Monday, November 30, 2015

Refinancing and more refinancing

Anthony Sanders of George Mason U. explains why the Obama plan is doomed; more on Freddie and hedging bets on refinancing

Refinancing and more refinancing


George Mason University real estate economist Anthony Sanders has an interesting perspective on President Obama’s latest housing plan, announced Wednesday.

Details of the plan are spelled out in my report elsewhere on, but the most important aspect to many is the price tag, $5 billion to $10 billion, to be borne by a “small fee” — Obama’s words — charged to financial institutions. That is, if Congress approves, and the Republican members cast doubt on that immediately.

You can read the entire blog post,, but the most interesting piece is this:

Will it work?

Sanders said that we should bear in mind that this proposal is a “variant” of the mortgage refinancing plan the president announced in October. Sanders said that plan, what he calls Home Affordable Refinance Program 2.0, “is a wealth redistribution from mortgage-backed securities investors and taxpayers to the borrowers. So for every dollar that is allocated towards reducing interest and principal there is a dollar lost to MBS investors and taxpayers. Nothing is free.

So, will a wealth redistribution of $5 billion to $10 billion revive the housing market?

“It is highly doubtful,” Sanders said. Will it lower defaults? “It will not lower defaults in any meaningful way.“

“To be sure,” Sanders said, the borrowers that receive the lower interest rates will be happy, but they should ask their neighbors if they want to pay for it.”

One more refinancing issue. There was a joint NPR/ProPublica report Monday contending, in effect, that Freddie Mac is preventing people from refinancing to maintain higher rates of return on its securities.

Freddie Mac subsequently issued a statement defending its record. In addition, there was what my friend Holden Lewis, columnist, said was a “wonky by excellent piece by Yves Smith on where ProPublica got it wrong

NPR tells me there will be more on it Thursday about 9 a.m.

We encourage respectful comments but reserve the right to delete anything that doesn't contribute to an engaging dialogue.
Help us moderate this thread by flagging comments that violate our guidelines.

Comment policy: comments are intended to be civil, friendly conversations. Please treat other participants with respect and in a way that you would want to be treated. You are responsible for what you say. And please, stay on topic. If you see an objectionable post, please report it to us using the "Report Abuse" option.

Please note that comments are monitored by staff. We reserve the right at all times to remove any information or materials that are unlawful, threatening, abusive, libelous, defamatory, obscene, vulgar, pornographic, profane, indecent or otherwise objectionable. Personal attacks, especially on other participants, are not permitted. We reserve the right to permanently block any user who violates these terms and conditions.

Additionally comments that are long, have multiple paragraph breaks, include code, or include hyperlinks may not be posted.

Read 0 comments
comments powered by Disqus
About this blog
Alan J. Heavens blogs about home improvement and the real estate industry and hosts regular chats on those topics. Reach Alan J. at

Alan J. Heavens Inquirer Real Estate Columnist
Also on
letter icon Newsletter