Economics, Pethokoukis

Why Obama’s possible new housing refi plan probably isn’t going anywhere

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Team Obama may take yet another stab at dealing with the aftermath of the housing collapse. The WSJ’s Nick Timiraos has the deets:

The Obama administration is considering expanding its mortgage-refinancing programs to include borrowers whose mortgages aren’t backed by the government and who owe more than their homes are worth, according to people familiar with the discussions. Such a move would benefit borrowers and provide a boost to the economy by unleashing cash that homeowners could spend elsewhere. But one proposal being considered would also transfer potentially riskier loans held by private investors into the taxpayer-supported mortgage giants Fannie Mae and Freddie Mac.

Analyst Jaret Seiberg of the Washington Research Group has his doubts:

We believe there are low odds for legislation that would permit Fannie and Freddie to refinance borrowers in non-agency mortgages. We question if House Republican leaders would even bring up such a bill up for a vote as this would shift to taxpayers credit risk now held by the private sector. That is something House Republicans are unlikely to stomach. We even question if one can get the 60 votes needed to advance this legislation in the Senate. The President in his State of the Union speech a year ago proposed a similar program using FHA. That legislation never even made it to a vote in the full Senate or House.

But Timiraos also mention, dare I say it, a Plan B to help underwater borrowers:

A second proposal under discussion by the administration would reduce rates for underwater borrowers through mortgage modifications. The proposal wouldn’t require legislation, and would allow borrowers to qualify for a reduced rate under the existing Home Affordable Modification Program, or HAMP. Currently, homeowners can have their loans reworked through HAMP only if their mortgage company deems that they are at “imminent” risk of defaulting. The new proposal would redefine “imminent default” to include borrowers who are deeply underwater on their mortgage.

Now, this one is a bit more intriguing because it would not require Congress to play ball. But Seiberg still isn’t buying this one, either:

Yet we question if investors would permit servicers to conclude that a borrower deserves a HAMP modification simply because they are underwater on their loan. As a result, litigation would seem likely as servicers are required to follow the servicing agreements on how to deal with troubled borrowers. Servicers do not have carte blanche in this space. We also believe House Republicans would object strongly to using HAMP in this manner. This helps explain why House Republicans included an elimination of the HAMP program as part of their fiscal cliff package. Our bottom line is that the administration could attempt to use HAMP in this manner, but we question if the effort would succeed.

It would not have surprised me if Mitt Romney, had he won, would have proposed some sort of housing plan. Romney economic adviser Glenn Hubbard, along with colleague Christopher Mayer at Columbia University, has devised a plan where every homeowner with a GSE mortgage could refinance his or her mortgage with a new mortgage at a current fixed rate of 4.20% or less. Nearly $4 trillion of mortgages could be refinanced, helping roughly 30 million borrowers save $75 billion to $80 billion a year. As Hubbard and Mayer see it, it would be like a long-­lasting tax cut for these 25 or 30 million American families.

But that would have been a “Nixon to China” move that only a GOP president could pull off with congressional Republicans. At this point, the only thing helping homeowners is the slowly recovering economy and perhaps a bit more inflation to raise their nominal incomes — and housing prices — and reduce their debt burden.

29 thoughts on “Why Obama’s possible new housing refi plan probably isn’t going anywhere

  1. “It would not have surprised me if Mitt Romney, had he won, would have proposed some sort of housing plan. Romney economic adviser Glenn Hubbard, along with colleague Christopher Mayer at Columbia University, has devised a plan where every homeowner with a GSE mortgage could refinance his or her mortgage with a new mortgage at a current fixed rate of 4.20% or less. Nearly $4 trillion of mortgages could be refinanced, helping roughly 30 million borrowers save $75 billion to $80 billion a year. As Hubbard and Mayer see it, it would be like a long-­lasting tax cut for these 25 or 30 million American families.

    But that would have been a “Nixon to China” move that only a GOP president could pull off with congressional Republicans.”

    Let me help you here, Jim, because this is where you start to actually LEARN something about the mortgage market, instead of posting the usual swill.

    To take your last point, I sincerely doubt if the Tea Party loontards in Congress would be any more willing to disavow their ideological rigidity for Romney than they would for Mr. Boehner.

    So why don’t we throw that out as a mere waste of bandwidth, shall we?

    Secondly, Mr. Hubbard, the Wall Street cat’s paw who would have been Treasury Secretary had the execrable Mr. Romney had won- sort of like putting Joseph Mengele in charge of Jewish orphanages- is limiting his refi proposal to GSE mortgages only.

