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Freddie Mac takes first Secondary Market stand agains Subprime lending
This week Freddie Mac announced that it will no longer purchase common subprime mortgages, becoming the first major secondary market player to stop putting subprime into its portfolio. The announcement this week should be no surprise to those who follow Freddie's anti-predatory lending practices. Freddie has been at the forefront of this for some time.
Freddie Mac will still purchase subprime Adjustable Rate Mortgages (ARM's) and securities backed by these loans where the home buyers are qualified at the fully-indexed and fully-amortized rates. Freddie Mac, the secondary mortgage purchaser created by Congress in 1970, hopes that by limiting the purchase to only these types of subprime loans they can help home buyers avoid what Freddie calls "sticker shock" when the interest rates climb and payments rise beyond what the homeowner can then afford.
By taking these types of steps, Freddie Mac is attempting to help curb a problem that has had an undue influence in the real estate industry for some time, predatory lending and mortgage fraud. Previously, Freddie has taken other steps designed to help reduce the amount of predatory lending included in its portfolios. Some of those steps include requiring lenders provide complete credit information to all credit bureaus, refusing to invest in mortgages with ... more

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