Obama to refinance underwater mortgages

[Admiral Yi]

Would have been cheaper than what we did.

What did we do?

[MadImmortalMan]

Would have been cheaper than what we did.

What did we do?

Home buyer tax credit, cash for clunkers, TARP, ARRA, POMO, QE1, QE2, etc, etc, etc, ABCDEFG...

[Admiral Yi]

Home buyer tax credit, cash for clunkers, TARP, ARRA, POMO, QE1, QE2, etc, etc, etc, ABCDEFG...

You're just being silly.

[Sheilbh]

This seems sensible, based on what Yi said.  I could do with more details though

[Berkut]

Yes, making sure that people who cannot afford to buy a house can still have a mortgage can only end well, as history can show us.

[MadImmortalMan]

Yes, making sure that people who cannot afford to buy a house can still have a mortgage can only end well, as history can show us.

You can leverage a one hundred dollar bill 2000%! That's super-duper better than anything out there. Not daytrade brokerage accounts, not EFSF, not Basel II, nothing.

[Admiral Yi]

Yes, making sure that people who cannot afford to buy a house can still have a mortgage can only end well, as history can show us.

I'm generally pretty leary of this idea, but one thing that mitigates is that the program is open only to borrowers who have not missed a payment.

Kinda wacky that we have 9 million underwater borrowers who haven't missed a payment.

[MadImmortalMan]

Kinda wacky that we have 9 million underwater borrowers who haven't missed a payment.

I'm one of those.   

It doesn't surprise me, actually. 70% of my city is underwater on their mortgages.


Edit: A million bucks for everyone would certainly solve the deleveraging problem...

[DGuller]

Refinancing a mortgage that even way underwater can make sense. since you can't just dump your house and move somewhere else.  Your credit rating is going to be too shot to take another mortgage. 

That said, I'm afraid that this measure will just let the insolvency fester for that much longer, in a Japanese kind of scenario.  Ultimately, if your mortgage is underwater, you're a prisoner in your own home, even if you can handle the payments, and that can't be good when that's multiplied by millions.  There is no quick fix for the problems of liabilities exceeding your assets, without high inflation or wholesale debt write-down.

[Valmy]

Kinda wacky that we have 9 million underwater borrowers who haven't missed a payment.

Well that is an awful lot but it is possible with the popping of the bubble.  Tons of recent buyers would have been stuck in that position.

[Sheilbh]

I'm generally pretty leary of this idea, but one thing that mitigates is that the program is open only to borrowers who have not missed a payment.

Kinda wacky that we have 9 million underwater borrowers who haven't missed a payment.

It sounds a great deal like some of what Glenn Hubbard's been saying in the FT. 

Basically his argument is that problems in the mortgage market are cancelling out low interest rates, household wealth and income and that taxpayers have borne the credit risk of mortgages since 2008 anyway.  For Fannie and Freddie mortgage holders, who are up to date on payments, to refinance at current low interest rates would, in his phrase, be the same as a long-term tax cut of around $70 billion a year (over the life of the mortgage).  As defaults diminish the Treasury's exposure to risk would diminish substantially.

[The Brain]

Meh. They chose to live underwater.

[Valmy]

Yes, making sure that people who cannot afford to buy a house can still have a mortgage can only end well, as history can show us.

Well supposedly this is trying to close that door now that that particular horse has already gallopped off.

Of course it probably will be used as part of the bag of financial tricks used to get more people into homes they cannot afford somehow.  Unintended consequences and all that.

[Ed Anger]

Meh. They chose to live underwater.

Works for SpongeBob.

[Darth Wagtaros]

Meh. They chose to live underwater.

Works for SpongeBob.

Yes. under the sea.