Freddie Mac to cut purchases of home loans

Freddie Mac may have to cut purchases of home loans from banks and bonds which are backed by housing debt, the second-largest U.S. mortgage-finance company hopes that they will be able to shore up its capital amid record delinquencies.

Freddie Mac who are sponsored by the US government are also thinking about selling securities and reducing its dividend, while they prepare to issue $5.5 billion of stock. Matthew Jozoff, JPMorgan Chase & Co. analyst has said in a report last week that the growth in mortgage holdings for Fannie Mae and Freddie Mac will be “weak.”

He also added “This just means much less credit availability for mortgage borrowers, they were teed up to be saviors of the mortgage crisis, but now they’ve got their own capital issues.”

Both the Bush administration and Congress are hoping that both companies will be able to pull the U.S. out of the housing slump, as they purchase mortgage from banks, providing money to make new loans.

Both these companies will have a tough job on their hands as Treasury Secretary Henry Paulson had to try and get Congressional approval last week to extend the credit for both banks.

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