Great news, folks! The over-leveraged government-run debt manufacturer known as Freddie Mac has finally fixed its mortgage calculator!
For those consumers who rely on government-sponsored enterprises to tell them what to do with their money, the Freddie Mac calculator used to work like this (via Planet Money):
You plug in the cost of rent, cost of renters insurance, and the price of an equivalent home. Then it asks you to punch in an estimated appreciation rate for the home — how much you think the home’s price will change over time.
But there was one little problem with the calculator: It returned a 404 if the user entered a negative appreciation value. Meaning that since home prices began plummeting in late 2007 all the way until now, Freddie Mac’s main tool for moving mortgages worked only in an alternate universe.
In October, the calculator’s creator apologized on Planet Money for designing a calculator that did not actually calculate things in this universe:
Jacob Kosoff used to work as an economist for Freddie Mac’s “Mission Department.” His job was to look at the loan data each month and promote homeownership. He says his team was full of true believers who called themselves “housers.”
“I thought subprime was the best thing in the world,” he says.
It was not until the spring of 2008, just months before Freddie would be bailed out by the federal government, that Kosoff began to question his fundamental belief that owning a home was better than renting.
“I’m sorry that I didn’t send an e-mail or work a little harder to get that fixed so the calculator can allow for the possibility of reality,” Kosoff says.
Kosoff wonders if some people used the calculator to come to a very bad decision: to buy an overpriced house with a subprime mortgage when they should have rented instead.
According to Kosoff, the calculator is now working. “The Rent vs Buy calculator on the Freddie Mac website has been fixed,” Kosoff told Planet Money yesterday in an email. “Though I wasn’t able to get it fixed while I worked there, I am very relieved it is working properly now.” The millions of homeowners who were duped by their government–slightly less relieved!