Freddie Mac adds incentives to cut costly inventory

NEW YORK, July 20 (Reuters) - Freddie Mac FRE.P, the second-largest U.S. residential mortgage finance company, on Monday said it is adding fresh incentives for buyers of foreclosed homes by paying certain closing costs.

The government-controlled company said it would pay for some closing costs and two-year warranties on homes purchased from its inventory, which has soared since 2007 as the housing crisis and U.S. recession increased foreclosures.

The glut of foreclosed homes is weighing on Freddie Mac and other financial institutions, which are finding the inventory costly to maintain and difficult to unload. Inventories of unsold homes are often blamed for prolonging the housing crisis by pushing prices lower and keeping would-be buyers on the sidelines, waiting for the market to stabilize.

Freddie Mac had 29,145 homes in its "real estate owned" portfolio on March 31, more than double that at the end of 2007, according to regulatory filings. The costs have deepened the McLean, Virginia-based company's losses, which have forced it to draw $51.7 billion in government support.

Reducing real estate inventory should cut foreclosure-related losses, justifying costs of the promotion, said Brad German, a Freddie Mac spokesman. Homes with warranties also tend to garner higher prices, he added.

Freddie Mac's promotion, which will pay for up to 3.5 percent of the sales price in a buyer's closing costs, started on July 17 and will run through October 30, it said. It is available on owner-occupied homes sold for at least $25,000. (Reporting by Al Yoon; Editing by Padraic Cassidy)