Previously Delinquent Loans to Be Re-Securitized

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Loans that were previously part of mortgage-backed securities, became delinquent and have since been cured will be securitized again.

What’s more, the securities will essentially be guaranteed by the U.S. government.

News of the re-securitizations came Wednesday from Freddie Mac.

According to the McLean, Va.-based company, the previously delinquent loans were purchased from pools of its mortgage participation certificates.

While the loans have been reinstated to current and performing status, none have been modified.

The strategy is being implemented this month. The loans will be pooled into Freddie’s participation certificates with a new “R” prefix.

While the initial securitization will only include loans that have been current for at least 12 consecutive months, subsequent issuances will include reinstated loans that have been current for just four consecutive months.

The re-securitizations will help Freddie reduce its investment portfolio, which stood at $679 billion as of Sept. 30.

“This capability represents an important step in Freddie Mac’s disposition strategy for its distressed asset portfolio,” Freddie Mac Vice President – Distressed Assets Management Adama Kah said in the announcement. “These securitizations will achieve the key goals of developing liquidity, flexibility and scalability while conserving value for the taxpayer.”

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