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The government needs to butt out.
WC, they aren't talking about any subsidies. Just reasonable refinances. Pay off the older higher interest note (held by someone else) and refinance them at a lower rate. No government money involved.
The government needs to butt out.
As long as it's not "government-backed mortgages," then I'm fine with it.
Just how does that happen?
Lenders take a hit on the interest. Since the loans are government-backed, they can have that kind of say on the matter (or so they think)
Yes.
The people also need to also stop relying on government!
The people didn't specifically ask for this.
The way the mortgage market works the loans are originated and funded by a bank. That bank does not hold the note to term. The bank then flips the note to Freddie/Fannie/Sallie and earns an origination fee. They may or may not continue to collect on the note for a fee. Thus, you may still be making your payments to "Chase" but Chase no longer owns the note That frees their money up to originate more loans. Fannie/Freddie/Sallie then package these notes into large blocks and sell them to investors. The investors know when they buy a package of 30 year notes that they won't all last 30 years. Until the housing bust the average time a homeowner stayed in a house/note was 7 years. They also knew that if interest rates dropped the notes coulkd be refinanced and paid off early. Fannie/Freddie/Sallie are the the gate keeper/collector and distribute the payments to the appropriate owner of the notes.
The problem was that when the market blew up they radically tightened the credit requirements for refi's. People that were in higher interest home loans and making their payments religiously but had credit blemishes couldn't refi and were stuck with their higher house payments. They were locked in.
As I understand it, this plan would allow people that are current in their high interest mortgage payments to refi even with some credit hickeys into lower interest/payment mortgages. the theory is, if they can maker a $1500 note they can certainly replace that with a $1100 note.
The hope is that those that may even be underwater in their homes now would continue to make their payments and "ride it out" and not surrender their homes to foreclosure if money got too tight.
Regardless of how effective this would be, it's likely the only 'stimulus' Obama has any chance of getting through congress. That said, I would be surprised to see the republicans oppose this just to spite him even if thy think it would be effective. That's pretty much all they've done since he got into office.
Yes, but rates are based on risk. The government should let the lenders assess that risk.
Like I said, as long as it isn't government backed.
The concern though is will the investors who end up buying those mortgage bundles from F&F be willing to touch new bundles that include some upside down mortgages? I'll bet they don't without there being some kind of government guarantee to cover the difference if that mortgage fails and the house needs to be foreclosed on. Without that guarantee, you're basically asking them to buy uncollateralized debt at a very, very low interest rate. One way or the other, the taxpayers are going to end up being on the hook for something. Be it a guarantee to the investors buying the bundles, or be it through F&F having to hold on to those mortgages themselves.
My other concern is that in order to get people into these refinances, you have to relax lending standards. Something just doesn't feel right about using relaxed lending standards to get out of a financial crisis caused by relaxed lending standards.
I concur 100%.
It wouldn't have been much of a crisis had it only been a bunch of foreclosures.
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