Outrage ensued when people learned that big banks sold bundles of shaky mortgages to unwitting investors, then turned around and placed bets that those securities would tank. Now there’s an even bigger bombshell in the offing: An investigation conducted by ProPublica and NPR found that government-owned Freddie Mac has invested in financial instruments that profit when homeowners are stuck in high-interest mortgages.

Freddie Mac is supposed to be dedicated to backstopping mortgages and making it easier for people to get housing loans, but instead of dumping riskier investments as it was ordered to under terms of its government bailout in 2010, it doubled down on securities that pay off when homeowners lose. Freddie Mac says its investment department is separate from the rule-making arm that dictates when and under what circumstances homeowners can borrow, although the company began making bets on high-interest mortgages starting in 2010, around the same time the entity issued new rules that made it harder for many people stuck in such mortgages to refinance.

At the same time Freddie Mac tightened the terms under which it would extend credit to homeowners and raised fees associated with refinancing. The Federal Reserve has even noticed how detrimental this was to Freddie Mac’s supposed mission and blasted Freddie as well as sister mortgage entity Fannie Mae, calling their fees “difficult to justify.”

“We remain committed to reducing our retained portfolio and appropriately managing its risks,” spokesman Michael Cosgrove said in a statement via email. He added that Freddie Mac’s investment portfolio is $60 billion smaller than it is required to be. Cosgrove also confirmed, though, that Freddie Mac still owns the troubling securities outlined in the ProPublica story.

Homeowners lose out when they can’t refinance to a lower mortgage rate, and the economy suffers, too. If borrowers are struggling financially, a lower rate might keep them out of foreclosure, and everyone who refinances frees up more of their income — money that could be funneled back into the anemic economy.

“In three years we refinanced more than 4.3 million mortgages totaling about $930 billion,” Cosgrove said in the statement. According to research company CoreLogic, nearly 11 million homes were underwater late last year. Homeowners going through the frustration of trying unsuccessfully to refinance may wonder how many more people could have benefited from a more extensive refinancing program.

But there is one person who has benefited: Peter Federico, head of the trading division at Freddie Mac, was paid $2.5 million in 2010 and was eligible to make even more in 2011, according to the story posted on ProPublica’s website.

Read the full story: Freddie Mac Bets Against American Homeowners