Freddie Mac, the taxpayer-owned mortgage giant, is reportedly betting that homeowners will be unable to refinance their mortgages at lower rates, even as it tightens the rules that allow mortgage holders to do just that.
The mortgage company has — legally — invested billions of dollars in complex mortgage-backed securities that are profitable only if homeowners are unable to refinance at lower rates, according to an investigation by NPR and independent investigative newsroom ProPublica.
Freddie’s potential conflict rests on the fact that it makes many of the rules that determine whether homeowners can refinance, and that it is, ostensibly, supposed to be making it easier for underwater homeowners to refinance.
Freddie CEO Charles Haldeman assured Congress in December that the company was helping reduce costs for cash-strapped borrowers, but publicly available documents show Freddie’s investment portfolio actually benefits when borrowers are unable to switch to lower-rate loans, according to NPR.
And Freddie has been saying no to mortgage holders more often, though it says the employees that make its investment decisions and those that make rules for mortgage holders work separately from each other, according to NPR.
Read the full story here, and let us know if you think Freddie is purposely making it harder for struggling homeowners to refinance to grab short-term profits, or if it’s reasonably tightening its standards and hedging its bets.