Earlier today, ProPublica in partnership with NPR posted an article accusing Freddie Mac executives of essentially hedging their investments by investing in credit default swaps that certain MBS pools would fail. This article didn’t escape the watchful eye of Jacob Gaffney at Housing Wire who posted a scathing editorial of the piece which you can read an excerpt of both articles below.
Freddie Mac Bets Against American Homeowners
Jesse Eisinger, ProPublica and Chris Arnold, NPR
Freddie Mac, the taxpayer-owned mortgage giant, has placed multibillion-dollar bets that pay off if homeowners stay trapped in expensive mortgages with interest rates well above current rates.
Freddie began increasing these bets dramatically in late 2010, the same time that the company was making it harder for homeowners to get out of such high-interest mortgages.
No evidence has emerged that these decisions were coordinated. The company is a key gatekeeper for home loans but says its traders are “walled off” from the officials who have restricted homeowners from taking advantage of historically low interest rates by imposing higher fees and new rules.
Freddie’s charter calls for the company to make home loans more accessible. Its chief executive, Charles Haldeman Jr., recently told Congress that his company is “helping financially strapped families reduce their mortgage costs through refinancing their mortgages.”
The NPR witch hunt of Freddie Mac
Jacob Gaffney, Housing Wire
NPR and ProPublica on Monday released the results of their “investigation” into the operations at Freddie Mac.
And through this exhaustive detective work they’ve shockingly found the government-sponsored enterprises securitize mortgages. Or, as NPR puts it, uses “Wall Street alchemy.”
Who in their right mind would try to counter NPR and ProPublica articles that clearly depict the evil mortgage market behemoth undercutting homeownership initiatives and doing the unthinkable: Trying to earn money for bond investors?
Hate to say it NPR and ProPublica, but the same thing is happening at Ginnie Mae and Fannie Mae, and just about everywhere a home is bought, sold and financed.
But not in the trite, bombastic language that now dominates mortgage finance news.
The biggest tell of this witch hunt is the lack of new evidence to back the claims of NPR and ProPublica. Yes, Freddie Mac securitizes loans. Yes, Freddie Mac doesn’t sit on those loans.
Also, Freddie Mac once more freely allowed lending to homeowners. That landed it basically where it is now. More glaring, however, is the lack of mention of prepayment risk.
