Freddie Mac's Conflict Is 'Unsavory,' 'Shocking,' 'Stunning,' Key Senators Say
Two senators who have taken the lead on legislation aimed to help homeowners refinance at historically low interest rates were blunt this morning about how concerned they are by the news NPR reported earlier this week that Freddie Mac "has placed multibillion-dollar bets against American homeowners being able to refinance to cheaper mortgages."
The taxpayer-owned mortgage company's actions are "at best unsavory and at worst immoral," Sen. Johnny Isakson, R-Ga., said.
"Shocking and stunning," added Sen. Barbara Boxer, D-Calif. "The mission of Freddie Mac," she said, is "to make homeownership affordable." The program that NPR's Chris Arnold detailed indicates Freddie Mac has turned "against their mission," the senator said.
The senators were interviewed today by Morning Edition co-host Steve Inskeep. More from the conversation is due on Thursday's broadcast. Click here to find an NPR station that broadcasts or streams the show. We'll add the as-aired version of the discussion to the top of this post when it's ready.
As Chris Arnold reported this week, Freddie Mac "has invested billions of dollars betting that U.S. homeowners won't be able to refinance their mortgages at today's lower rates, according to an investigation by NPR and ProPublica, an independent, nonprofit newsroom."
Isakson said it's one thing for financial institutions to "hedge" against circumstances they can't control, but something altogether different for an institution such as Freddie Mac to have influence over something such as mortgage rates and then to make investments that could pay off if those rates move in a certain direction.
Boxer places much of the blame on Edward DeMarco, acting director of Freddie Mac's regulator, the Federal Housing Finance Agency (FHFA). In a contentious meeting with DeMarco (held before the NPR/ProPublica story was released), Boxer said, DeMarco told her that "his interest is making sure Fannie [Mae] and Freddie do well financially," not making homeownership more affordable.
NPR has invited DeMarco to make his case and will continue to seek an interview with him, Steve Inskeep says.
Isakson and Boxer are sponsors of legislation "intended to help some eight million homeowners with mortgage rates exceeding 6 percent to refinance at today's lower interest rates, below 4 percent," as Chris Arnold has reported. Isakson said today he's encouraged that the White House seems to have "embraced" their effort — most notably with today's speech by President Obama in which he laid out more details of his plan to make refinancing easier for many homeowners.
The senators say they plan to seek answers from DeMarco and other Freddie Mac officials.