Posted on 01/04/2012 7:46:26 PM PST by AU72
This could be just the beginning. If President Barack Obama’s legally dodgy appointment of Richard Cordray to head the consumer finance agency should stick, it may open the door to more such actions. Here’s Jaret Seiberg of the Washington Research Group:
To us, the most important takeaway from a recess appointment of Cordray is that the President could use this same maneuver to put a housing advocate in charge of FHFA.
And why is that important? The Federal Housing Finance Agency is the regulator and conservator of Fannie Mae and Freddie Mac. And the FHFA currently has an acting director, Edward DeMarco. If Obama replaces him with a “housing advocate” via the same recess appointment process, here’s what might happen next, according to Seiberg:
That could lead to a mass refinancing program for agency-backed mortgages that would go well beyond the existing HARP program. That could hurt agency MBS pricing and result in higher financing costs going forward. Yet it also could be a big boost for the economy and housing going into the election.
Indeed, my sources tell me the Obama administration has been eager to implement just such a plan, but needs to have its own man heading the FHFA to make it happen. The plan would be modeled after one originally devised by Columbia University economists Glenn Hubbard (a campaign adviser to Mitt Romney and AEI visiting scholar) and Christopher Mayer. In recent congressional testimony, Mayer described how the mass refinancing plan would work:
Under our plan, every homeowner with a GSE mortgage can refinance his or her mortgage with a new mortgage at a current fixed of 4.20 percent or less. … To qualify, the homeowner must be current on his or her mortgage or become so for at least three months. … Other than being current, we would impose no other qualification or application, except for the intention to accept the new rate (that is, no appraisal, no income verification, no tax returns, etc.).
Mayer estimates that some $3.7 trillion of mortgages would be refinanced. That’s right, this would be the Mother of All Mortgage Refinancing Plans. It would help roughly 30 million borrowers save $75 billion to $80 billion a year. As Mayer puts it: “This plan would function like a long-lasting tax cut for these 25 or 30 million American families.”
On his website, Hubbard says the plan would have an immediate fixed cost to the government of $121 billion. And he calculates the economic impact as follows:
1. We estimate that 72 percent of owner occupant homeowners would be eligible to refinance at no cost to them. Their monthly mortgage payments would fall by an average of $355, for a total national fiscal injection $7.1 billion each month.
2. The typical borrower would reduce his or her principal and interest payments by about $350 dollars, a total reduction in mortgage payments of nearly $100 billion per year.
3. The macroeconomic stimulus effect should also include an additional housing wealth effect. At the low end of our estimates, improved mortgage market operations would reduce house price declines by 10 percent. With an estimated aggregate housing valuation of about $18 trillion, housing wealth would increase about $1.8 trillion relative to what it might fall to without this program. If we assume a relatively low marginal propensity to consume out of housing wealth of 3.5 percent, U.S. consumption would rise by $63 billion relative to what would otherwise have occurred.
4. Combining these estimates gives a total macroeconomic stimulus of as $118 billion per year in lower mortgage payments and any new consumer spending due to a housing wealth effect. In addition to the direct macroeconomic stimulus, jump-starting the stalled housing market will increase employment in a variety of industries that depend on housing transactions (mortgage and real estate brokers, home supply companies, moving companies, etc.) as well as increase the efficiency of the labor market by reducing impediments to households moving to take another job.
Bottom line: Talk about a political and economic game changer in this presidential election year. Obama could offer a trillion-dollar stimulus — as measured over a decade –that would directly and immediately impact tens of millions of Americans suffering from the housing depression. Cash in their pockets. Imagine the electoral impact on key states, such as Florida, suffering from both high unemployment and devastated housing markets.
And the beauty part for Obama? He wouldn’t need approval from Congress to do it. Even though many Republicans would scream that the plan would reward irresponsible homeowners who took on too much leverage — indeed, talk of a housing bailout is what launched the Tea Party movement – they probably couldn’t stop it. And Hubbard already has an answer to the moral hazard issue: “This proposal requires borrowers to give up a share of future appreciation in order to participate. Lenders must eat a portion of the losses as well. Everyone gives a little bit.”
The 2012 battle for the White House is looking razor close. A mass refinancing plan might be enough to tip it to Obama
The guy’s hellbent on enslaving the generations ahead.
