“Although Freddie Mac’s bets are legal, they’re highly offensive,” said Morgan Korn, the Daily Ticker.
On Monday, NPR and ProPublica released a report saying that Freddie Mac had allegedly been placing billions of dollars worth of bets against struggling homeowners who were trying to restructure their mortgages.
Ironically, these homeowners are also the owners of Freddie Mac, a tax-payer owned mortgage company.
NPR/ProPublica’s review of public documents found that Freddie Mac invested in securities called “inverse floaters.” These floaters receive all the interest payments from specified mortgage-backed securities.
“If lots of people ‘pre-pay’ their old loans and refinance into new, cheaper ones, then Freddie Mac starts to lose money,” ProPublica’s Jesse Eisinger and NPR’s Chris Arnold explained. “If people can’t refinance, then Freddie wins because it continues to receive that flow of older, higher interest payments.”
Freddie Mac had been in the hot seat before for its top executives’ salaries, reported to be as high as $6 million each, although the company had reported extreme financial losses.
About 80 percent of people do not successfully find help with foreclosure through their lenders.
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