staci86 said:This is a backdoor bailout of many of the investors, banks, and finance companies who lent too much money to deadbeats. While these refinances do help homeowners, they take garbage loans off the books of overexposed entities, and move them to the GSEs, where they become a public problem.

Let the company which made the bad loan hold that bad loan, and pay the price for doing so.In many cases, the company that holds the bad loan (FNM/FRE) is a de facto part of the US government, so the bad loans are already a public problem.

I think an underwater house would be sweet... I'd ride a stingray to work!
cclyde said:nycll said:How is that gonna help bank balance sheets btw? I believe these loans will be sold to F&F.They'll make fees on making the loans. Which they'll donate to members of both corrupt parties: the system works!

jayK said:In many cases, the company that holds the bad loan (FNM/FRE) is a de facto part of the US government, so the bad loans are already a public problem.
In many cases, yes. Refinancing an agency ARM can avert a foreclosure without increasing taxpayer exposure.

The problem, though, comes from the fact that most of the outrageous ARMs and pay-option mortgages are not agency loans, and are held on balance sheets firmly within the private system. The worst of the loans were securitized by now-defunct finance companies (not banks) and sold off as MBS to investors.

The loans made by some of the worst lenders (Option One, Saxon, Aurora, AHM, etc) do not belong on the public balance sheet. The investors who funded that trash deserve to take the loss, and should not be made whole by the taxpayer for giving a 100% ARM (now underwater by 30-60%) with a 7% margin to an underemployed deadbeat with a 620 FICO and a 50% DTI.

Metric said:Yeah im kind of confused as to why people think this will cost them more in tax dollars? say i have a 400k mortage today at 7% but tomorrow I have the same 400k at 5% how has that shifted anything?

"t" is a part of risk. By increasing "t" you increase risk.

SlimTim said:Metric said:Yeah im kind of confused as to why people think this will cost them more in tax dollars? say i have a 400k mortage today at 7% but tomorrow I have the same 400k at 5% how has that shifted anything?

Since the loan is now known to exceed the market value of the property, it is no longer fully secured. This would justify a much higher rate. It's completely artificial to allow such a loan to get the same rates as fully secured mortgages. The risk is far higher, and that's a major factor in setting loan rates.

Right but it already exceeds the value, that isnt going to change unless the mortgage is written down; so surely a lower payment would introduce security for paying back the debt? surely the risk drops if the payment is more affordable?

If the fed buys the loans.. at least taxpayers don't bear the burden.. even the tax evaders due through inflation. If you haven't noticed.. the dollar is pretty ugly lately, and gold, oil, and gas have been rocketing. IN THE Face of HUGE, growing unemployment.

Who else would buy these loans??? And 125% won't help the hardest hit areas where they need 200%+

It's without saying these type of loans is what started this mess.. and the question is who ends up with them..

They could try selling them to sucker individual investors, possibly.

Dealguy123 said:

Like someone else said.. why this is bad is because it's a transfer of bad debt onto the taxpayer. The folks who have the real subprime mortgages/etc held by private banks will qualify (as long as they can get a 125% LTV loan), and essentially the risk has now been shifted from private banks onto the backs of the taxpayers.

The current Making Home Affordable Refinance program is only for people with loans that are already backed or guaranteed by FRE/FNM as evidenced by this quote on the website "If your mortgage loan is owned by Fannie Mae or Freddie Mac, you may be eligible for a Home Affordable Refinance to take advantage of lower interest rates. Only loans owned or guaranteed by Fannie Mae or Freddie Mac are eligible".

Unless you see something to refute that fact in any of the linked articles(which I don't see), then it's safe to assume that even though the LTV requirement will expand to include loans up to 125% LTV, they will still have to meet the criteria of being FNM/FRE owned or guaranteed. Therefore this new program adds no additional risks to the taxpayer, since the taxpayers are essentially on the hook for all of these loans anyway.

I'm not sure what to say. Is there anything the Feds can't mess up at this point?

clearanceman said:I'm not sure what to say. Is there anything the Feds can't mess up at this point?They'll continue to demonstrate their creativity in finding new things to mess up.

beethovengirl said:If they're going to allow refis up to 125% LTV, the loans need to be recourse loans and typically non-dischargeable in bankruptcy, like student loans. Those are the only terms under which I would support 125% LTV refis on the taxpayers' dime. Otherwise, this is just a hand-out to banks holding worthless option ARMs and the like.
I was thinking the exact same thing. This policy really isn't that bad if they throw in a recourse provision, even if it's just recourse for the additional 25% over value.