“Reduce Guidelines on Mortgages Would Have More Effect”
This article speaks to the proposal being made by the administration that would refinance millions of homeowners and cost this country billions of dollars, that we don’t have, by the way. They are thinking, this may stimulate our economy.
I have a better idea, Fannie Mae and Freddie Mac should reduce some of the idiotic guidelines that have been created over the last couple of years. Give more folks an opportunity to buy a home, that is already on the market. Give prospective buyers and folks that want to refinance an easier time to get their mortgage.
Also, the fees that Fannie Mae and Freddie Mac are now charging slightly lower credit scores, will any of those folks pay their mortgage any better, I don’t think so! They are charging the consumer for some of the craziest reason, time to stop this practice.
Finally, the repeal of Dodd-Frank would reduce the cost to the consumer in the mortgage process!
The Wall Street Journal, August 30, 2011, Alan Zibel
Will Refinancing Stimulate the Economy?
It sounds like an easy way to stimulate the economy: The government, working through mortgage finance companies Fannie Mae and Freddie Mac, could refinance millions of American homeowners’ loans at today’s rock-bottom interest rates and put more money in Americans’ pockets at a time when the economy is staggering.
But doing so is more complicated than it sounds.
Some economists have argued that the Obama administration should launch a massive refinance program, benefiting even those who aren’t actually applying. But that option appears to be impractical, analysts say, partly because investors in mortgage-backed securities could challenge the government’s right to do so.
On Tuesday, a person familiar with the matter said the administration is “highly unlikely” to launch a sweeping effort to automatically refinance millions of home loans. Instead, the administration may look for targeted changes to existing program that allow more borrowers take advantage of low mortgage rates.
“The kinds of things that are likely are ones that are going to have a modest positive impact,” Michael Barr, a former top Treasury Department official who teaches at the University of Michigan’s law school, said in an interview. “They’re worth doing but they’re not game-changers.”
Steps that administration officials could take include having Fannie and Freddie eliminate or reduce charges they currently assess banks when riskier borrowers take out loans. Another would be to allow homeowners to refinance even if they owe more than 25% above of their property’s current value on their primary mortgage.
With mortgage rates hovering near the lowest levels in decades, allowing more borrowers to refinance would put more cash in Americans’ pockets and provide a boost to the broader economy. The average rate on a 30-year fixed loan was 4.22% last week, according to Freddie Mac, near the lowest level in more than 50 years.
Reducing or eliminating the charges by Fannie and Freddie on refinancing makes sense, advocates say, since the two mortgage giants already guarantee these loans.
Mark Zandi, chief economist at Moody’s Analytics, estimates that the administration could spur around 1 million additional refinanced loans over the next six to 12 months if it eliminates those fees and takes other steps to encourage refinancing–such as eliminating or streamlining appraisal requirements on refinanced loans and cutting closing costs.
But there are other potential roadblocks, including the possibility that lenders might not pass along the savings to homeowners. Banks also are reluctant to refinance riskier borrowers because of the risk they will have to buy back the mortgage if it later defaults.
To enact any changes, the administration will need the cooperation of the independent federal regulator of Fannie Mae and Freddie Mac, which would be called on to implement any program. The regulator, the Federal Housing Finance Agency, has been skeptical of any changes that would lead to increased losses at Fannie and Freddie. Propping up the two mortgage giants has cost taxpayers $141 billion to date.
Shortly after taking office in 2009, the administration rolled out an effort to help those borrowers refinance, anticipating it would help millions of homeowners. As of May, it had helped about 810,000 homeowners refinance into loans with lower interest rates, though it has helped a much smaller share of underwater borrowers
Joe Petrowsky, NMLS #6869
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