    Why don’t you pick up the phone and ask him why he’s doing that? Because when he gives you his answer, you’ll find that everything Messrs. Pinto and Wallison have written is utter rubbish.

    By the way Jim, this also ties in to your crocodile tears over the labor situation and the economy. Despite the carnage, over 90% of mortgages out there are being paid on time, and most folks are not underwater on their mortgages, and the overwhelming majority of them are being serviced by the borrowers normally. Wells Fargo boasted of modifying over 900,000 mortgages, HAMP is probably past the million mark by now, and there are all those other lenders out there.

    In other words, Jim, millions upon millions of people have refinanced their mortgages- sometimes twice or even three times- giving them a “tax cut” that would easily dwarf anything that Romney would have proposed. The equivalent of Larry Kudlow’s wet dream. Times 10.

    And yet- with this gigantic windfall- 30 year mortgages at 3.5%!!!!- with hundreds of dollars PER MONTH being freed up by MILLIONS OF WAGE EARNERS, the economy hasn’t reached anything like escape velocity.

    Ponder that, Jim. Instead of producing this bilge, why don’t you think about what is REALLY going on out there and tell us what you really know?

  2. Let me help you out maxie boy since your apparently grip on reality is still tenuous as ever: “I sincerely doubt if the Tea Party loontards in Congress would be any more willing to disavow their ideological rigidity for Romney than they would for Mr. Boehner“…

    Said ‘loontard rigidlymaxie boy as you’re are stupidly calling it happens to be the belief in the Constitution?

    Ever heard of that document?

    Speaking bilge you’re long and loud on inane assertions and damn short on credible substance but then that’s your style…

    Zillow Infographic: The U.S. Housing Crisis: Where are home loans underwater?

    • Good chart, Juandos. ” According to the third quarter Zillow Negative Equity Report, 28.2 percent of U.S. homeowners with a mortgage are underwater.” Quite a bit more than the 10% Maxi Pad claims.

      • Uh, meathead: this may come as a surprise to you, but a great many people who are “underwater” pay their mortgages on time. The report you referenced, but (plus ca change) didn’t read stated

        “While roughly a quarter of homeowners with a mortgage are underwater, 90.3 percent of these homeowners are current on their mortgage and continue to make payments.”

        As I said “Despite the carnage, over 90% of mortgages out there are being paid on time, and most folks are not underwater on their mortgages, and the overwhelming majority of them are being serviced by the borrowers normally.”

        So Juandos made an idiot of himself again. Poor Juandos.
        This is what happens when you substitute cut and paste for genuine knowledge.

        By the way, with prices rising, especially quickly in the “hot zones” like Florida, Arizona and Nevada, look for this number to shrink dramatically by this time next year.

        • “this may come as a surprise to you, but a great many people who are “underwater” pay their mortgages on time.”

          Ah, you’re right. I thought you referenced negative equity, not the % current on payments. You’re still a douche, but you got me on this one.

        • “This: Combined, the FHA, Fannie and Freddie back 9 out of 10 mortgages used for home purchases…”

          That’s post-Lehman. You don’t know even know what you’re complaining about.

          • That’s post-Lehman. You don’t know even know what you’re complaining about“…

            maxie boy will go to any lengths to prove himself to and proud of it…

            Hey maxie boy did you bother to check the date of the article?

            Hey maxie boy, did you bother to check the constitution to see where the federal government is mandated to interfer in the housing market?

          • “maxie boy will go to any lengths to prove himself to and proud of it…

            Hey maxie boy did you bother to check the date of the article?

            Hey maxie boy, did you bother to check the constitution to see where the federal government is mandated to interfer in the housing market?”

            Ahhh, shaddup.

    • Helloooo, Juandos. Fannie and Freddie had 60 percent of the market preboom, slipping to 40 percent as the shadow banks (Wall St) chopped MBS packages into tranches and sold the top levels as “risk free” derivatives. Now it’s back to 90 percent because the investors Wall St torched know that the govt can’t let Fannie and Freddie fail. Even then the Fed was the just about the only buyer in its initial round of $1.25 trillion in MBS purchases, and it continues to buy $40 billion/month.

      I have just described the boom/bust cycle inherent in unregulated markets.

      But it is heartening to see AEI addressing real problems. No action would put money into consumers’ pockets faster. And the Fed needs help. Here is one reaction to the Fed’s third round and latest round of MBS purchases:

      “The idea here is that if they buy these securities it will keep mortgage rates low and give banks the capacity to issue more mortgages,” explains Nick Colas, ConvergEx Group chief market strategist. “But this isn’t our first rodeo, we’ve been trying to do this for three years now and the best thing we can really claim is that we haven’t fallen into a deep recession, but we can’t claim victory.”

