Thursday, February 2, 2012

Freddie Mac Bets Against Homeowners

An NPR story from this week details how Freddie Mac was betting against the very homeowners it was intedned to help:

[P]ublic documents show that in 2010 and 2011, Freddie Mac set out to make gains for its own investment portfolio by using complex mortgage securities that brought in more money for Freddie Mac when homeowners in higher interest-rate loans were unable to qualify for a refinancing.

Those trades "put them squarely against the homeowner," PIMCO's Simon says.

Freddie Mac's trades came at a time when mortgage rates were falling to record lows. Millions of homeowners wish they could refinance, but their lenders tell them they can't qualify for today's low rates because of tight rules. Freddie Mac is one of the gatekeepers with the power to set those rules, and lately, it has been saying no more often to homeowners.

Steve Clowney

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Without taking a position either way, I think it is important to remind readers however that there is a different perspective as to how to interpret Freddie's purchases of "inverse floaters". See:

Posted by: Kurt Paulsen | Feb 2, 2012 7:03:41 AM

Thanks Kurt!

Posted by: Steve Clowney | Feb 2, 2012 4:46:17 PM

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