Highlights:
In a move scheduled to take effect for all loans delivered after Aug. 8, Freddie Mac will restrict financing to second-home and investment purchasers who already have "individual or joint ownership" interests in multiple properties. In the case of second-home buyers, they will be ineligible for new mortgages through Freddie if they have ownership interests in more than four properties securing debt, including the one they propose to finance.
Why the continuing rollbacks, and how long could they continue? Lenders and insurers are carefully studying the sources of their greatest losses from mortgage vintages between 2003 and 2007. In the areas where they see inordinate risk, they are reacting by eradicating that risk. Some of those high-loss loan products -- mass-marketed option ARMs with minimal down payments and "stated" incomes, for instance -- probably never will be seen again. Others are likely to return only with tougher underwriting standards and higher fees tied to credit and geographic risks.
