Freddie Mac has decided to become a more active buyer of its newly issued mortgage-backed securities to prop up the pricing of its MBS, which are called participation certificates.The secondary market agency also announced that it plans to sell its holdings of Fannie Mae MBS to fund the purchases. At the beginning of this year, Freddie Mac held $77.0 billion in Fannie Mae MBS, according to the Office of Federal Housing Enterprise Oversight. "The sale of Fannie Mae securities will facilitate the funding of TBA PC purchases...," according to an information supplement dated Oct. 29. In recent weeks, Freddie Mac signaled that it will lower its guarantee fee to ensure that its bids for whole loans is competitive with Fannie's. This temporary policy is designed to make Freddie more competitive and to improve the pricing of its PCs. "If Freddie Mac's price performance strategies are not successful over the long term, this could have a material adverse effect on the profitability of Freddie Mac's securitization business," the information supplement says.

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