We DON’T make homes possible


It is clear that Freddie Mac (the Federal Home Loan Mortgage Corporation) has not learned it’s lesson from the millions they lost during the housing crash in 2008.  They have continued to act unethically and take advantage of both the government and American homeowners who wish to buy mortgages.  They have tested the government’s generosity long enough – the company is now facing many lawsuits and is facing extinction because of their mistreatment of homeowners and taxpayers money. 

For those who don’t know, Freddie Mac is a taxpayer-owned mortgage giant that was created by the government to make loans more accessible.  However, during the housing bubble they took advantage of their position by backing loans they knew were terrible.  The top executives at Freddie Mac also are being charged by the SEC for failing to disclose billions of dollars in risky subprime mortgages.  The company lost more than $30 billion and as a result the taxpayers had to pick up the pieces.  In order to bolster the economy, the Obama administration had asked Freddie Mac (and their competitor Fannie Mae) to ease conditions for people looking for mortgages and offering incentives to forgive some homeowner debt.  The company has refused.   

Regardless of one’s opinion about the company’s policies, one cannot deny the unethical behavior that was exposed earlier this year.  Apparently, the company has been betting against homeowners’ ability refinance their loans while they make it more difficult for them to do so.  Furthermore, they have bought several billion dollars of inverse floater securities (which made up of the interest from the mortgages) and saved it for themselves while selling the far less risky principal.  This is the opposite of what they should be doing, which is decrease the size of their investment portfolios.  These securities would enable the company to make more money with higher interest rates, which is why the benefit.  Of course, this entire concept completely contradicts the sole purpose of the company: to help homeowners find cheaper mortgages.  The company has taken no incentives to right the wrongs they committed during the housing bubble, and instead of making strives to boost the economy they have been digging in their heals. 

http://www.nytimes.com/2012/01/31/business/freddie-mac-investments-under-scrutiny-by-treasury-dept.html?ref=business&_r=0

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3 thoughts on “We DON’T make homes possible

  1. Wow, I had no idea this was still happening. You would think something would be done to prevent this behavior from happening. What did people not learn their lesson when the housing bubble burst? This is so discouraging.

  2. Nice post, i learned some new things. It is hard to believe that Freddie Mac is doing something that is questionably unethical from the onset like betting against the loans they have approved after the financial crisis. While it may be unfortunate that they refuse to ease conditions for people looking for mortgages or offer them incentives to forgive some homeowner debt, they also have a responsibility to not lend to people that will have trouble paying their debts. It is unfair to responsible borrowers to use government backed funds to ignore portions of peoples’ debts because they took out a loan they couldn’t pay. I think a great debate or question for next week would be, “Where does government intervention end and personal responsibility begin?”

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