Home Loan Focus

Freddie Mac is working to buy up mortgages totaling about the same amount as were foreclosed in California last year, $15 billion.

Freddie Mac is lending a jumbo hand to a group of major U.S. banks, offering to buy as much as $15 billion in mortgages that used to be too big for its program.

On Thursday, Freddie Mac (nyse: FRE – news - people ) said it would purchase home loans of up to $729,000 from lenders including Wells Fargo, JPMorgan Chase, Citigroup, and Washington Mutual.
Freddie Mac Super-Sizes Its Program

This has been expected for a couple months now since the government cleared the way for Freddie Mac to take on these jumbo sized loans a process that mirrors a plan also allowing VA loan amounts to go higher as well.

In the past, a borrower that wanted to borrow more than $417,000 would have to get a primary mortgage for the first part of the mortgage up to that old max and then another for the amount over that paying a substantially higher interest rate.  Potentially, now Freddie Mac can make it easier for people to take out a loan or more importantly refinance with a federally backed loan as Freddie Mac now starts to purchase loans off the books of banks, enabling them theoretically to re-extend new credit to new borrowers.  That said, don’t run the printers out of ink yet, the big ‘if’ in this equation is the concept of re-extending the credit once the banks are bailed out by Freddie Mac.  It could be possible that Freddie Mac and the US government are just taking on bad loans from banks that could write good loans in the first place.

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