Home > Avid Law Center > Freddie Mac Bets Against U.S. Homeowners

Freddie Mac Bets Against U.S. Homeowners

A new investigation conducted by NPR and ProPublica, an independent, nonprofit newsroom, found that Freddie Mac invested billions of dollars betting that U.S. homeowners won’t be able to refinance their mortgages at today’s lower rates.

Contrary to the organization’s mission and purpose, these investments, while legal, raise concerns about a conflict of interest within Freddie Mac, a taxpayer-owned mortgage company.

The investigation brought to light public documents that 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.

With today’s record low interest rates, millions of homeowners try to refinance only to be denied due to strict rules created by the banks – and Freddie Mac, one of the gatekeepers with the power to set those rules, has been denying homeowners more often.

President Obama has pushed for legislation that would allow homeowners to qualify for refinance without what he called “red tape” or a “runaround from the banks.” Some economists agree that a mass refinancing program would benefit homeowners and in-turn the economy. It would also reduce the amount of foreclosures which would benefit mortgage giants Freddie Mac and Fannie Mae. But with a mass re-fi program he bets they made would get wiped out.

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