Posted on 09/08/2011 11:36:01 AM PDT by Palter
Tonight, President Obama will speak to the nation about ways in which he believes Washington can inject some adrenaline into the languishing economic recovery. It isn't hard to figure out why: job growth has been trending down and may have ceased altogether in August. With unemployment still near double digits, that's a big problem.
Some reports indicate that he'll announce one stimulus measure that purports to cost taxpayers nothing. The administration may push Fannie and Freddie to allow more homeowners to refinance at current very low mortgage interest rates. The measure might sound good in theory but will ultimately amount to another failed attempt at healing the housing market and broader economy.
The Idea
Inside Mortgage Finance reports that the president could announce what it calls a re-worked "Home Affordable Refinance Program" ("HARP 2.0"). The idea is simple enough: push the agencies to allow more borrowers to refinance at very low interest rates, around 4%. For borrowers with mortgage rates at or above 6%, this savings becomes real money that can be spent to stimulate the economy.
How much money are we talking about homeowners saving? It depends on their previous interest rate and mortgage size. For a family that originally had a $250,000 mortgage at 6%, moving to a 4% interest rate would cut their monthly payment by at least $300. If their mortgage payment was initially 35% of their income, then this is like giving their income a 7% boost.
The administration might like this plan for two reasons. First, it wouldn't take any legislation if the Federal Housing Finance Authority coerces Fannie Mae and Freddie Mac to go along. Second, it wouldn't directly cost taxpayers anything or increase the size of the deficit.
(Excerpt) Read more at theatlantic.com ...
More money and transactions for the big banks, financed and assured by YOU.
How unsuprising....
This may be, but a lot of this mess could have been lessoned if more people could have refinanced early on.
CURRENT 30-yr. fixed mortgage rates are running 3.95-4.25%.
I see no reasonable savings, especially after costs, and adding in Mortgage Insurance again for anyone not in a $500,000+ home.
I don’t get it. How do you refinance a loan when the balance due is so much greater than the market value?
Let’s say someone bought a house for 300K and still owes 260K. But the house will only appraise for 200K. What bank will refinance the 260K on a house that isn’t worth close to that?
The more I watch Obama the more I get the impression that he subscribes to the Rube Goldberg School of Economics.
Not to mention their $250,000 house is now only worth $175,000.
Shrug. Well, back in the day. Banks would lend out more than the appraisal. Okay, the house you want is 300k, but your qualified for 600k. Why not get a 600k house says the bank.
Right now HARP let's you go to 125%. HARP is for loans already owned by Fannie and Freddie. They are taking on no additional risk as they already own the loans.
You can't use HARP to refinance a loan they do not own.
They are just allowing a borrower to get a better rate.
For those homeowners who bought a home within your means, by saving and sacrificing, working two jobs, and being sensible with your purchase, keep paying! You do not qualify!
THIS IS A SNEAKY REVENUE GENERATOR!!!
He knows eliminating the mortgage interest deduction is highly unpopular, so how do you increase the taxable income on taxpayers while looking like a hero? Lower their deduction by way of a lower interest rate. That $300 savings each month becomes an increase of $3600 a year of taxable income, and since most homeowners are in the taxable bracket, then this becomes a tax increase, albeit a voluntary one. Nothing this president does is designed to help you or us. Just be careful before leaping at supporting crap like this.
“Let’s say someone bought a house for 300K and still owes 260K. But the house will only appraise for 200K. What bank will refinance the 260K on a house that isn’t worth close to that?”
They are not appraising. What they are doing is taking the existing mortgage, refinancing that and making their money on the fees. Your 300k home is now worth 260k.
Remember, if they reappraise your home, the reduced value of now would reflect a new property tax. They don’t want to do that.
How do you refi when the owner of the note is unknown or hidden from the borrower?
If they are going to print money anyway, go for 1-1.5% and let everyone re-finance to a 15, 30, or 40 yr fixed conventional, their choice, underwater or not. The government will get back more from the reduced mortgage deductions. Then, remove the FICA cap of $106,800 for even more revenue. There are better ways to use the printed money than loaning it to shaky “green” companies and throwing it away on welfare and food stamps.
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