Freddie Mac is giving experienced lenders a 90-day commitment to buy up Alt-A loans, including reduced-documentation mortgages, which should give more Alt-A borrowers the ability to lock in rates for three months.
“Freddie Mac continues to be an active force in the Alt-A market and is taking steps to increase liquidity in the Alt-A market while maintaining its commitment to prudently and responsibly manage mortgage credit risk,” Paul E. Mullings, Freddie Mac’s senior vice president for single-family sourcing, said in a statement Tuesday.
Freddie Mac is providing 90-day forward commitment capability on a negotiated basis to experienced lenders, Mullings said, with credit terms that will accommodate a majority of the fixed- and adjustable-rate Alt-A product. That includes many of the reduced-documentation mortgages underwritten with appropriate credit-risk offsets that Freddie Mac now purchases on a bulk basis through structured transactions, he said.
“Available credit terms specifically include reduced-documentation mortgages underwritten with appropriate credit-risk offsets,” Mullings said. “This will give more Alt-A borrowers the security of being able to lock in their rate for up to three months.”
Freddie Mac will continue bulk purchases of Alt-A products on a spot-bid basis, Mullings said.
Based on continual assessment of credit performance and market conditions, Freddie Mac may decide to restrict credit terms available for some higher-risk mortgage products, including no-documentation and high LTV Alt-A mortgages, Mullings said.