Why did Freddie Mac buy my mortgage?


Freddie Mac Headquarters

I just don’t understand why Fannie Mae and Freddie Mac continue to get funding from the U.S. Government to purchase even more mortgages, given the hundreds of billions of dollars they have already lost in this “business line”.

In September, we closed on a mortgage loan with Fifth Third Bank and received an unbelievably low interest rate, which made us very happy.  It was so low that I commented to the banker that they were “giving away money”.  As part of the closing paperwork, a statement from Fifth Third said that they had not sold any mortgages to others in the recent past and have no plans to do so in the future at this time.  That was late September 2010.

Yesterday, we received a letter from Freddie Mac, the “governmental sponsored entity” or GSE that, like Fannie Mae, purchase mortgages then repackage them as securities and sell them to investors.  They informed us that they had purchased our loan from Fifth Third Bank.  What???   This is the same Freddie that just announced last week that lost $14 billion so far in 2010.  Why are they buying more mortages, especially low interest loans when everyone knows interest rates will be rising soon?  Won’t rising rates mean that Freddie will have to lose money if they resell the mortgage to an investor?

Both Fannie Mae and Freddie Mac were established by Congress years ago to “facilitate financing” of home loans.  Because of the implied backing of the U.S. Government, their securities in theory were lower risk to securities investors and therefore could contain a lower interest rate paid to investors.  This supposedly provided a way for the government to help banks and homeowners by purchasing the mortgages and freeing up the bank to lend more money.  Homeowners would benefit from the government keeping the mortgage market liquid.   That was … until the 2008 mortgage meltdown.  When Congress forced Fannie and Freddie to increase the loans given to low income (including “no documentation required” loans), things blew up when people couldn’t pay up.  So much for violating common sense economic prinicples – – you don’t lend money if the person can’t pay it back.

So what is happening here?  Freddie buys my low-interest loan from Fifth Third Bank in November.  Fifth Third can now lend that money to another homeowner, and Freddie has my loan on their books.  But in early 2011, interest rates may begin to rise due to inflationary pressures brought about by excessive governmental borrowing ($14 trillion so far) combined with the Federal Reserve “quantitative easing” policy (meaning, devaluating the dollar’s value by printing $600 billion in new money and using it to buy U.S. Treasury bills – – essentially financing more debt with money that has no real backing).  But Freddie has to turn my loan into a security they can sell to an investor, to recover their money.  The investor, however, wants a higher interest rate than I am paying on my loan because the dollar has been devalued by 10% in November/December, and inflation is rising.  Sounds like the common sense of economics is going to impact someone!   What can Freddie do?

Freddie Mac will have to take a loss on my loan to securitize it and sell it to an investor along with a batch of similar loans.  This means that taxpayers — meaning you and me – – – will need to kick in even more tax money to “save” Freddie from itself. 

Why does the Government continue this madness?  Why do we continue to allow our representatives to fund this ponzi scheme?  Sure, I got a low-interest loan, but your taxes and my taxes are going to have to pay for it since we (the U.S. Government) own Freddie and Fannie.  This must stop.  I would rather keep my taxes in my pocket and pay a “market” rate of interest when I borrow money than to pay for this whole Fannie/Freddie shell game.  Imagine how many people and computers it takes to buy and sell your mortgage — what is the real benefit?

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39 Responses to Why did Freddie Mac buy my mortgage?

  1. Darlene Littlejohn says:

    It’s amazing the number of people who somehow think they are getting “something for nothing”! Of course, some are if they don’t pay taxes. We need to hold our newly elected politians to their promises to put a stop to this.

  2. Erika says:

    yes, when will it stop? Looks like a re-run from the previous housing crash coming at us.

  3. Suzy Q says:

    Sigh. Hopefully we in MI have elected the right leaders to get this state back in ‘the game’ of winning instead of being trampled by what the feds are up to. We have to be informed voters (thank you for getting out the info I don’t have the guts to find) and get the leaders we need to correct the situations we DO know about. Don’t give up; fight the good fight. We can overcome.

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  8. Dr. Richard Head says:

    To top it all off, 5/3 is NOT recording these sales to investors like Freddia Mac. Ohio revised code requires that transfers or assignees of mortgage must be recorded at the County Recorder Office – ORC 5301.31 and 5301.32. I searched the office for records regarding the transfer of my mortgage from 5/3 to FEDERAL HOME LOAN MORTGAGE (aka Freddie Mac) and none were indicated. I requested the note from 5/3 and they plainly stated the following –
    “The investor who owns your loan is: FEDERAL HOME LOAN MORTGAGE..
    The transfer of ownership is not recorded so that Fifth Third can continue to service your loan under a servicing agreement with the investro.”

    So I guess having Freddie Mac as an investor of your mortgage note overtakes any established Ohio law? Strange.

    I am now asking for Satisfaction of Mortgage and an accounting of all payments paid to the investor of FEDERAL HOME LOAN MORTGAGE. 5/3, at least to my non-lawyer understanding of Ohio Revised Code, is required to transfer their lien to Freddie Mac since 5/3 was already fully compensated by Freddie Mac for the mortgage. All mortgage payments should also be forwarded to Freddie Mac. Since 5/3 did not complete the appropriate mortgage assignment, and there is no basis for the claim of continued receipt of the borrower’s payments. We will see.

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  13. Awesome post. Do you mind if I ask what your source is for this information?

  14. Minecraft says:

    It’s interesting to see this point of view. I can’t say fore sure if I agree or not, but it is something I will think about now.

