Freddie Mac wants to securitize reperforming residential loans and plans to issue its first bond – a Participation Certificate – by the end of November.
The first PC will be backed by reperforming loans that have been current for at least 12 months, according to the Freddie vice president Mark Hansson.
"By securitizing mortgage loans that were delinquent, but reinstated to performing status, Freddie Mac will provide additional needed liquidity to the market using our traditional mortgage security vehicles," Hansson said.
Freddie has been purchasing seriously delinquent mortgages out of existing PCs since February 2010. To date, it has acquired nearly $150 billion of such mortgages, which are 120 days or more past due.
Some of these repurchased loans are eventually modified or restructured. But Freddie is not planning to use modified loans in the reperforming PCs.
Only mortgages where the borrowers have caught up on their payments through repayment plans – by becoming gainfully employed again or by other means will be eligible for the new securitization program.
Freddie revealed the securitization program Thursday morning. But a spokesman could not provide an estimate on how many of these reperforming mortgages the GSE is holding -- or the size of the first PC.
It is understood that Freddie plans to issue the reperforming PCs with an "R" prefix on a regular basis.
