trusts expressed interest, and they are waiting for the commencement of the offering. The investors hope to make profit from the effort.
During an investor conference on June 12, John M. Anzalone, chief investment officer of Invesco Mortgage Capital Inc (NYSE:IVR) said, “There hasn’t been a deal yet, but we’re expecting there to be at least a couple this year.”
According to the source that first deal will become part of the series of transactions called Structured Agency Risk Issuance.
Fan and Fred Prevented 2.7 Million Foreclosures
The FHFA is supervising the operations of mortgage giants, Federal National Mortgage Association (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) since it was bailed out by the government in 2008. The agency dictates how much the companies could charge to guarantee traditional mortgage bonds. This year, both companies are required to share risk on $30 billion in home loans.
Based on FHFA’s fifth annual report to Congress, Fannie Mae / Federal National Mortgage Association (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) prevented 2.7 million foreclosures, wherein almost 50 percent of the loans were modified. The agency stated that the key challenges confronting the mortgage giants include ongoing stress in the U.S. housing market, current economic environment, uncertainty of the long-term prospects of its operations and charters, and the need to implement the FHA Strategic Plan for Conservatorship.