Mortgage finance giant Freddie Mac has committed to buy as much as $20 billion in mortgages to help borrowers with high-priced loans stay in their homes, the company’s chief executive said Wednesday.
The initiative by the government-sponsored company, which is the second-largest buyer and guarantor of home loans in the country, was disclosed by Freddie Mac Chairman and Chief Executive Richard Syron at a meeting on Capitol Hill. It came a day after federal bank regulators called on lenders to work with distressed borrowers unable to meet payments on high-risk mortgages to help them keep their homes.
Syron and the head of No. 1 mortgage financer Fannie Mae said Tuesday that the companies are developing new types of loans to aid homeowners in avoiding default.
Home-mortgage delinquencies and foreclosures have been surging in recent months, especially for people who took out subprime mortgages — higher-priced loans for people with tarnished credit or low incomes who are considered greater risks. The distress has roiled financial markets and stoked anxiety that it could spill over into the broader economy.
Syron said details of the new mortgage purchase program still must be worked out with the company’s federal regulator.