Skip to comments.Toxic Exploding Freddie Mortgage Factory To Close
Posted on 02/26/2010 4:18:31 PM PST by Lorianne
Gee, what took you so long?
McLean, VA Freddie Mac (NYSE: FRE) announced today that on or about September 1, 2010, the company will cease purchasing and securitizing interest only mortgages, including Freddie Mac Initial InterestSM fixed-rate and adjustable-rate mortgages. Additional information will be provided to Freddie Mac Seller/Servicers in an upcoming Single-Family Seller/Servicer Guide bulletin.
Interest only mortgages, including Freddie Mac Initial Interest mortgages, provide for interest-only payments for a specified period of time beginning with the first monthly payment after the note date, and principal and interest payments on a fully amortizing basis for the remainder of the mortgage term.
These "vehicles" are an outright scam for 99% of all borrowers. Their exclusive proper use is as a bridge loan.
Let me explain.
Let's say you have a $500,000 house you wish to buy. An I/O loan for the first two years (for example) at approximately 3.5% (currently) would have an interest-only payment of $1,458.
But when the two years is over assuming the interest rate does not change you now have a 28 year amortizing loan and the payment jumps to $2,329.70 - an increase of about 60%.
This is damn near what you have with an "Option ARM", which is similarly explosive when it has an initial "teaser rate." For example, the same loan with a 2% "initial teaser" interest-only has an initial payment of $833.33, but jumps to the same $2,329.70 if it resets to 3.5% once the "teaser" is over.
(Excerpt) Read more at market-ticker.org ...
Freddie Mac Announces That It Will Cease Purchases of Interest Only Mortgages
Fannie & Freddie are toxic disasters filled with clueless ACORN workers. They have played a LARGE part in wiping out the financial system.
Trust me, before your time Fannie and Freddie were defended as independent self supporting capitalist enterprises, integral to to the free market system which was making us al rich, rich, rich! Not just by Barney Fag , but by the majority of posters here on FR.
I don't ever remember anything like that. Why don't you dig up a few of those threads so we can all have a good laugh?
I can’t believe they’re still buying these mortgages, now, or will continue to buy them through September. It’s ludicrous.
These type of mortgages should be against the law, and any bank stupid enough to make them, should fail so completely that there would be a crater in the ground from the fall.
Help me. Is there is a search engine feature to use under posts from /to account? Sadly I can’t devote a week just to inconvience a convienent memory.