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

[merrill]

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

 

[g5000]

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.

 

[Valox]

It is very debatable if they were intentionally betting against homeowners.
Freddie Mac Bets Against Refinancing? Or Just Higher Rates? - Forbes

 

[g5000]

It is very debatable if they were intentionally betting against homeowners.
Freddie Mac Bets Against Refinancing? Or Just Higher Rates? - Forbes

From that link:

Freddie bought $3.4 billion in “inverse floaters,"

Ahhhhhh. That says it all right there. They are fricking idiots.

 

[merrill]

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!!!

 

[merrill]

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!!!

 

[waltky]

ARM's losing popularity...

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.

A report from Freddie Mac says 95% of all mortgage refinances are for fixed-rate mortgages, even though adjustable-rate mortgages may offer a better deal in short term. Freddie Mac's quarterly transition report has the goods, noting that homeowners "clearly preferred" fixed-rate mortgages over ARMs - even if the original loan was an ARM. On the surface, it appears homeowners are skittish about interest rates moving up, and won't risk getting caught with their pants down with an ARM that rises if and when rates head north.

But that doesn't look like it's going to happen anytime soon. The Federal Reserve has shown no inclination to move from its current zero-rate economic policy, with most Fed observers saying interest rates won't rise until 2014. That policy has left rates at historically low levels. Consider the average 30-year fixed-rate home mortgage rate, which stands at 4.22% this week after reaching 4.075% last week, as measured by the BankingMyWay Weekly Mortgage Rate Calculator. Even that low number is at the high end of mortgage rates this week.

The Freddie Mac data say more Americans homeowners are turning to 15-year mortgages, given the low rates in that category. Fannie Mae reports that 43% of 30-year mortgage holders chose a 15-20 year mortgage during the fourth quarter of 2011. But homeowners are eschewing ARMs in big numbers: 58% of homeowners who had held a hybrid ARM moved to a fixed-rate mortgage, suggesting homeowners are indeed nervous about interest rates moving upward. It's all about saving money and eliminating risk, Fannie Mae says.

"For borrowers motivated to refinance by low fixed-rates, they could obtain even lower rates by shortening their term," said Frank Nothaft, Freddie Mac's chief economist, in a statement. "Compared to a 30-year fixed-rate mortgage, the interest rate on a 15-year fixed was about 0.7 percentage points lower during the fourth quarter. And for borrowers who plan to remain in their current home for only a few years, the hybrid ARM allows for even a greater interest-rate savings."

Given the Freddie Mac data, it looks like homeowners aren't taking any chances with their mortgages. Increasingly, they're "all in" on fixed-rate mortgages. In the short term, at least, fixed-rate customers are leaving a lot of money on the table, but they're presumably still sleeping better at night.

Source

 

[waltky]

Here we go again...

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).

Obama announced his latest mortgage program at a White House news conference on Tuesday. Any American with a mortgage insured by the Federal Housing Administration (FHA) endorsed on or before May 31, 2009 and who is current with their mortgage payments would qualify, according to HUD. No additional underwriting, or examining the verification of income, employment status or creditworthiness, will be done. “Basically that’s because they already have an FHA loan and that’s just refinancing the same loan,” HUD spokesman Lemar C. Wooley told CNSNews.com.

Wooley further explained in an e-mail, “Even if their circumstances have changed, they are still managing to be current on the original higher priced mortgage, so that’s the proof to the FHA that they can handle the lower payments.” “The streamline refinance process is only available for FHA-insured mortgages that are performing – the borrower is paying the mortgage,” Wooley said. He added, “By not requiring verification of income and other underwriting requirements, FHA reduces the cost of the transaction, as well as the time it takes – all to the mutual advantage of the borrower, the lender and FHA.”

Underwriting is generally done for both initial mortgages and refinancing, said Reed Piano, managing director of the National Association of Mortgage Underwriters. He said the normal mortgage underwriting process checks “employment verification, income verification, analysis or thorough examination of a borrower’s creditworthiness based on a lender’s requirements, any federal or state requirements.” When an institution does the underwriting for a mortgage, it is "validating the entire process. They are validating the appraisal, the title, the credit, income verification, pretty much everything from A-to-Z and they’re seeing if the file is good and meets the requirements,” Piano told CNSNews.com.

The White House estimates 2 million to 3 million FHA borrowers are eligible. “While it is always difficult to estimate participation in these programs, this will result in significant monthly savings for hundreds of thousands of families,” a White House news release said. “Today we’re taking it a step further--we are cutting by more than half the refinancing fees that families pay for loans ensured by the Federal Housing Administration,” Obama said at the press conference on Tuesday. “That’s going to save the typical family in that situation an extra $1,000 a year, on top of the savings that they’d also receive from refinancing. That would make refinancing even more attractive to more families. It’s like another tax cut that will put more money in people’s pockets. We’re going to do this on our own. We don’t need congressional authorization to do it.”

MORE

 

[uscitizen]

We can't lock up the fannie/freddie officials they are not govt officials.