When Homeowners Lose, Does Freddie Mac Win?

Yes, according to a January 30 article published by nonprofit news organizations ProPublica and National Public Radio. The joint report has sparked a Federal Housing Finance Agency (FHFA) investigation into the bailed-out mortage behemoth’s bet-hedging on “inverse floaters.”

Bloomberg Businessweek reported that FHFA and Freddie Mac agreed to stop making investments in inverse floater derivatives while the mortgage firm’s market activity is scrutinized.

According to ProPublica and NPR, the mortgage giant made a Wall Street-style bet against the likelihood of homeowners’ inability to refinance at lower interest rates, hoping to profit from the “financial jail” of regulations enacted in the wake the subprime mortgage crisis in which Freddie Mac played a significant role.

Before the ink on details about the Freddie Mac investigation has even had a chance to dry, Reuters posted this morning’s FHFA announcement that investors could now sign up to pre-qualify to bid on foreclosed properties held by the government-controlled firms. "This is an important step toward increasing private investment in foreclosed properties to maximize value and stabilize communities," said FHFA acting director Edward DeMarco.

Ka-ching!

Comments

[Zhang Guang]

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[Hendri Prastio Kurniawan]

ok
According to ProPublica and NPR, the mortgage giant made a Wall Street-style bet against the likelihood of homeowners’ inability to refinance at lower interest rates, hoping to profit from the “financial jail” of regulations enacted in the wake the subprime mortgage crisis in which Freddie Mac played a significant role.
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