Yesterday I posted that Fannie and Freddie are getting ready to increase fees on mortgages. After hearing President Obama's speech yesterday on "stabilizing the housing market", you'll see why.
"A key element of the plan will allow up to five million borrowers who owe more than their home is worth to refinance through Fannie Mae and Freddie Mac."
If Fannie and Freddie are essentially going to agree to take on five million "bad loans", doesn't that significantly increase their operating costs?
"For those already in foreclosure (but not yet out of their homes), the federal government will provide matching funds to lenders to lower interest rates on loans. The plan requires that payments be no more than 31% of monthly income."
So if you owe more than your home is worth, but your payment is now affordable, aren't you just renting the home from the government until you decide to move, at which time you mail the keys back to the lender?
One section of the Obama housing plan that will require congressional approval for enactment would give bankruptcy judges added power to perform "cramdowns", or unilateral powers to renegotiate mortgage loans when borrowers go into bankruptcy. If this change to the bankruptcy codes is approved by Congress, get ready for a lot more bankruptcies over the next few years.
I'm not saying we shouldn't work on some kind of stabilization plan. I'm just saying this plan has a very high likelihood of driving interest rates up, which means that under the Obama plan future buyers are going to pay a large part of the price for mistakes that were made in the past.
That's why rates in the 5's RIGHT NOW are too good to pass up.
