Magazine article American Banker

Freddie Mac's Secondary Mortgage Portfolio Grows by Leaps

Magazine article American Banker

Freddie Mac's Secondary Mortgage Portfolio Grows by Leaps

Article excerpt

SAN FRANCISCO -- During the past year the secondary mortgage market has grown phenomenally, boosting the Federal Home Loan Mortgage Corp.'s loan purchases to unprecedented levels, according to Kenneth J. Thygerson, president of the publicly chartered corporation.

The Federal Home Loan Mortgage Corp., commonly known as Freddie Mac, experienced a 140% increase in loan deliveries in the first quarter of this year over the same period in 1984, Mr. Thygerson told reporters during the Western Secondary Mortgage Market Conference here last week. He said the growth was largely due to the impact of lower interest rates.

"We're now acquiring mortgages at the rate of $40 billion a year," he said. That compares to a total of $111.6 billion in mortgages purchased from Freddie Mac's inception in 1970 through April 30, 1985. Freddie Mac is the predominant player in the conventional secondary home-mortgage market, handling about two-thirds of all such transactions.

Freddie Mac serves as a conduit linking mortgage lenders and capital markets. It buys mortgages from lenders, pools and packages them into securities, and sells those securities to investors.

"We're seeing an explosive amount of growth," said Mr. Thygerson. Lower interest rates, now widely available for 30 years at 12.5%, compared to 30 years for 14.5% several years ago, have helped spark home building, reselling of existing homes, and refinancing, he said.

Also significant, Mr. Thygerson said, is that thrifts, which had given up on seeing some of their old loans at full value again, have taken advantage of the decline in rates to sell off fixed-rate, long-term loans in exchange for variable-rate, short-term assets.

Lastly, Mr. Thygerson said that new net worth requirements imposed on the savings industry have decreased the rate of growth on savings balnces, prompting thrifts to sell old loans to obtain other investment funds. …

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