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Big Mortgage ReFi – MS chimes in
A reader wrote me this morning, “Where’s the Beef?” I’ve gone out on a limb suggesting that something rather large was in the offing regarding a plan for a big mortgage Refi. On 9/21 I said that some details would be forthcoming about now. All I get is silence from Treasury, the White House or the FHFA. I’m not ready to throw in the towel on this one just yet.
It’s one thing when a blogger like me starts a rumor on a Mega Deal like this. It’s quite another when big shots like Morgan Stanley jump on the bandwagon. This from David Greenlaw (Managing Director and Chief U.S. Fixed Income Economist):
Ben White at Politico reports that an Obama reelection campaign source has told him that the Administration may soon try to launch a sweeping "mortgage modification" program This report makes some sense. Recent polls show that Obama is trailing both of the leading Republican candidates. And, if the economy deteriorates, the President is likely to fall further behind. Since it seems increasingly unlikely that the Administration will be able to persuade Congress to adopt all of the measures included in Obama's latest economic stimulus proposal, it's not too surprising to learn that political operatives are starting to push for measures that do not require Congressional action.
Of course, from our perspective, a streamlined refi program would appear to represent another stimulus option that does not require Congressional approval. To be sure, there are significant hurdles to adoption of both streamlined refi and mortgage mod at this point -- the most obvious being the FHFA.
The article from Politico that got Greenlaw excited:
OBAMA CAMPAIGN EAGER FOR BIG MORTGAGE FIX?
Top source tells M.M. that senior Democrats aligned with the Obama 2012 campaign are pushing hard to see a much bigger federal mortgage modification program put into place as soon as possible to start bringing relief to middle class homeowners well in advance of the 2012 election. The new effort would be yet another attempt to address the biggest drag on the economy: U.S. consumers saddled with too much mortgage debt, little or no equity and not enough extra cash to drive the kind of spending necessary to fuel faster growth and more robust job creation.
I think Greenlaw is right. The hang-up to a deal is the FHFA. The Federal Reserve has facilitated a ReFi with Operation Twist and the decision to re-invest principal proceeds from its MBS holdings back into more MBS (a significant policy change).
In order to have a "party" all that is needed is to have FHFA waive both the income and asset requirements for a Refi of performing mortgages held by Fannie or Freddie. Bernanke spoke about this yesterday in his presentation to Congress. He said that that a bank lender should be willing to ReFi a borrower who is current as it increases the probability that the borrower will stay current. I think he was actually speaking to Mr. DeMarco at the FHA when he said these words.
The next chapter of this story has to come from the FHFA. I’m looking for a statement that clarifies the rules for a Refi in the not too distant future. This ball’s in DeMarco’s court.
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I think Bruce has addressed the cost thing but it may be of value if he were to spell out what the total projected cost of mass refi would be and how he thinks it would be funded as in who would eat it..
It won't be enough.
I own a home through the now defunct/corrupt TB&W, Freddie (I think) took it over. We now pay 3.1%, I don't see it getting lower, even if it does, we won't budge. Know why? OUR JOBS. We both work for globals, in my spouses case, 3/4 of the group got sent packing last quarter. I look at my own corp., and I see see all-time year lows. Neither are in danger of going under of course, but they will cut because they have too.
My family is in financial lock down mode, and will be for the foreseeable future. Neither a Democrat or Republican is going to change that for us.
Nothingburger.
The tea party would carve them a new one.
You somehow think that Tea Party folk don't have an underwater mortgage? They were all hard-working folk who lived within their means? Uh-huh.
SO we bribe (excuse me), give new "homeowners" 6-8k in tax credits last year so they would take the plunge and buy a massively depreciating asset. I know some that did, and they are underwater already even after discounting the tax credit. Now we are gonna give them a blanket refi? Someone is gonna eat this cost, and I can't help but guess it will be the taxpayer as usual. Why don't we just pay people to live in houses???? That seems to be the only thing left that hasn't been tried lately.
Just think, it wouldn't be a big deal if your boss paid you one miilion a year. Then you could pay off the mortgage and you'd have enough bones left over to buy some crack.
So would it include loan write-downs?
Who eats the losses?
No writedowns at all. You just refi your existing FNMA, Freddie Mac or FHA loan at current rates, which will drop debt servicing costs and put more money in pockets, presumably to spend and juice the economy, but beter yet, to make a vote for The BIg O that much more likely. The losses are on the those who own the bonds, as the prices will drop due to massive prepayments. ( I think ).
Losers would be the ones that have RMBS REITs like NLY.
And practically everyone's retirement funds!
Meanwhile, the Fed would be a loser if they actually had to remain solvent. Instead, they just "reinvest the proceeds" without regard to profit or loss. But then again, when one has a magic checkbook, what is accounting anyway?
Yep, retirement funds own a lot of them too. They'd go back to market rates of return. The Chinese gov't. has a lot too. The Fed gets to print as much $$ as they want. They can't lose.
Linda Green
Linda Lovelace
Lenders who table-funded loans, leveraged the shit out of them, insured to the max against default, skipped REMIC and paid no taxes, then robo-signed the houses back to themselves by virtue of ridiculous (void/voidable) chains of title.
Everyone who bought a house paid filing fees or recording fees. That was supposed to be the cost to file the mortgage at the county clerk's office -- which didn't get done. When are the County Clerk's going to go ape and want their fees that went to the bottom lines? Fraud? Yep.
From what I've seen, the initial filings aren't the issue, but the inter-MERS transfers afterward that weren't recorded.
County Clerks have been told to STFU and await instructions from the Attorneys General, who are "on the case." (a.k.a., awaiting with outstretched hands)
Maybe the top 0.1% that have $47.5 Trillion.
They will print it. We will all pay for this F'up, even if we lived within our means and didn't commit capital stupidly. Even if we payed attention in class and did our own research to avoid getting sucked into the fiasco. We will all pay for the fiasco enabled and created by a handful of players in the banking-political cartel.