Freddie Mac finds 'unacceptable' mortgage refinancing practices (CA)

[UpInArms]

http://www.marketwatch.com/news/story.asp?guid=%7BE0ED8E63%2D91A1%2D4053%2DBC4B%2DC341C9F5627D%7D

MCLEAN, Va. (MarketWatch) -- Freddie Mac (FRE) said Wednesday that a mortgage broker had been discovered using unacceptable financial incentives designed to result in quick refinancings of mortgages in California.

In a press release, Freddie Mac said the questionable practices increased the likelihood that the mortgages in question would prepay faster than comparable mortgages originated without such practices, Freddie Mac said. The mortgages were originated at above-market interest rates for the borrowers involved.

"Prearranged refinancing arrangements are not permitted on mortgages sold to Freddie Mac," said Dave Stevens, Freddie Mac's senior vice president for mortgage sourcing, in the release.

The matter came to light after problems concerning mortgage prepayments were discovered by National City Mortgage, a Freddie Mac customer. Prior to detecting the questionable refinance practices, however, certain mortgages originated under such practices were sold to Freddie Mac, the release said.

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