Freddie Mac – Federal Home Loan Mortgage Corp (OTCBB:FMCC) is planning to sell a new type of debt related to delinquent mortgages, according to a report from Bloomberg based on information from a source familiar with the transaction.
Freddie Mac engaged services with Credit Suisse
According to the report, the government-controlled mortgage giant will start offering its risk-sharing debt worth $400 million tomorrow, July 17. Freddie Mac – Federal Home Loan Mortgage Corp (OTCBB:FMCC) engaged the services of Credit Suisse Group AG (NYSE:CS) to handle the offering.
Gates Capital Management's ECF Value Funds have a fantastic track record. The funds (full-name Excess Cash Flow Value Funds), which invest in an event-driven equity and credit strategy, have produced a 12.6% annualised return over the past 26 years. The funds added 7.7% overall in the second half of 2022, outperforming the 3.4% return for Read More
The Federal Housing Finance Agency (FHFA) is demonstrating its objective to reduce the role of the mortgage giant in the residential-mortgage market with latest move of the Freddie Mac – Federal Home Loan Mortgage Corp (OTCBB:FMCC).
At present, Freddie Mac – Federal Home Loan Mortgage Corp (OTCBB:FMCC) and Fannie Mae (OTCBB:FNMA) account 85 percent of the government-backed loans in the residential-mortgage market in the country. The FHFA was responsible in supervising the operations of the mortgage giants since 2008, when both firms were placed under government conservatorship after receiving nearly $200 billion bailout.
New bond offering
People knowledgeable about the latest offering requested anonymity because the details of the transaction were not yet disclosed to the public. According to them, Freddie Mac – Federal Home Loan Mortgage Corp (OTCBB:FMCC) is directly responsible for the new bond offerings, and are not mortgage-backed securities. The sources said that the transactions involve two floating rate notes, each worth $200 million with projected average lives of 2.2 years and 8.2 years.
In May, Freddie Mac – Federal Home Loan Mortgage Corp (OTCBB:FMCC) announced that it started creating bonds supported by certain performing modified mortgage loans under its mortgage-related investment portfolio. The mortgage giant also said that it already completed $1 billion worth of securitization. Since 2011, Freddie Mac had been repackaging previously delinquent mortgages (at least 120 days delinquent) that started to perform again without modification into bonds.
Primary mortgage market survey
Meanwhile, the recent Primary Mortgage Market Survey (PMMS) released by Freddie Mac – Federal Home Loan Mortgage Corp (OTCBB:FMCC) showed that the average fixed-mortgage rates continue to trend higher on market speculations that the Federal Reserve will soon reduce its current bond-buying initiatives.
The survey showed that the 30-year fixed rate mortgage (FRM) was 4.51 percent for the week ending July 11, 2013. The 15-year FRM was 3.39 percent, the 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) was 3.26 percent, and the 1-year Treasury-indexed ARM was 2.66 percent.
Frank Nothaft, vice president and chief economist at Freddie Mac – Federal Home Loan Mortgage Corp (OTCBB:FMCC) commented, “June’s strong employment led to more market speculation that the Federal Reserve will reduce future bond purchases causing bond yields to rise and mortgage rates followed. However, the minutes of the June 18 and 19 Federal Reserve’s monetary policy committee meeting, released July 10, stated that many members indicated further improvement in the outlook for the labor market would be required before it would be appropriate to slow the pace of bond purchases.”