Freddie Mac’s new mortgage product that allows borrowers to put down just 3 percent is off to a strong start, says Freddie Mac’s Chief Executive Donald Layton.
Layton wouldn’t provide specific numbers on the 3 percent loan performance, but he reported that the mortgage giant netted a $4.2 billion total profit during the second quarter.
Lawmakers had expressed concern about Freddie Mac’s 3 percent down payment option loans, which debuted in March, arguing that it could lead to losses at the government-backed company. The Federal Housing Administration also supports low down payment loans but requires more insurance from home owners than Freddie Mac’s.
Freddie Mac is charging more to guarantee mortgages as they gradually shrink the size of their loan portfolios.
Freddie Mac, along with Fannie Mae, remain under government conservatorship and send their profits to the U.S. Treasury.
Freddie Mac reported that more than 40 percent of its net interest income in the second quarter was from management and guarantee fees.
By the end of June, Freddie Mac’s post-2008 business has increased to 63 percent of its single-family credit guarantee portfolio. Also, its single-family serious delinquency rate – loans that have payments late by 90 days or more — stood at 1.53 percent in the second quarter, the lowest since November 2008 and below the national rate of 4.24 percent.
Source: “New 3%-Down Mortgage Off to ‘Good Start,’ Freddie Mac Chief Says,” MarketWatch (Aug. 4, 2015)