Freddie Mac does more damage to real estate’s reputation

January 31, 2012  |  Dan Rafter  |  Print Article  |  Email this Article

Is it any wonder that most people don’t trust the real estate industry?

Just consider the recent investigation of NRP and ProPublica. The two news agencies found that Freddie Mac purchased billions of dollars worth of complex mortgage-backed securities that only profit if borrowers remain trapped in high-interest-rate home loans.

Freddie Mac today holds $5 billion worth these securities. Its regulator, the Federal Housing Finance Agency, has since requested that Freddie Mac stop purchasing these securities. Freddie Mac in December agreed to this request.

Now, what does this story say to the homeowners across the country who want to refinance to mortgage loans with lower interest rates but have been denied? It says that the game was rigged against them from the start.

The Freddie Mac story is just one more blow against the real estate industries. The reporters who cover real estate — people like me — know that the vast majority of professionals doing business in the industry are smart and hard-working. But members of the general public? They have a far lower opinion of the industry.

I’d say its similar to the feelings that consumers have toward lawyers, car salesmen, contractors and, yes, journalists.

Freddie Mac certainly hasn’t helped the image of the real estate industry. And don’t think that members of the public will differentiate between those real estate professionals who work in residential and those who work in the commercial fields.

The Freddie Mac story, simply, is one that the real estate industry desperately doesn’t need as it tries to recover from some of the most difficult years in memory.

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3 Responses to “Freddie Mac does more damage to real estate’s reputation”

  1. bill johnson says:

    how do we fix this

  2. Joe says:

    I find fault with the NPR and Propublica reporting as it is incomplete. If Freddie and Fannie did decouple securitized principal contracts from interest rate payments, options or swaps to hedge potential losses could have been divided into traunches, one of which would pay off if borrowers did not refinance. The report did not report on caps, collars, or counterparty agreements if any.

    While the optics are bad as reported, did the entire suite of financial products insulate the entities from everybody refinancing, which would kick in guaranteed payments of income streams, as well as cover the counterparty if no one refinanced.

    An incomplete story on the series of transactions is to reporting insider sales of stock, but failing to report 1/3 of compensation options were sold and the insider increased their ownership interest by twice what they sold in the company. Or not reporting the CEO tok only stock for compensation to show his belief in the company and sold stack was to provide cash flow.

    I agree the story as reported paints real-estate in a poor light, but is that sensationalism or an accurate portrait?

  3. R Smith says:

    Disappointing to see you jump on the Agency bashing bandwagon. Especially since the “newsblasts” you profit from often have to do with the advertisement of the placement of Freddie/Fannie debt. Hypocritical just like every other money grubber out there.


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