Freddie Makes $20B Subprime Commitment

Freddie Mac has announced that it will purchase $20 billion in fixed-rate and hybrid adjustable-rate mortgage products that will provide more options for lenders to offer subprime borrowers.The products, which are under development and slated to be introduced by midsummer, will limit payment shock by offering reduced adjustable-rate margins, longer fixed-rate terms, and longer reset periods, the government-sponsored enterprise said. The $20 billion commitment was made by Freddie Mac chairman and chief executive Richard F. Syron at the Homeownership Preservation Summit convened by Sen. Christopher J. Dodd, D-Conn., and attended by Sen. Richard Shelby, R-Ala. Mr. Syron said the pledge is intended "to assist families caught up in the subprime crisis and to make the market more stable and transparent for all borrowers." The commitment followed a recent announcement that Freddie Mac will stop buying subprime mortgages that have "a high likelihood of excessive payment shock" and of risking foreclosure. The GSE can be found online at http://www.freddiemac.com.