The White House's Mortgage Refi for Dummies - A Letter From Obama

Confounded Interest ^ | 0606/2012 | Anthony B. Sanders

[whitedog57]

The Federal Reserve released its Beige Book (not to be confused with the Necronomicon from Bruce Campbell’s film “Army of Darkness”) said today that the U.S. economy maintained a moderate pace of growth as factory output rose and the real-estate market improved.

“Overall economic activity expanded at a moderate pace” from early April to late May, the Fed said in its Beige Book business survey, which is based on reports from its 12 district banks. “Hiring was steady or increased slightly.”

Real GDP growth at 1.9% is pretty moderate. And a cash only/investor housing recovery is doing about as well as expected. So, things look … moderate.

Then I got this email from The White House encouraging me to refinance my mortgage to record low rates.

He is the video presentation by Eddie Dezzen Brian Deese explaining why you are a dummy for not refinancing your mortgage through one of the 14 Administration loan modification programs

Well, maybe it is Eddie Deezen (right) from the film “1941″ (who was in the Ferris Wheel with his dummy).

.

Yes, the Senate is grappling with taking the safeties off the HARP 2.0 torpedo and allowing “RESPONSIBLE BORROWERS” to refinance their mortgages at 4.0% or lower. [Why are we helping borrowers who aren't in jeopardy?] I forgot, this is STIMULUS, not an attempt to help distressed borrowers.

One of the recommendations is remove the loan level price adjustments (or risk pricing) that Fannie Mae and Freddie Mac put into place recently. These LLPAs are charges to lenders for selling risky loans to the GSEs. Here are Fannie Mae’s LLPAs:

Are you surprised that lenders aren’t thrilled about taking haircuts on risky loans sold to the GSEs? But the recent legislation in the Senate (and backed by President Obama) would do just that – take the safeties off the HARP 2.0 torpedo.

Look at FICO 105%. The lender haircut is 3%! And this is just for refinancing an existing mortgage! High LTV loans are risky to hold by the GSEs.

Mr Deese (or Eddie Deezen) left this little ditty out of his “Mortgage Refis for Dummies” presentation. Even worse, taxpayers will pick up the tab if Fannie Mae and Freddie Mac are forced to ignore risk prices in their refis.

Bankrate has a superb graphic (also not disclosed by Deese/Deezen):

If you are interested in buying a home, remember that it is likely that the government is setting the credit standard (since 90+ of the market is Fannie Mae, Freddie Mac and FHA). Here is a recent Fannie Mae TBA for a mortgage-passthrough. The average FICO (credit score) is 771 and the average loan-to-value ratio is 69% (or 31% down payment).

So, the GSEs are charging lenders risk premiums for both refis and new originations. As they should!

At the end of today’s Senate hearing on the Dodd-Frank legislation, Banking Committee Chairman Tim Johnson (D) said “In addition, there is another important legislative matter facing this Committee—helping responsible homeowners refinance into lower interest rates at no cost to the taxpayers.”

How can you remove the safeguards and ignore the LLPAs and claim that their is no cost to the taxpayers?

Bottom line: leave the HARP 2.0 in place as is. We already have a refi wave in the works. Let’s not cook the goose that laid the golden egg.

[whitedog57]

Obama COMMANDS you to get a loan modification ... at someone else's expense.

See link to HARP success. Pretty interesting!

[Carriage Hill]

0bummer&RegimeFromHell = just another FAIL.