Friday, July 30, 2010

The $45 Billion Stimulus: What If All Mortgage Holders Were Automatically Refinanced to Current Market Rates?

Current mortgage rates are about 4.5%.  Re-fi's would free up $45 billion for consumers to waste stimulate the economy.  The short version is at Zero Hedge.  The long version, HAMP, and downsides are at CalculatedRisk. (ht: serious buyer)


Humpty said...

I wonder what the unintended consequences will be? I'm sure all those who are in favor don't care about the consequences. Let's just make all those people happy!

Meanwhile, let the Bush tax cuts expire despite all the warnings of what that will do to our economy!

Montpellier said...

That Lawler screed on CR was quite impressive. I don't believe this "plan" (MS trial balloon) is going anywhere.

Although I'm a "class warrior" I'm betting all the Bush tax cuts get extended until there is a new Congress. After that, I'm betting the top bracket reverts - and it should. Perhaps the threat of that will make the investor-class amenable to the idea of more comprehensive tax reform. It is wrong that we place the proportionally heaviest tax burden on wage earners while the truly wealthy - the investor class whose income is all 1099- and not W-2 - all pay 15%-20%. That is just wrong.

Anonymous said...

Serious Buyer:
If the 10 year Treasury rate goes to 2%, this 'gift' has all sorts of adverse consequences for people who bought real estate at the top and hope it will inflate back up soon. Some that come to mind are:
1) no writedown of principal on an already inflated mortgage value
2) ARMs go down in a deflationary economy, not up, so bankers profit and homeowners lose the reset.
i.e., ING offers 3.5%-3.75%.
3) delay of homeowner walkaways and bank writeoffs
4) illusion of housing stability -- bank income stream at 4.5% is very profitable with zero rate and perhaps negative real rate so no incentive for FED to immediately raise rates OR gov to unload Fannie Mae and Freddie Mac before next Presidential election

Not Me, But People said...

...and at the moment, 25% of Americans have a credit score less than 600...