      Read more: http://www.foxbusiness.com/personal-finance/2012/09/14/feds-big-bet-will-it-work/#ixzz2GGPQqqX2

      • There is a nascent “private label” securitization market coming back, but if the Feds want to spur that, they should simply lower the mortgage dollar amount that the GSEs cover, and let the AAA Jumbo market come back.

        As it is, no one knows what vehicle could replace the GSes effectively, but it should be a good time to start scaling back their presence in the market as housing stabilizes. Doing this on the high end is a good place to start.

      • I have just described the boom/bust cycle inherent in unregulated markets“…

        Yes todd and you’ve also given an apt description of how the moon is made of green cheese…

        The federal government doesn’t belong in the housing market regardless of what you collectivists think…

        Thanks anyway…

        • “The federal government doesn’t belong in the housing market regardless of what you collectivists think…”

          Yeah, especially since the private sector did such a wonderful job of stewardship of it. LOL! What a dope!

          • Yeah, especially since the private sector did such a wonderful job of stewardship of it. LOL! What a dope!“…

            Hey maxi boy, what came first?

            Interference by a corrupt and incompetent federal government or banks and other home lending institutions trying to make a buck even with the federal government monkey on their collective backs?

          • “Interference by a corrupt and incompetent federal government or banks and other home lending institutions trying to make a buck even with the federal government monkey on their collective backs?”

            Wrong on both (as always) – correct answer: home lending institutions WITHOUT the federal government on their backs.

            You want the list of non-regulated banks that were responsible for the majority of foreclosures AGAIN?

            Of course, what could evidence matter to someone like you? You have your scapegoat, and when the master calls, you fetch. Pathetic little urchin.

          • Wrong on both (as always) – correct answer: home lending institutions WITHOUT the federal government on their backs“…

            maxie boy with his usual graceless panache makes an inane statement sans any credible source of information to back it up…

            You want the list of non-regulated banks that were responsible for the majority of foreclosures AGAIN?“…

            You want to repeat that mistake of listing supposedly non-regulated banks (they’re all regulated) again?!?!

            Of course, what could evidence matter to someone like you?“…

            Coming from you maxie boy that’s pretty rich considering how you’re the font of zero credible information…

          • “maxie boy with his usual graceless panache makes an inane statement sans any credible source of information to back it up…”

            It’s been posted on several threads numerous times, from the St. Louis Fed, and several other sources. You’re just a brainless troll who denies the evidence put in front of him. Get lost, already. You’re stinking the place up.

          • maxie boy whines: “It’s been posted on several threads numerous times, from the St. Louis Fed, and several other sources“…

            I said ‘credible‘ sources…

            The Fed is no more credible than you are…

          • This is the idiocy we’re dealing with“…

            Yes maxie cretin, the idiocy of you thinking you know what you’re talking about…

            Don’t you just hate the obvious?

        • The FHA dates to 1934 when it was almost impossible to get a mortgage after a similar real estate collapse, You can look it up. In 2008, the Fed became the buyer of last resort of mortgage-backed bonds because it was the last resort. You can look that up too. In both cases, there would have been no housing market for many, many years without federal intervention.

          • The FHA dates to 1934 when it was almost impossible to get a mortgage after a similar real estate collapse, You can look it up. In 2008, the Fed became the buyer of last resort of mortgage-backed bonds because it was the last resort“…

            What’s your point todd?

            The federal government still has no mandate under the constitution to involve itself in the housing market…

            Now you seem to be cheerleading the incompetent fed

          • Your point: the GSEs should not make 9 of 10 mortgages. My point: you prefer 0 of 0, as in no housing market at all?

          • todd says: “Your point: the GSEs should not make 9 of 10 mortgages. My point: you prefer 0 of 0, as in no housing market at all?“…

            Ha! Ha! Ha!

            Apparently you don’t understand markets very well, especially free ones…

            People have been buying and selling housing for centuries before then ever was a federal government…

  3. The Nixon to China business is despicable. If Hubbard thinks mortgage relief is beneficial, the American thing to do is to say so regardless of who is president.

    • “The Nixon to China business is despicable. If Hubbard thinks mortgage relief is beneficial, the American thing to do is to say so regardless of who is president.”

      Sorry, they’re too busy smelling Austrian butts.

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