Federal Home Loan Mortgage Corp (OTCMKTS:FMCC) will from now on, round off all factors in Single-Family and Multifamily mortgage-backed securities. The change, which came into effect on July 25, replaces the initial methodology that involved truncating the last digit of the factors.
Impact of New Methodology
Freddie Mac says the change will allow it to match Federal National Mortgage Assctn Fnni Me (OTCMKTS:FNMA)’s factor calculation process. The change is also expected to go a long way in ensuring uniformity across the two company’s securities products.
Even though the changes will affect a good number of Freddie Mac products including, multifamily mortgage-backed securities, Multifamily Gold PCs will not be impacted.
The change comes at a time when interest rates for U.S 30 year mortgages have fallen to all-time lows in response to the Brexit vote outcome. Last week the mortgage rate dropped to 3.41%, down from a high of 3.48% posted the previous week, according to the latest Freddie Mac survey. Growing concern that the Federal Reserve could leave interest rates at the current levels has all but fueled demand for US government debt.
Sell Off of Delinquent Loans
Meanwhile, Freddie Mac has confirmed the sale of 189 deeply delinquent non-performing loans via auction. The offloaded loans have been delinquent for five years on average. According to data from Broker Price Opinion BPO, most of the loans are geographically concentrated in the Florida area. The sale, which is poised to close in September, is expected to generate as much as $43.7 million.
Freddie Mac had already sold off $4.3 billion worth of NPLs as of the first quarter as it continues to reduce the burden of less liquid assets in its mortgage-related portfolio. Recently the company confirmed it had obtained three new insurance policies under its Agency Credit Insurance Structure Program.
The insurance policies according to Federal Home Loan Mortgage Corp (OTCMKTS:FMCC) provides a maximum limit of $788 million of losses for single-family loans. Since the program begun in 2013, the company has placed over $5 billion in insurance coverage through ACIS transactions.