Freddie to refuse subprime purchases

Freddie Mac, the second-largest U.S. mortgage finance company, told lenders that beginning next month it will no longer buy subprime loans issued in New York state.

New York Gov. David Paterson, a Democrat, last week signed new foreclosure and lending laws that tighten legal protections for borrowers. Freddie won’t buy loans dated on or after Sept. 1 that meet the state’s new subprime definition, the McLean company said Tuesday in a lender bulletin on its Web site.

Government-chartered Freddie and Fannie Mae, which together own or guarantee 42 percent of the $12 trillion U.S. home loan market, are both slowing their mortgage purchases after last week posting bigger-than-expected losses for the second quarter.

The companies have been battered by record delinquencies and rising losses as they struggle to shore up their weakened balance sheets amid the worst housing slump since the Great Depression.

Subprime loans are issued to borrowers with poor credit or high levels of debt.