GSE’s Decision to Purchase Delinquent Loans Forces The Question: Who Will Investors Believe Now?
Posted To: Voice of Housing
Yesterday Freddie Mac announced that it would purchase "substantially all" of the seriously delinquent loans from their fixed-rate mortgage Participation Certificate (PC) securities. The implications of the move extend well beyond the immediate effect on the investors in Freddie Mac securities. Of course, right away we’ll see at least some of the impacts of the FAS 166 & 167 rulings that my colleague Joe Murin anticipated in a post last month here on “Voice of Housing”. As Joe pointed out, investors’ returns in these securities will be hit insofar as these repurchases will accelerate prepayment speeds, which will reduce the value of the securities to those investors. In the big picture, Freddie’s decision goes to the heart of the question concerning…(read more)