Freddie Mac Betting Against Homeowners = fire the administrators and jail them!

Discussion in 'Politics' started by merrill, Jan 30, 2012.

  1. merrill
    Offline

    merrill VIP Member

    Joined:
    Dec 27, 2011
    Messages:
    1,263
    Thanks Received:
    92
    Trophy Points:
    83
    Ratings:
    +92
    Report: Freddie Mac Bet Against American Homeowners


    An investigation by ProPublica and NPR News has revealed Freddie Mac, the taxpayer-owned mortgage giant, has placed multi-billion-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.


    Democracy Now! | Headlines for January 30, 2012
     
  2. g5000
    Offline

    g5000 Diamond Member

    Joined:
    Nov 26, 2011
    Messages:
    55,976
    Thanks Received:
    9,333
    Trophy Points:
    2,030
    Ratings:
    +24,525
    What Freddie Mac did is what a lot of banks do with asset backed securities. They sold off the principal payments and kept the interest payments.

    This means that if a borrower refinances, the principal gets paid off, and the interest payments stop coming in. So whoever kept the interest payments portion of the loan stops getting paid.

    They don't lose money, they just stop getting interest payments. If they were the orginator of the loan, they have already broken even when they sold off the principal.

    So, yeah, you would not want the borrower to refinance if your revenue stream is nothing but interest payments.

    Why this is being passed off in the media as "betting", though, is beyond me. It is disingenuous next to the the actual casino-style betting that has occured, and is still occuring.

    The question of whether or not this raises a conflict of interest is a valid one, however.

    I have seen nothing about what kind of scope we are looking at here. How much of Freddie Mac's portfolio was interest only?

    Before we go off half-cocked, we need to know that much, at a minimum.

    I think it is very ironic that things have come back full circle. The whole reason mortgage backed securities were invented in the first place was to minimize the risk to lenders of borrowers refinancing when interest rates dropped.

    Stupid idiots.

    As I said at the top, though, Freddie Mac is not the only financial institution suffering from the lower interest rates in the market these days. All investors are pushing back hard to make refinancing tougher so that their revenue streams continue to come in.

    If you are an investor and bought securities paying 8 percent interest, when the market drops and borrowers refinance, your 8 percent revenue stream dries up and now you have to go back into the market to buy new securities. Except these new securities are paying at a lower return since interest rates dropped.

    Anyway, I think it is dishonest to call what Freddie Mac did as "betting".

    I do think it is worth looking into whether they deliberately prevented people from refinancing just so they (Freddie Mac) could continue to collect the high interest payments, though.
     
    Last edited: Jan 30, 2012
  3. Valox
    Offline

    Valox Senior Member

    Joined:
    Dec 1, 2011
    Messages:
    1,023
    Thanks Received:
    122
    Trophy Points:
    48
    Ratings:
    +123
  4. g5000
    Offline

    g5000 Diamond Member

    Joined:
    Nov 26, 2011
    Messages:
    55,976
    Thanks Received:
    9,333
    Trophy Points:
    2,030
    Ratings:
    +24,525
    Last edited: Jan 30, 2012
  5. merrill
    Offline

    merrill VIP Member

    Joined:
    Dec 27, 2011
    Messages:
    1,263
    Thanks Received:
    92
    Trophy Points:
    83
    Ratings:
    +92
    I went to my credit union looking to get a home improvement loan. Low and behold my local rep says HEY how about we get you more money for less.

    What's Up?

    Refinancing a locked in rate from several years ago to a new 50% lower locked in rate for a much reduced term in years.

    Now:
    1. Great new low locked in rate

    2. Ten years knocked off

    3. lower monthly mortgage payments

    4. yet borrowed more for the home improvement ( gotta be careful cuz don't want to spend too much with home values still depreciating)

    5. in essence more for wayyyyy less = a good investment

    Should congress clean house at the Freddie's and prosecute? Damn right!!!
     
  6. merrill
    Offline

    merrill VIP Member

    Joined:
    Dec 27, 2011
    Messages:
    1,263
    Thanks Received:
    92
    Trophy Points:
    83
    Ratings:
    +92
    De-regulation has allowed financial institutions to become gambling casinos with YOUR MONEY backed and/or bailed out with OUR TAX DOLLARS.

    Does anyone wonder why we need regulations and stiff mandatory criminal penalties?

    College educated white collars cannot be trusted!!!
     
  7. waltky
    Online

    waltky Wise ol' monkey Supporting Member

    Joined:
    Feb 6, 2011
    Messages:
    20,814
    Thanks Received:
    1,789
    Trophy Points:
    215
    Location:
    Okolona, KY
    Ratings:
    +3,870
    ARM's losing popularity...
    :eusa_eh:
    Are Adjustable-Rate Mortgages Dying?
    2/17/12 --- Up to 95% of mortgage refinances are for fixed-rate mortgages, even though ARMs may be better in the short term.
     
  8. waltky
    Online

    waltky Wise ol' monkey Supporting Member

    Joined:
    Feb 6, 2011
    Messages:
    20,814
    Thanks Received:
    1,789
    Trophy Points:
    215
    Location:
    Okolona, KY
    Ratings:
    +3,870
    Here we go again...
    :eusa_eh:
    Obama Will Make Taxpayers Guarantee Mortgages for 2-3 Million Borrowers Without Checking Their Incomes or Employment
    March 7, 2012 – With no authorization from Congress, President Barack Obama has announced that his administration--through the Federal Housing Administration--will insure refinanced mortgages for 2 to 3 million borrowers without verifying their income or even if they hold a job, according to the Department of Housing and Urban Development (HUD).
     
  9. uscitizen
    Offline

    uscitizen Senior Member

    Joined:
    May 6, 2007
    Messages:
    45,941
    Thanks Received:
    4,791
    Trophy Points:
    48
    Location:
    My Shack
    Ratings:
    +4,807
    We can't lock up the fannie/freddie officials they are not govt officials.
     

Share This Page