  15. JasonKingston says:

    I know that it’s over a year ago that you posted this but the same thing, from the same bank, just happened to me. Thank you for the explanation. I went from “why” to “WTF”. Much thanks!

    • auditdir says:

      Unreal how they are continuing to get away with this!

      • Jill Dosh says:

        July 2012….this just happened to me! The home was bank owned (Orchard Terrace) and we got a great interest rate. Just got the notification that Freddie Mac took over our loan. WTF is right!!! I know governments have no problem breaking promises…. After a year of showings and greatly reduced price, we managed to sell out big home for this little home. I hoped to feel settled, but no…now the government is in my life AGAIN! NOBAMA 2012

  16. sallison says:

    What happened with your mortgage just happened to us. We refinanced at a low rate in November. We just received, today, a notice that our Mortgage with 5/3 bank was bought by Freddie Mac.

  17. Benton says:

    We just received a letter today concerning our new 5/3 loan being old to Freddie Mac. WTF. Not happy right now.

  18. Benton says:

    We just received a letter today concerning our new 5/3 loan being sold to Freddie Mac. WTF. Not happy right now.

  19. Rance says:

    We received a letter today from Freddie Mac notifying us they had bought our Wells Fargo Mortgage. This mortgage was only held by Wells Fargo for 60 days before changing hands. What’s going on here?? (Our interest rate is 3.375 on a 15 yr fixed)

  20. Scott says:

    Just did a Chase refi that Chase offered to me, I did not pursue them. What is going on with the govt.? I will email this to Dave Ramsey for further understanding.

  21. Julie says:

    I received a letter ONE WEEK after closing saying my mortgage had been sold to Freddie Mac.

    • Jill says:

      Thank GOD for the internet. There are a lot of things going on that noone questions, noone reports. When the government is involved…decent hard working people get SCREWED!!! NOBAMA 2012

  22. Jody says:

    Interest rates will go up because of excessive borrowing? Not in a liquidity trap. In fact, they’ve gone down and still have downward pressure some two years after this article was written. Also, Fannie/Freddie sell these loans on the secondary market, so it is not automatically a loss to the taxpayer. But I do agree it does seem like banks are just eliminating their risk and maintaining the servicing of the loans to make money.

    • auditdir says:

      Jody, great point on the suppression of interest rates by the Fed. The Federal Reserve is current creating $85 billion per month in new money to purchase government and other mortgage securities specifically to keep the 10-year long term interest rates down below market levels. Unfortunately, the ability to print money without limits gives them the mechanism to manipulate interest rates. But for how long? Retirees are getting screwed with these 0.175% interest rates on CDs and bank balances. Many have predicted this house of cards will come tumbling down … then all Hell will break loose.

  23. Jill says:

    So now our homes are ‘government property’…great!! So when China demands payment on the huge debt……please NOBAMA 2012 I HATE SOCIALISM

  24. My mortgage with 5/3 was also transferred to Freddie.

  25. Henry Cox says:

    I want to know who changed the rules at Fannie Mae and Freddie Mac that caused them to change their qualifying requirements and start buying loans where a majority of those loans had no chance of being paid. Was it Barney Frank or George Bush. Once it bame a fact that the loans would be purchased no matter what the qualifications or down payments of the buyers were, the melt down started. Goldman Sacs jumped on the opportunity and figured out how to securitize the loans and hide the true risks of the mortgages and they made millions or possibly billions. Moody’s and the other credit rating firms issued high ratings because the government had agree to buy the loan and they made millions. Since there were no risks AIG insurance was happy to insure the loans since there was no risk because the Fannie Mae and Freddie Mac would buy the loans and they had a high rating and they made millions or billions. All of the above made obsene profits and bonuses doing what they knew was issuing, securitizing, selling and insuring bad loans. Sombody imposed their will in Fannie Mae and Freddie Mac to make them do these stupid things. Obama blames bush for the financial meltdown. It did happen in his terms. I want to know who changed the rules. You used to have to have a 10% down payment or pay 5% down and buy mortgage insurance. You used to have to prove your income to qualify. Who changed the rules and destroyed the American Financial System?

  26. Dee says:

    I just received a letter from Freddie Mac telling me they bought my mortgage from BBT (who made a big deal about the fact they have never sold nor plan to sell any mortgages) and the letter stated that it would not be made a matter of public record. I don’t like being owned by a failing government entity. What will they do next – call in the loan to make up the loss and trap me into re-financing at a much higher interest rate to cover the debt we have incurred as a nation.

  27. Penny Grimaldi says:

    I am speaking on behalf of my daughter, who just got a loan thru CityMortgage. We were pleased of the low interest rate. Her first payment was February , 2013. On February 6, 2013 she recieved a letter from Freddie Mac advising they own her mortgage. Of course, they are they investors, however, the bank will still recieve the mortgage payments. I placed calls to Freddic MAc, however, the menu selection did not get me to the correct department. I called CityMortgage and the phone rep was unable to answer my question “after all the trouble we, government/citizens of the United States of America) had with Freddie Mac and Fannie May, why would they be able to do the very thing that caused the housing bubble? After reading some articles via the internet and your article/reader postings, I am assured my gut feeling was correct. I will attempt to get this information to a governmet source or media to see if we can get a bona fide answer. Why?

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  32. Underwater says:

    Since I just found out my loan was purchased in 2003 by Freddie and Wells Fargo is ‘offering’ to refi my loan through them finially (still am under water), can I deal directly with Freddie and skip Wells Fargo? They do not like to do things via email and that makes me nervous. They claim I now qualify for HARP and there will be NO costs ……just a lower interest rate and choice of terms.

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