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Low mortgage rates are not enough

As a mortgage broker, I am frustrated with all the bailouts being offered to the companies that contributed to our economic crisis. I am frustrated because those that can are ignoring an opportunity to help homeowners.

If a homeowner had an FHA loan, they could refinance to a lower rate without an appraisal - Streamline Refinance. This provision required that the homeowner was current on their mortgage and had made their payments on time for the last 12 months.

Why not allow Fannie Mae and Freddie Mac create a similar program. This would make today's lower rates available to those homeowners that have lost equity but still want to stay in their homes. If critical, a provision could be included that the homeowner would have to pay a fee if they sold/refinanced their home during the next two years and that only one Streamline refinance was available to a homeowner.

It seems too easy but you can bet that it will not happen. Not enough $-00000000's to get anyone's attention.

This proposal will probably receive the same attention to my earlier post - Banks not helping homeowners enough.

Have a great day!

Posted by Angelo Cusinato |CRMS, CMC|Mortgage Specialist on 12/04/2008 01:06 PM

Comments (11)

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11 Comments on Low mortgage rates are not enough

DEC

I've never seen anything like this, Angelo. The government is throwing money around hoping some of it will stick to the problem, but they have neither a plan nor a clue. It's embarrassing to see such a bunch of "experts" who can't seem to grasp the true problem--and unfortunately, I have little confidence they ever will.

Another Very nice blog. good luck with your business in the coming year.

Kind regards,

Andrew Lowell

I agree with you I think they should come out with a better way or actually a better idea to help old, new and potential home owners.

www.globalmarketrealty.com

Andrew, I started in 1983 so you may have a few more gray hairs and a few more good experiences helping homebuyers with the American Dream. It is truely amazing how far the feds have their heads stuck....in the sand. If they wanted to talk to experts, they would have to admit that they are too far removed from the problem to solve it. Listening to the sub-prime complaints is a great example of the squeeky wheel getting greased...or is it the politician getting greased.
Anyway, a Streamline Refinance would maintain the collateral risk of low home values without compromising on credit standards while improving the affordability part of the equation. Much too easy for the feds to be expected to understand and too easy a solution.

Damn, another gray hair just landed on my laptop. Have a great day!

Angelo: Thank you. Credit needs to ease. Until it does, nothing anyone does will help. That's the bottom line.

DEC

What difference does it make if the consumer wants to purchase or refinance????

If the property will not appraise, nothing is going to happen.

We have millions of home onwers held hostage to their property because they owe far more than the property will appraise.

Great idea Angelo.

I find it incredible, but more so SCARY, that the most innovative, original, and usually correct thinking in terms of dealing with this"mess" we've been given is coming from the "average" person by way of blogs and forums.

Maybe the "great" and well educated decision makers should spend a few hours down here with us; the great unwashed. I'm sure they'd be able to steal a few good ideas.

I still think that the rates will continue to drop after Xmas. It should create a lot of refi business.

Len, Thanks for the comment. You are right about being held hostage. But if we want to lower the number of future foreclosures, we have to find a way to make the hostage more comfortable. A lower rate and payment is easier to tolerate and may lessen the motivation to hand in the keys. Realistically, in either case, you are only renting and getting the home for a lower rent/month at least makes it a little easier to tolerate the rest of the problems we face.

AHI, Thanks for the praise - and my name isn't even JOE(the plumber). If they want my ideas, they don't have to steal them unless that would make them more comforable. I will not even try to take credit - after all, it is only common sense. Have a great day!

Hi Angelo,

At first glance, it seems to me that you are suggesting gasoline to put out the fire. One of the reasons investors pulled out of mortgage backed securities, I believe, is that they finally learned what was in them. They didn't feel all that secure with their investments. Now, why would they buy mortgages that are almost certainly undercollateralized?

On the other hand, your idea would help to stem the tide of foreclosures. That would be a welcome development.

I guess it's really a difficult balance: To try to get the cash flowing again with investor confidence while, at the same time, filling the pool of qualified borrowers. What good is one without the other?

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