Did Freddie Mac bet against homeowners seeking to refinance?

By Elliot Njus, The Oregonian

Taxpayers bailed out Freddie Mac and its sister mortgage giant Fannie Mae to the tune of about $185 billion, so naturally a January report suggesting Freddie may have conspired against homeowners seeking to refinance raised hackles. But a government watchdog reported Wednesday the problematic investments it cited were simply a prudent hedge.

Investigative journalism nonprofit ProPublica and NPR alleged in a joint report Freddie was investing in a derivative that would pay off more if mortgageholders kept paying high rates. At the same time, it was making it more difficult for borrowers to refinance into lower rates.

On Wednesday, the watchdog said there was no evidence of collusion. Some reports suggested Freddie had been cleared of all charges, but the report does admits the investments may have created an incentive for Freddie to keep borrowers in their current loans. From The Wall Street Journal developments blog:

The report explained that Freddie had retained the inverse floater positions because there was stronger demand for other securities. …

While Freddie Mac’s trading unit could, in theory, misuse internal data and interfere with refinancing, the inspector general found “no evidence of collusion” between those sides of Freddie Mac’s operations. [more]

CLICK HERE to view the original article

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s