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.