Freddie Mac and Fannie Mae Purchasing Delinquent Mortgages

The past two years have been nothing but brutal for investors in a variety of different mortgages. As the overall prices of real estate, have made many mortgages illiquid; this is because of fears surrounding how bad the current market conditions were. To calm fears, both Freddie Mac and Fannie Mae said back in 2007 that they would be purchasing delinquent mortgages, in an effort to help stabilize the market. Now, three years later, both mortgage giants announced that they will be purchasing $200 billion in delinquent mortgages. What took them so long was: both were waiting for changes to take place in the different accounting rules. As of January 1^st, this restriction was lifted as the Financial Accounting Standards Board required all financial institutions to keep both performing and non performing loans on their books.  The reason why this is important is: since the financial crisis began there were calls to require all financial institutions to disclose all non performing loans. This was a necessary step to knowing the total amount of toxic paper that is out there. The move from both Freddie Mac and Fannie Mae is: the government's latest efforts to help spur mortgage demand, by removing the delinquent mortgages off the books of various financial institutions.

What this shows, is that both Freddie Mac and Fannie Mae are going to be aggressively buying delinquent mortgages. Over the long term, this will provide stability in mortgage rates, as this toxic paper is finally removed from the books of various financial institutions. This will provide the floor that so many have been looking for in the mortgage market.