I’m glad Jesse Eisinger went back and examined why one of the GSEs failed to offer mass refinancing for years, until the federal government basically insisted. But I think this is a story that attempts to set up a binary ideological dynamic where Occam’s razor suggests a lot of bipartisanship in neglecting homeowners. To start, here’s Eisenger’s argument:

Freddie Mac, the taxpayer-owned mortgage giant, made it harder for millions of Americans to refinance their high-interest-rate mortgages for fear it would cut into company profits, present and former Freddie Mac officials disclosed in recent interviews.

In closed door meetings, two Republican-leaning board members and at least one executive resisted a mass refi policy for an additional reason, according to the interviews: They regarded it as a backdoor economic stimulus […]

Freddie and Fannie maintained and erected barriers to refinancings when the Obama administration launched a program in early 2009 specifically designed to make refinancing more accessible — the Home Affordable Refinance Program, or HARP. Freddie continued to hinder refinancings through a late 2011 relaunch of HARP designed to further slash refi costs and paperwork. At that point, Fannie began opening its gates more widely, but Freddie still kept barriers in place.

Eisinger has a strong amount of evidence to suggest that Freddie dragged their feet more than Fannie. But the internal deliberations are more about the potential loss of taxpayer money than this “Republicans want to tank the economy” idea. And even with the argument of those who argued that refinancing was “designed to be a stimulus,” I’m not certain that’s partisan so much as it is a fear about the extension of the GSE mandate away from their core policy, especially when they were in conservatorship.

You have to look more broadly at the housing policies over the past several years, I think. Just look at HARP. The original program came in early 2009. It took Treasury almost three years to redesign the program, when it was well-known early on that it did little to boost refis. If Treasury were serious about mass refinancing, they wouldn’t have waited that long to tweak the mechanism. And that’s just on refinancing, not the areas of loan modification and foreclosure prevention and prosecutions and the foreclosure fraud settlement. When you add all that into the mix, the idea that there was a Republican mole stopping a Democratic Administration from helping homeowners becomes quite silly.

Incidentally, Freddie Mac is allowing limited principal reduction through the Hardest Hit Fund. So it’s not like they aren’t reaching the limits of what their conservator will let them do.

David Dayen

David Dayen