Insiders at Freddie Mac are downplaying the memo revealed by Bloomberg yesterday.
The memo revealed that a survey of mortgages Freddie bought from Citigroup in late 2009 and early 2010 uncovered shockingly high rates of defects. In late 2009, for example, more than 30 percent of the mortgages in the review had flaws.
These weren't old, housing-bubble-era mortgages. They were loans made in 2009. Among the defects Freddie Mac detected were a missing appraisal, missing documentation, loans exceeding the maximum amount permitted, and a construction loan described as a refinancing. In short, a mess of shoddy paperwork—a blazing indicator of poor underwriting.
But a source at Freddie is now telling HousingWire that the review will "not necessarily result in repurchases and is more of a 'routine' look at those loans."
In short, Freddie is just rolling over and playing dead. And since Freddie is owned by the government, taxpayers will pay for any of these loans that go bad.
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