Damaged property clause waived for Gulf region mortgages
By MortgageDaily.com staff
9/27/2005

Freddie Mac is bending the rules to help accommodate lenders with mortgages secured by properties located in areas heavily affected by Katrina.

The McLean, Va. company will purchase an estimated $300 million of such single-family mortgages closed between June 1 and Aug. 29, according to an announcement Monday.

"Freddie Mac's action will go a long way toward bringing critically needed capital into the Gulf Region," commented HUD Secretary Alphonso Jackson in the announcement. "Along with the tremendous federal reinvestment that is taking place, I'm heartened to know that our partners are doing their bit to keep the home mortgage finance pipeline opened so we can accelerate the recovery in rebuilding of these devastated communities."

Typically, loans that may have potential property damage or income loss and were closed and funded in anticipation of sale to Freddie would not be eligible for purchase. This, even with lifetime recourse and if the loans were originated in compliance with Freddie's Seller/Service Guide requirements, according to the announcement.

However, the government-sponsored enterprise explained that, given the special circumstances surrounding the mortgages, it will buy the loans for its retained portfolio to provide lenders with immediate liquidity relief. None of the loans will be placed in mortgage pools backing Freddie Mortgage Participation Certificates.

"By purchasing these loans we can expedite payments to our lenders, who need additional funds for storm recovery activities, while simultaneously protecting the loan pools backing Freddie Mac PCs from Katrina's impact," said Freddie Chairman and CEO Richard Syron in the announcement.

Lenders have until Oct. 31, 2005, to sell their loans, Freddie said.

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