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Obama Seeks The Ultimate Free Lunch For Housing, And It's A Bank Bailout In Disguise

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Obama Seeks The Ultimate Free Lunch For Housing, And It's A Bank Bailout In Disguise

President Obama is in Fantasyland or in some alternate universe. He wants to strengthen the housing market provided

* The plan helps a broad swath of homeowner

* The plan stimulates the economy

* The plan costs next to nothing

So says the New York Times in U.S. May Back Refinance Plan for Mortgages

The Obama administration is considering further actions to strengthen the housing market, but the bar is high: plans must help a broad swath of homeowners, stimulate the economy and cost next to nothing.

One proposal would allow millions of homeowners with government-backed mortgages to refinance them at today’s lower interest rates, about 4 percent, according to two people briefed on the administration’s discussions who asked not to be identified because they were not allowed to talk about the information.

A wave of refinancing could be a strong stimulus to the economy, because it would lower consumers’ mortgage bills right away and allow them to spend elsewhere. But such a sweeping change could face opposition from the regulator who oversees Fannie Mae and Freddie Mac, and from investors in government-backed mortgage bonds.

Investors may suspect a plan is in the works. Fannie and Freddie mortgage bonds had been trading well above their face value because so few people were refinancing, keeping returns on the bonds high. But those bond prices dropped sharply this week.

Read more: http://globaleconomicanalysis.blogspot.com/2011/08/obama-seeks-holy-grail-of-housing.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+MishsGlobalEconomicTrendAnalysis+%28Mish%27s+Global+Economic+Trend+Analysis%29#ixzz1WEnOtbM9

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How is the plan going to cost next to nothing?

What they mean is that it will cost a lot of Other People's Money but it won't be apparent to them.

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What they mean is that it will cost a lot of Other People's Money but it won't be apparent to them.

I bet the plan involves swapping non recourse mortgages for recourse mortgages at a lower rate.

Eg can't pay a 200k mortgage at 7 per cent. Tempted to walk way? How about swapping it for a variable rate (recourse) mortgage, currently at 3%. We may even be able to extend the term, or even lower the principal. Interested? Phone 1-800-cash-in.

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What they mean is that it will cost a lot of Other People's Money but it won't be apparent to them.

Why shouldn't it cost the mortgage companies?

They were guilty of financial mis-selling in the first place (liar loans, house prices can only ever go up etc.)

Anyway, wasn't this whole sector bailed for/overpaid for write-downs in 08 and 09? Those in neg equity never got a handout and a write down.

You have to put both sides of the balance sheet straight.

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Its a good plan. US mortgages are mainly on fixed rates unlike ours. Our floating rates are one reason why our housing market hasn't crashed like theirs.

There is no reason why US homeowners should be paying 5% when their banks get 0.25% through to 2013..

And for all the wannabe owners, mortgages would be cheaper.

NO doubt there a few UK owners feeling a little dumb for jumping into fixed rate delas after having been scared by 'rates to soar' talk.

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Its a good plan. US mortgages are mainly on fixed rates unlike ours. Our floating rates are one reason why our housing market hasn't crashed like theirs.

There is no reason why US homeowners should be paying 5% when their banks get 0.25% through to 2013..

And for all the wannabe owners, mortgages would be cheaper.

NO doubt there a few UK owners feeling a little dumb for jumping into fixed rate delas after having been scared by 'rates to soar' talk.

The banks do not get money at 0.25%. Yes, some is at these levels, or lower, through repos or the overnight market, but they have a huge amount to raise in the bond and medium term note markets, and there the cost is significantly higher - a lot closer to 5%. Also, most of the mortgage debt was repackaged and sold on as bonds, where it has ended up in the hands of your pension provider or insurer.

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Why shouldn't it cost the mortgage companies?

They were guilty of financial mis-selling in the first place (liar loans, house prices can only ever go up etc.)

It won't cost the employees and directors of mortgage companies. It will cost their shareholders - i.e. your pension fund.

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  • 331 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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