"It's a little early in the game," Coffey added, "since we only made announcement of the program on Jan. 13, but the response from lenders has been tremendous--more than 1,500 so far--and our original projection for the first year was about $500 million, but the feedback that we've had would put that figure closer to $1 billion.
"We're getting a flood of inquiries from lenders, as we had expected, who already have a product on the shelf and these have to be studied on a one-on-one basis to make sure that they qualify."
Unlocking the potential treasure trove of untapped home equity, Freddie Mac's Coffey feels, will, literally, free billions of dollars for a variety of fruitful ventures--a new-home purchase, home remodeling, investments, a college education or, literally, anything. The most fertile field: homeowners between the ages of 35 and 49, the bracket embracing most of the baby boomers of post-World War II.
Acknowledging that there have been fears expressed that easing the ability of homeowners to "cash in" on their equity could trigger a binge of consumer over-indulgence--European vacations, yachts and other creature comforts--Coffey, nevertheless, shrugs off the threat.
"I think it's greatly overstated. We're a conservative organization and we take a long hard look at the background of our principals--those who will be writing these seconds. 'Do they know what they're doing?' That's the real key.
"We've laid out our credit guidelines for them, the ratio of debt that's permissible, and we don't think that any restrictions on why the homeowner \o7 wants\f7 the money is any of our business--only his ability to repay the indebtedness, which is what made him a good credit risk in the first place. I know that Fannie Mae feels the same way, and I think this fear goes back to that old prejudice against seconds, generally. There's no sound reason in the world why a second mortgage shouldn't be every bit as sound an investment as a first."
The Federal Home Loan Mortgage Corp., Freddie Mac, is a publicly chartered corporation whose preferred stock is owned by the country's savings and loan institutions--although it buys from the entire market, not merely the S&Ls, but from consumer finance companies, commercial banks, second-mortgage companies, mortgage bankers, credit unions and individuals.
Until about a year before it plunged into the second-mortgage market last month, Freddie Mac's charter restricted its buying of seconds to home improvement loans that were tied to energy conservation.