Fannie, Freddie to start buying back bad loans
By The Associated Press
WASHINGTON Government-controlled mortgage-finance companies Fannie Mae and Freddie Mac said Wednesday they will buy back troubled loans contained in securities they already have sold to investors.
The two companies are repurchasing mortgage loans for which borrowers have missed at least four months of payments. At the end of last year, Fannie had about $127 billion of such loans, while Freddie Mac had about $70 billion.
The two guarantee the mortgage securities they sell to investors. Buying back the delinquent loans would cost less than making those guarantee payments, both companies said.
Fannie and Freddie have been run under tight government oversight since their near-collapse in September 2008. They have required $111 billion in federal aid to stay afloat.
Late last year, the Obama administration pledged to cover unlimited losses through 2012 for both companies, lifting an earlier cap of $400 billion. That gave Fannie and Freddie more leeway to buy back delinquent loans.
“It is my expectation that any net additions to their retained mortgage portfolios would be related to this activity,” the companies’ chief regulator, Edward DeMarco, said in a letter sent to Congress this month.
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