When millions of borrowers were locked into high-interest mortgages that hiked their monthly payments to unaffordable levels, mortgage giant Freddie Mac made it more difficult for them to refinance to lower-interest loans, to avoid cutting into company profits, according to a published report.
The tightening of refinancing rules occurred during the deepest years of the recession, when homeowners needed help the most, causing hundreds of thousands of delinquencies and foreclosures, according to economists and former and current Freddie Mac officials interviewed by ProPublica, the non-profit investigative journalism organization.
If taxpayer-owned Freddie Mac and its sister company, Fannie Mae, had expanded refinance efforts to help homeowners, rather than creating barriers, another 9 million homeowners would’ve been able to save an estimated $75 billion in interest payments, the report said.
It blamed both companies for failing to help borrowers but said Freddie Mac was more resistant in its policies than Fannie Mae, even after taxpayers bailed them out. Together, the companies owned nearly two-thirds of U.S. mortgages.
When the Obama administration tried to make refinancing more available by cutting costs and slashing paperwork, Freddie Mac continue to make it difficult for troubled borrowers to take advantage of lower rates, the report said.
As the threat of foreclosures grew, Freddie refused to broaden refinancing policies for fear that many of the borrowers who needed help would only default anyway, and that loosening refi standards would slash the company’s profits, the report quoted former board members and an executive as saying.
Freddie Mac declined to make an executive available for comment, the report said.
The economy may be improving but the housing crisis is still in play. According to a recent AARP report, at least 3.5 million homeowners 50-plus are still at risk of losing their homes to foreclosure at the most vulnerable point of their lives.