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Fannie and Freddie will buy more delinquent loans
WASHINGTON (2/12/10)—Fannie Mae and Freddie Mac have announced that they are gearing up their efforts to purchase as much as $200 billion of delinquent loans that carry their guarantees. The government-sponsored enterprises are required to buy out nonperforming mortgages, which have been packaged into mortgage-backed, when they modify the loans or when the loan has been delinquent for two years. However, now Fannie and Freddie say they will buy loans that are just 120 days past due on payments. (Wall Street Journal Feb. 11) The change in operations is the result of an accounting change that became effective Jan. 1 that makes it less costly for Fannie and Freddie to purchase delinquent loans. Previously, it was more cost effective to make principal and interest payments to bondholders on nonperforming loans because buyouts sparked steep write-downs.


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