Freddie Mac Bets Against American Homeowners

Discussion in 'Economics' started by abducens, Jan 30, 2012.

  1. Freddie Mac, the taxpayer-owned mortgage giant, has placed multibillion-dollar bets that pay off if homeowners stay trapped in expensive mortgages with interest rates well above current rates.

    Freddie began increasing these bets dramatically in late 2010, the same time that the company was making it harder for homeowners to get out of such high-interest mortgages.
  2. Freddie purchased inverse floater portions of 29 deals in 2010 and 2011, with 26 bought between October 2010 and April 2011. That compares with seven for all of 2009 and five in 2008.

    I wonder who they bought them from.

    It would seen to me these "inverse floaters" would be worthless to whoever held them before with the risk of refi, but now they are back in the hands of Freddie. Some banks somewhere made out on this deal, again at the expense of the homeownwer.
  3. There was some book I read but basically when Bush tried ot reform Fannie and Freddie, he was powerless to do so, (hence these changes were never made) Then later Hank Paulson tried again,and Bush basically said they are untouchable.

    This is what is happening in general to the Gov't, too many unelected "officals" with too much power. We are seeing this with EPA.
  4. Maybe Freddie Mac make the bet in 2009 this will happen, so if this interest rate change happen, no homeowner (in time) will want to refinance, and be happy with average 6% interest rate they have?

    "Here's a look at rates for fixed- and adjustable-rate mortgages over the past 52 weeks:

    Current week's average Last week's average 52-week high 52-week low

    30-year fixed 3.98 3.88 5.05 3.88

    15-year fixed 3.24 3.17 4.29 3.16

    5-year adjustable 2.85 2.82 3.92 2.82

    1-year adjustable 2.74 2.74 3.40 2.74
  5. Fannie and Freddie are untouchable because voters won't stand for anything else.

    Democracy in full effect.