WASHINGTON -- Mortgage giant Freddie Mac said yesterday it will no longer buy those high-risk home mortgages that it deems to be the most vulnerable to foreclosure. The move came amid a deteriorating market for subprime loans affected by slumping home prices and rising interest rates
The government-sponsored company, which is the second-biggest financer of US home loans, said it will begin using stricter standards for mortgages that it buys -- including limiting the use of loans requiring less documentation of the borrower's status than conventional mortgages. The goal is "to help ensure that future borrowers have the income necessary to afford their homes," McLean, Va.-based Freddie Mac said.
"The steps we are taking today will provide more protection to consumers and enhance the level of underwriting standards in the market," said chairman and chief executive Richard Syron.
The changes will take effect Sept. 1, the company said, to avoid disrupting the mortgage market.
Also yesterday Syron, a former president of the Federal Reserve Bank of Boston, said he's willing to step aside within six months to make way for chief operating officer Eugene McQuade, who helped him revive the company after $5 billon in accounting errors.