Did Freddie Mac Want You to Fail?

COMMENTARY | I have been telling my friends lately that I hate banks and insurance companies. It seems I now have a bit more ammunition. ProPublica and NPR News recently uncovered disturbing news. Freddie Mac, a mortgage company controlled by the government, has made investments that will be worth more if homeowners are unable to refinance their mortgages.

American homeowners are not enjoying happy days. Communities are full of empty houses as banks creep through stacks of files representing short sale and foreclosed homes. In most markets, homes are worth far less than they were several years ago. Many homeowners are underwater on their mortgages, and now we learn that a lender of huge influence might actually be rooting against us. Even those not easily outraged might sit up and take note of this perceived duplicity.

My wife and I ran up against this new reality just two weeks ago. Wanting to make an offer on a house in our neighborhood, we called the same bank we used in 2005 when we bought our current home. Our agent said our cash available for down payment, ratios, income and credit scores were excellent.

The next day he called back and said that because of “the current housing market” we would have to show six months of reserves. With some scrambling we were able to manage, but what about those who couldn’t? If traditional measures such as credit history, income and debt ratios are not enough to buy a house, I doubt the housing market is going to recover any time soon.

This comes on the heels of another story of consumers getting fed up with a financial institution. New laws have financial companies scrambling to make up lost revenue, and Bank of America recently announced a new fee on debit cards. Twenty percent of its customers responded by saying so long.

The great irony at work here is Bank of America and Freddie Mac took bailout money from the American taxpayers (though B of A has returned the $45 billion it took). I say good for those customers who fled Bank of America, and I hope more follow. The only power consumers have is to take their money and walk, ideally to a place where their business is appreciated and they’re treated with respect. If only it were that easy when dealing with mortgages.

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