A federal watchdog found no evidence that Freddie Mac discouraged homeowners from refinancing their mortgages to profit from an exotic form of interest rate hedging.

The inspector general for the Federal Housing Finance Agency released a report Wednesday largely in response to a January investigation by ProPublica and National Public Radio that alleged Freddie had placed "multi-billion dollar bets that pay off if homeowners stay trapped in expensive mortgages."

The ProPublica story, under the headline "Freddie Mac Bets Against American Homeowners," caused a firestorm in Washington, sparking renewed calls for the government-sponsored enterprises to be dismantled.

Yet the inspector general's 33-page report found "no evidence" that Freddie Mac's capital markets business used non-public information to guide its investments.

Freddie has an "information wall" and the report found "no evidence of collusion" between the capital markets division and its single-family credit guarantee business "that would discourage borrowers from refinancing at lower rates or obstruct a homeowner from seeking more favorable mortgage terms."

ProPublica responded to the IG's report with a story that claimed the inspector general "did not independently evaluate" Freddie's firewall and instead "relied on the word of employees it interviewed and conducted no further investigation."

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