Mortgage Market Stability: Our Hurricane Response

Freddie Mac's second statutory purpose it to provide stability to the nation's housing markets. Like liquidity, stability is another under-appreciated aspect of our statutory purposes, that is, until things become unstable. Whether it was our mortgage purchases following the meltdown of the Long Term Capital Management hedge fund in 1998, or our confidence-building debt issuances in the extremely chaotic financial aftermath of 9/11, the combination of Freddie Mac's financial strength and mission focus has brought needed stability to financial markets. Our response to the 2005 hurricanes was no exception.

After Hurricanes Katrina, Rita and Wilma battered the Gulf Coast in the fall of 2005, Freddie Mac's actions helped cushion the impact of the hurricanes on struggling families, our lending partners and the region's housing sector as a whole. In the immediate aftermath of the storms, Freddie Mac and the Freddie Mac Foundation donated $10 million in humanitarian assistance, with special emphasis on finding temporary or permanent housing and providing supportive services for displaced families. Working with our nonprofit and business partners, Freddie Mac placed more than 2,100 families into housing, including single-family homes and apartments donated from our real estate-owned (REO) portfolio.

To help affected families keep their homes, we implemented a series of temporary policies. Through our lender customers and mortgage servicers (many of whom were themselves facing extraordinary hardships), we provided mortgage payment relief to any homeowner who needed it for up to as many as 21 months. By the end of last year, Freddie Mac had provided forbearance to more than 34,000 families, with the option for our servicers to continue to extend forbearance until June. Moreover, Freddie Mac implemented policies to avoid penalizing those who were attempting to rebuild their homes and lives. We instructed our servicers to suspend credit reporting, stop charging late fees, and stop pursuing collections on affected families who fell short on their mortgage payments.

In addition to providing mortgage payment relief, Freddie Mac streamlined our loan modification requirements so that servicers could easily assist homeowners seeking to hold on to their homes. In some cases, servicers restructured mortgages so borrowers would have lower and more manageable monthly payments. In other cases, servicers established repayment plans. By the end of 2006, Freddie Mac had provided workouts on more than 4,000 loans for Gulf homeowners. More loan workouts are underway.

Finally, to help begin the process of rebuilding in the Gulf region, Freddie Mac pledged to purchase $1 billion of mortgage revenue bonds (MRBs) from state and local housing finance agencies. Within one year, Freddie Mac had fulfilled the $1 billion commitment. The bonds are helping as many as 10,000 low-and moderate-income families obtain low-cost mortgages and home repair loans from participating lenders. The MRB initiative, as well as several other steps we took to assist lenders, servicers and their borrowers, depended heavily on our retained portfolio and its ability to allow us to spring into action quickly.