Freddie Mac and Washington Mutual both announced on Wednesday that they will commit billion of dollars to the subprime crisis. Freddie Mac is purchasing $20 billion in fixed-rate and hybrid ARM products that will provide lenders with more choices to offer subprime borrowers while Washington Mutual is refinancing up to $2 billion in subprime loans at discounted interest rates.
"We're reaching out to our subprime borrowers to help ensure they are in the best possible position to manage challenges posed by payment adjustments," says Kerry Killinger, Washington Mutual's chairman and CEO. "We want our customers to know what's ahead, to avoid surprises, and to understand the choices available to them. Stepping up and helping our customers stay in their homes is in the best interest of our borrowers, our communities, and Washington Mutual."
Freddie Mac's $20 billion commitment was made at the Homeownership Preservation Summit convened by Sen. Christopher J. Dodd (D-Conn.).
"We appreciate Senator Dodd's ongoing leadership in addressing the subprime issue. The problems facing borrowers in this segment of the market are of deep concern to Freddie Mac. Two months ago, we announced several pro-borrower steps, including the enhanced underwriting standards and more consumer-friendly mortgage products for borrowers with impaired credit," says Richard F. Syron, chairman and CEO of Freddie Mac. "Today, we're again ramping up our commitment through this $20 billion pledge to assist families caught up in the subprime crisis and to make the market more stable and transparent for all borrowers."
The commitment follows Freddie Mac's recent announcement that it will cease buying subprime mortgages that have a high likelihood of excessive payment shock and possible foreclosure. The announcement also comes on the heels of Tuesday's promise (along with Fannie Mae) to help troubled homeowners.
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