What would you think if you needed to refinance your mortgage, and you knew that the company that would be backing the loan had a vested interest (as in, would make money) by saying that you didn't meet the loan standards. Well, it turns out that that's what's been going on for a while now at Freddie Mac (and maybe Fannie as well. I forget).
To be clear, it is unknown if that has caused anyone to be rejected for a mortgage.
What is clear is that Freddie has been making investments that go down in value when people within the pool of mortgages on which a given investment is made refinance. What is also clear is that standards have gotten much tighter (this is not completely suspicious; it obviously needed to be done).
Whether there is a direct connection basically revolves around Freddie's goodwill. Do you want to rely on that?
More to the point, should you have to rely on that from an institution that has been bailed out by the federal government to the tune of tens (maybe hundreds? I forget) of billions of dollars, recently?
Also to the point, the type of investment made is a very risky one, in general. A lot less risky, when you're Freddie Mac, and taking advantage of your market influence. In fact, almost without risk if that connection does exist.
Given that, I'd be absolutely gobsmacked if there was no connection between Freddie's standards and those investments (actually, I'd call them bets, not investments).
More to come...
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