Freddie Mac to Take Delivery of Mortgages Secured by Properties in Areas Affected by Hurricane Katrina
26 September 2005 - 10:43PM
PR Newswire (US)
HUD Applauds Purchase of Loans Closed Between June 1-Aug 29 for
Freddie Mac Retained Portfolio for Easing Lender Liquidity,
Short-Term Financing Concerns MCLEAN, Va., Sept. 26
/PRNewswire-FirstCall/ -- In an effort to help the American housing
finance system better absorb Hurricane Katrina's aftershocks,
Freddie Mac today announced it was easing some of its policies in
order to purchase an estimated $300 million worth of single-family
mortgages that were closed between June 1 and August 29 and secured
by properties in areas that were heavily impacted by the storm.
Today's announcement is intended to help some Freddie Mac lenders
with closed loans in their pipelines -- that is, loans that lenders
funded and closed in anticipation of sale to Freddie Mac. These
loans may no longer be eligible for sale because of potential
property damage or income loss caused by Hurricane Katrina,
although they complied with Freddie Mac's Seller/Servicer Guide
requirements when they were originated. Typically such loans are
unacceptable to Freddie Mac, even with lifetime recourse. Given the
special circumstances surrounding these mortgages, Freddie Mac said
it would purchase the loans for its retained portfolio to provide
lenders with immediate liquidity relief. None of the loans will go
into mortgage pools backing Freddie Mortgage Participation
Certificates (PCs). The purchase offer expires on October 31, 2005.
HUD Secretary Alphonso Jackson said: "Freddie Mac's action will go
a long way toward bringing critically needed capital into the Gulf
Region. Along with the tremendous federal reinvestment that is
taking place, I'm heartened to know that our partners are doing
their bit to keep the home mortgage finance pipeline opened so we
can accelerate the recovery in rebuilding of these devastated
communities." "By purchasing these loans we can expedite payments
to our lenders, who need additional funds for storm recovery
activities, while simultaneously protecting the loan pools backing
Freddie Mac PCs from Katrina's impact," said Freddie Mac Chairman
and CEO Richard F. Syron. "I especially want to thank our
regulators, the Department of Housing and Urban Development and the
Office of Federal Housing Enterprise Oversight, for expeditiously
reviewing this unique way for Freddie Mac to fulfill its mission to
keep America's mortgage market strong, liquid and stable." Lender
Groups Praise Freddie Mac For Safeguarding Liquidity in Gulf Coast
"The effects of Hurricane Katrina have been devastating to the
communities in the affected areas," said Camden R. Fine, president
and CEO of the Independent Community Bankers of America. "Because
access to liquidity is fundamental to helping the community banks
and the communities rebuild the Gulf Coast, the ICBA applauds
Freddie Mac for leading the way with this program." "Freddie Mac is
to be commended for using its considerable resources to initiate
this relief effort," said Diane Casey-Landry, president and CEO of
America's Community Bankers. "This demonstrates Freddie's
commitment to fulfill its charter mission to provide liquidity and
stability to the mortgage markets. ACB encourages the banking
regulators, government agencies and others to demonstrate similar
flexibility as we all pitch in to help the victims of Hurricane
Katrina on their road to recovery." Today's announcement applies
specifically to mortgages that met Freddie Mac's Seller/Servicer
Guide requirements when they were originated and are backed by
properties in federally declared major disaster areas where FEMA's
Individual Assistance program is available for Hurricane Katrina
victims. How Hurricane Katrina Pipeline Offer Works Under this new
short-term policy, Freddie Mac is requiring recourse on mortgages
when the Seller/Servicer is unable to represent and warrant the
value, condition and marketability of the mortgaged property under
Freddie Mac's Guide requirements or, for properties located outside
of FEMA special hazard areas, that such properties have not
sustained uninsured flood damage. However, Freddie Mac will cancel
the recourse if the Seller/Servicer can provide the missing
assurances within three years. Regarding pipeline mortgages backed
by investment properties, Freddie Mac is requiring rent loss
insurance for at least six months of gross monthly rent. All
purchases of Katrina pipeline mortgages will be made under a
special negotiated contract. For more information, Seller/Servicers
should contact their Account Manager or call 1-800-FREDDIE. Today's
announcement builds on Freddie Mac's other efforts to assist Gulf
Coast families and communities. Since Hurricane Katrina struck,
Freddie Mac has adopted emergency policies that effectively suspend
mortgage collections from many single and multifamily borrowers
affected by the storm for 90 days, assure forbearance for National
Guard involved in Katrina recovery operations and joined with the
Freddie Mac Foundation to donate $10 million to hurricane relief
organizations. Freddie Mac is a stockholder-owned company
established by Congress in 1970 to support homeownership and rental
housing. Freddie Mac fulfills its mission by purchasing residential
mortgages and mortgage-related securities, which it finances
primarily by issuing mortgage-related securities and debt
instruments in the capital markets. Over the years, Freddie Mac has
made home possible for one in six homebuyers and nearly four
million renters in America. http://www.freddiemac.com/ DATASOURCE:
Freddie Mac CONTACT: Brad German of Freddie Mac, +1-703-903-2437
Web site: http://www.freddiemac.com/
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