Freddie Mac CEO Charles Haldeman, Jr. has written a rebuttal to the NPR/ProPublica story that criticised the corporation for making bets that would pay off if homeowners were stuck in onerous mortgages.
In an op-ed published in American Banker, Haldeman defended the corporation’s purchase of inverse floater swaps as a hedging strategy that would limit taxpayer exposure to losses:
Even though we reduced Freddie Mac’s investment portfolio significantly from $867 billion to $653 billion in less than three years, we continue to own a variety of mortgage obligations. The fact is that investors in mortgage securities are generally “hurt” by refinancings since the resulting proceeds must usually be re-invested at lower rates. But that doesn’t mean that holders of a mortgage security are “betting against struggling homeowners.” Rather, such securities can have many different purposes. Here, the securities in question helped us protect the value of our investment portfolio and reduce our need for taxpayer support.”
“Moreover, there is nothing about these securities that could keep a borrower from refinancing. A borrower’s ability to refinance is solely based on their creditworthiness – not which security their current mortgage backs.