Freddie Mac Expands Interest Only Arms Suite

The Mortgage-Pro · Site Admin Joined: 19 Jan 2005 Posts: 2248

Washington, DC – Freddie Mac today announced it was expanding its Initial Interest Only suite of mortgage products to include Constant Maturity Treasury (CMT) and London Interbank Offered Rate 3/1, 5/1, and 7/1 adjustable rate mortgages with a 10-year interest only period. Borrowers choosing these new Initial Interest ARMs will make fully amortizing principal and interest payments only after the 10-year initial interest period expires.

Freddie Mac also announced that starting July 1, 2005, originators could sell Initial Interest mortgages through the company’s web-based selling system and opt for Cash or Guarantor executions. Currently, Initial Interest mortgages are eligible for Guarantor executions through MIDANET or Gold Connection for Delivery.

"Freddie Mac’s Initial Interest ARMs with 10-year interest-only periods give savvy borrowers three important new ways to match their homebuying ambitions to their individual financial situations," said David Stevens, senior vice president of Mortgage Sourcing at Freddie Mac. "This also gives originators using Loan Prospector new marketing muscle by expanding the secondary market for an even wider range of interest-only mortgage product."

Designed for borrowers who fully understand that the monthly payment will rise following the interest-only period, Initial Interest mortgages provide lower monthly payments during the initial interest-only period and give borrowers the option of paying down principal with immediate reductions in their monthly payments during the interest only period . Once the interest-only period expires, the Initial Interest mortgage becomes a fully amortizing mortgage.

Today’s announcement builds on Freddie Mac’s Initial Interest suite, which includes fixed rate mortgages and 3/1, 5/1, 7/1 and 10/1 CMT and LIBOR-indexed ARMs with 3, 5, 7, and 10-year interest-only periods, respectively.