Freddie Mac Responds To Dubious Trade Allegations

• February 6, 2012
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by Shilpi Paul

The higher-ups at Freddie Mac are responding to recent allegations of suspicious trading with puzzlement, NPR reported late Friday.

In response to an investigation which revealed that Freddie Mac placed multi-million dollar bets that paid off if homeowners maintained mortgages with high interest rates, rather than refinancing, Edward DeMarco, the acting head of the Federal Housing Finance Agency (FHFA), told NPR’s Steve Inskeep that he is “completely puzzled by the notion that there was something immoral that went on here.”

Edward DeMarco [said] that Freddie Mac’s actions were “in the class of ordinary business transactions.” The “reverse floaters” in Freddie Mac’s investment portfolio did not affect the agency’s efforts to stabilize the mortgage market. Instead, DeMarco characterized the investments as part of Freddie Mac’s effort to make sure it doesn’t lose money.

The FHFA explained that Freddie decided to stop investing in the inverse floaters in the spring of 2011, and insists that the traders are “walled off” from the rest of the mortgage lender. According to The Wall Street Journal, lawmakers are currently pushing DeMarco to explain why the trades were ever retained.

This article originally published at http://dc.urbanturf.com/articles/blog/freddie_mac_responds_to_dubious_trade_allegations/5068

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