I don’t think this is about mortgages. I think this is about government takeover of land. It’s a form of nationalization and confiscation.
then eHow at my link is wrong and you should write and correct them
I was merely tyring to clarify the acronym GSE the author of the article used but never defined
But that is a different matter, really. In my prior case, I was refinancing with the same mortgage company. They did not do an appraisal, they did not do a credit check, and they didn’t have a loan officer involved. It really cost them nothing.
They sent me a 3-page form to fill out, I filled it out and notarized it, and mailed it back.
Now, it could be that I didn’t get the absolutely lowest rate I could. I wasn’t worried about it, because it cost me nothing, so I was saving a lot of money on my interest payments and I could always refinance again if I found a lower rate.
My point was that I did the exact same thing after Obama. I went to my existing mortgage company, and asked them to simply refinance my existing mortgage for the same amount. BUT, because of the new regulations designed to “protect” me, the lender needed to do a new appraisal, a new credit check, and a new title search. They had over a dozen forms that had to be filled out and filed with the federal government. They had a dedicated loan officer who had to come to my house and do a formal closing. All of that cost a lot of money, wasted money.
After all, they already had my loan. They knew my history, they knew the value of my house, they already had the risk. They didn’t need ANY of those checks, although those checks certainly did give them a slightly better idea of my current circumstances. But as a business, they weren’t interested in that new information. They needed it only because of government regulation.
Because of that, in retrospect I figured out that I could have gotten a cheaper deal by switching companies, since others have a more streamlined process and can charge less. There was absolutely ZERO advantage to me working with my existing lender, because they had to treat me as a new customer anyway.
Worse, even though my loan was for less than half of the assumed appraised value of my house, they couldn’t even to a drive-by appraisal, they had to send the appraiser into the house.
I still came out ahead, but just barely; the only reason I still went through with it was to get money out of the house for a college loan (because Obama took that over as well, so my home mortgage was a LOT cheaper interest than a college loan would have been, AND it was deductable because I was still below the original loan amount).
Or people who had the credit to run their mortgage through a private bank anf not Fannie/Freddie...
The $350 savings, taken in the context of this statement, would be an annual savings at $29.17 per month.
Now, who in his right mind is going to lose control of their bowels over $29.17 savings per month???
That eHow article is indeed wrong. I’m more surprised when someone gets the facts right regarding Fannie and Freddie.
The government agencies that do insure loans are the FHA, the VA, HUD, and some farm related loans with the Ag Dept. Ginnie Mae deals only in this insured paper, so although it doesn’t do the insuring itself its product is gov’t insured.
Ginnie Mae is a government owned corporation, as opposed to being government sponsored like Fannie and Freddie. People assumed that Fannie and Freddie were guaranteed like Ginnie Mae but they weren’t, not that it turned out to make any difference.
I agree with your statement:
“I went to my existing mortgage company, and asked them to simply refinance my existing mortgage for the same amount. BUT, because of the new regulations designed to “protect” me, the lender needed to do a new appraisal, a new credit check, and a new title search”
The new mortgage laws have certainly screwed consumers, not helped!
Then this Reuters article is also wrong, for it also defines Fanny and Freddy as “GSE’s”
http://www.reuters.com/article/2012/01/05/us-usa-fed-housing-idUSTRE8031SE20120105
FEW TOOLS
Fannie and Freddie, government-sponsored enterprises (GSE) that are chartered by Congress, buy loans from lenders and repackage them as securities for investors, which they then guarantee. The aim is to provide a steady source of funds for the mortgage market.
“That would certainly piss off the people who have been diligent about paying their mortgages.”
Just rewarding poor decisions while punishing frugality and maturity. What do you expect from marxists? ;-)
“Then this Reuters article is also wrong, for it also defines Fanny and Freddy as “GSE’s””
No, it’s not wrong. That part is correct, they are GSEs. The two firms were created by the government before they were spun off to private investors.
Where the other article erred was in stating that the securities sold by the GSEs were insured by the government. Those securities had no such guarantee, or at least they didn’t until the Bush administration decided to invent a guarantee out of thin air and stuck the taxpayer with the bill.
A prophetic article. This is almost passed socialism. We need a new word.
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