Mass Refinance Plan on the Discussion Table
The Obama Administration is considering several alternative plans to provide a mass refinance opportunity for Americans according to a New York Times article.
In order to gain any traction, proposals must help a large and diverse segment of homeowners, help stimulate the economy, and cost next to nothing. It is anticipated proposals dealing with the housing market are among the few the government can consider at this point, given the gridlock in Congress. A refinance plan does not increase the deficit; it can reduce defaults and increase consumer confidence.
One plan would allow people with GSE-backed mortgages to refinance to the current rate, hovering around the 4% mark. The new plan would loosen some of the existing refinance requirements in order to provide this opportunity to the broadest range of borrowers. Homeowners would be saved an estimated $85 billion per year in lowered mortgage payments. The opposition to this plan is strong, however because that $85 billion per year has to come from somewhere.
The government is also considering a plan to allow distressed homeowners to rent back their defaulted homes to keep a new flood of foreclosures from leading to another wave of abandoned homes. Fellow short sale investors might recall being taught NEVER to rent back a home to the previous owner. Many states targeted homeowners who did this as possible scam artists. In fact, this behavior was the impetus behind a lot of mortgage fraud protection acts that were floating around state legislatures in 2007-2008. And now the government is considering doing it…
There is expected to be opposition from the GSEs for a mass refinance program because lower refinance numbers help to keep up GSE mortgage bond rates. There are also questions about whether a refinance plan could actually do enough to address the major problem of underwater mortgages that have drained about $700 billion more than homes are worth from homeowners.
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I had cancer in 2007/2008 and when I went back to work the Real Estate Market was NO more. I contacted CitiGroup and they verbally told me they would make my loan over 40 years and reduce my interest to 2% and they did for two years and then a letter arrived that said I owed them nearly $80,000.00 in late charges and interest. They added this to my already upside down loan making my Mtg. $400,000.00 plus on a house not worth $200K in todays market. They have cost me my home.
Bob, quoting from your article:
“One plan would allow people with GSE-backed mortgages to refinance to the current rate, hovering around the 4% mark. The new plan would loosen some of the existing refinance requirements in order to provide this opportunity to the broadest range of borrowers. Homeowners would be saved an estimated $85 billion per year in lowered mortgage payments. The opposition to this plan is strong, however because that $85 billion per year has to come from somewhere.”
I didn’t read the NYT article, so I don’t know the source of this statement. I’ll just say I would expect opposition to be coming (obviously) from the banksters and/or their lobbyists. This projected $85B savings isn’t lost tax revenue, so there is no “shortfall” from the government’s perspective. The lost interest is simply FREE MONEY that the banksters don’t want to give up.
Thanks for the regular email notifications about market conditions. Keep up the good work.
Bob, Do you think investor’s mortgages would be included in a mass refinance plan?
Thanks, David Forbes
They could make it so easy and just chop every mortgage to 4%. Banks have no problem raising and lowering credit card rates. It should be simple to change mtg rates too… without making people apply for the refinance either. Just send the new mtg statement with the new lower payments.