Feds investigate Freddie Mac’s bet against homeowners

The Treasury Department is investigating allegations against Freddie Mac that accuse the government-sponsored enterprise of “betting against homeowners’ ability to refinance their loans” while also putting in roadblocks to make it more difficult refinance at today’s lower rates, according to White House spokesman Jay Carney.

Some argue that Freddie Mac imposed several barriers to homeowners who wanted to refinance their mortgages, like adding risk-based fees.

The White House says it has tried to get the GSEs to ease such refinancing restrictions, as well as participate in debt-forgiveness programs, so more homeowners can take advantage of current low mortgage rates.

The Treasury Department announced last week that it would extend for the first time to Freddie Mac and Fannie Mae-backed loans incentives for lenders to forgive portions of homeowner debt in a refinancing program.
But both GSEs have traditionally refused to permit debt reduction on its loans because it says it will create more losses to taxpayers. (The GSEs are backed by taxpayer money.) The GSEs did agree to review the current incentives, however.

Several media outlets are reporting that Freddie Mac had a multibillion-dollar investment that hinged on borrowers continuing to pay higher interest rates, and they’re alleging that’s why the GSE wasn’t so eager to help more homeowners refinance.