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An unidentified man walks from the Freddie Mac offices on August 11, 2010, in McLean, Virginia.
Government sponsored Freddie Mac has invested billions of dollars in mortgage securities that appreciate when homeowners fail to refinance high-rate mortgages and is also making homeowners’ path to lower-rate mortgages more difficult, according to a joint investigation by NPR and ProPublica.
The enterprise, according to Freddie Mac’s website, has “a public mission to stabilize the nation's residential mortgage markets and expand opportunities for homeownership.” The investigation found that the mortgage giant profits from homeowners’ refinance disqualifications, which poses a potentially severe conflict of interest. The Federal Housing Finance Agency, which controls Freddie Mac, maintains there is a wall between the investment and lending branches of the organization to prevent these kinds of conflicts of interest, which seems to indicate that Freddie Mac indeed “wins” when homeowners lose even in the best-case scenario. Freddie Mac declined to be interviewed for the story, so Patt checks with one of the reporters and an analyst who explains their practices.
How appropriate is it for tax-payer funded Freddie Mac to have a vested interest in homeowner’s misfortunes? Are homeowners being set up to fail?
Jesse Eisinger, reporter with ProPublica and co-writer of the piece
Ted Frank, adjunct fellow with the Manhattan Institute’s Center for Legal Policy and editor of the Institute’s award-winning web magazine, PointofLaw.com