Mar 16 2018 46078 1

Dated: 03/16/2018

Views: 160

Freddie Mac announces a plan to reduce costs for borrowers

  • Share

  • Tweet

  • Share

  • Share

The government sponsored entity (GSE) Freddie Mac announced that it will be allowed to transfer mortgage-credit risk to the private market, which it said would reduce costs to borrowers.

© Shutterstock

The structure that Freddie Mac will use is called Integrated Mortgage Insurance (IMAGIN). Freddie Mac said it would remove some costs that normally are included in insurance prices.

This structure would take the place of lender-paid mortgage insurance that is currently put on loans when borrowers make down payments of less than 20 percent. This will primarily impact a lot of first-time homebuyers or low- to moderate-income borrowers. For example, a borrower with a 5 percent down payment on a $200,000 home purchase, would save roughly $5,600 over 10 years through this new structure.

It would also reduce Freddie Mac’s counterparty risk by eliminating insurers’ ability to question the validity of a claim when a borrower defaults. Further, this new structure would likely make underwriting the GSE’s loans more streamlined as it eliminates the need for private mortgage insurance company approvals and certifications.

The National Association of Federally Insured Credit Unions, in its principles for housing finance reform, has supported the notion of expanding credit risk transfer transactions to further disperse risk among private investors.

Latest Blog Posts

Do You Need Credit Repair To Qualify For A Mortgage?

Is your credit holding you back from buying a home?How does credit repair work?Credit repair is 100% legal. It works because of a law called “The Fair Credit Reporting Act.” The FCRA

Read More