Seeking to capitalize on rising demand for mortgage securities as the housing market rebounds, government-sponsored enterprise Freddie Mac has started packaging the modified mortgage loans it holds into bonds, with more than $1 billion securitized so far.
The loans were modified to assist borrowers who were at risk of foreclosure, to stabilize markets and to mitigate losses, in the wake of the 2008 housing crash and subsequent government takeover of the mortgage financier. In order to be converted into bonds, these mortgages must have been current for six months.
‘Securitizing loans that have been modified and are now performing will allow Freddie Mac to better manage its mortgage-related investments portfolio,’ said Adama Kah, vice president of distressed assets management. ‘We are taking another important step that creates liquidity and taxpayer value for these modified loans through PC securitization.’
The company reports that the modified mortgages are being pooled into new fixed-rate modified participation certificates with new ‘MA-MD’ prefixes. They are not TBA deliverable and do not include loans modified through the Home Affordable Mortgage Program.
Freddie Mac will provide additional pool-level and loan-level disclosures specific to the modified PCs, including loan attributes at origination before modification; at the time of modification; and at the time of securitization as modified PCs. The GSE also will provide pool-level disclosure of payment history covering up to 36 months prior to the modified PC issuance.
Freddie Mac has securitized more than $3 billion in re-performing, unmodified loans since November 2011.