Freddie Mac to cease purchasing interest only mortgages

Freddie Mac announced today that it will stop purchasing and securitizing interest-only mortgages as of Sept. 1, including Freddie Mac Initial Interest fixed-rate and adjustable-rate mortgages.

“We’re stopping purchases of all interest-only type mortgages as a result of the continuing poor performance of these products,” said Michael Cosgrove, a Freddie Mac spokesman.

Interest-only mortgages made up 7 percent of the company’s portfolio as of Dec. 31, and 17.6 percent of the loans were seriously delinquent. The overall delinquency rate of the company’s loan portfolio is 3.98 percent.

"We start 2010 with some early signs of stabilization in the housing market," said Freddie Mac CEO Charles Haldeman Jr. "Still, the housing recovery remains fragile, with significant downside risk posed by higher unemployment and a potential large wave of foreclosures."

Mr. Haldeman is well deserving of his $6 million compensation package

given his truly insightful business decisions. Who would have even dreamed

interest only mortgages would produce high levels of delinquency?