Comments on: Refis!

By: no_body

no_body — Sat, 13 Oct 2012 00:25:36 +0000

I don’t think the Fed can buy munis. But it can buy back corporate bonds and mortgage backed securities held by banks or other financial institutions. Due to the Savings and Loan crises of the 1990s. And PACE bonds are mortgage backed securities. Ideally then the state would create a state bank like North Dakota has and funnel the PACE bonds through it. Which could also handle munis it if wanted to lower rates.

By: mitakeet

mitakeet — Fri, 12 Oct 2012 01:02:46 +0000

Your idea of the FED buying PACE bonds makes a lot of sense, but why not also have the FED buy muni bonds as well? I bet lowering the interest rate on munis would give a big shot on the arm for a lot of state and local communities and also result in a jumpstart to the economy. I am confused with this focus on mortgage rates when they are already at historical lows. While I can see that refis would pump some money into the economy, wouldn’t creating more jobs have a greater multiplier effect than mortgage refis for the same investment on the FED’s part?

By: Bill Gatliff

Bill Gatliff — Thu, 11 Oct 2012 08:45:09 +0000

Jared:

I heard on a Marketplace (radio show) discussion the other day that 70% of mortgages taken shortly before the onset of the recession were people taking out accumulated equity in their houses, and not new mortgages as we have all been told.

Were they doing this to maintain their lifestyles? To provide income during job loss? Is it possible to even know?

I’m thinking that there must be implications in the above that would factor into how people might react to mortgage policy changes and the overall economic recovery. For example, these people loaded up on debt just before home values tumbled, which doubled the damage to their bottom lines.

Thoughts?

By: no_body

no_body — Thu, 11 Oct 2012 01:16:43 +0000

There is a much more direct way the Fed could create jobs using QE3. All the Fed has to say is six little words, “The Fed will buy PACE Bonds”.

Property Assessed Clean Energy bonds are the exact same financial vehicle used to pay for schools, sewer upgrades and are paid back through property taxes.

http://www.pacenow.org

This would jump start the economy by putting an estimated 3 million construction workers back the job, retro-fitting homes or ten permanent ones per million. Lower our trade deficit. And the Fed could even charge the homeowner only 3% interest and return the profit to the Treasury to reduce the public debt.

I know the Fed can’t create an asset class directly. But the Fed buying them would eliminate the problem with F&F, investors and the first lien position. Because the Fed owns a trillion of F&F securities anyway, the Fed will make money either way. By the Fed purchasing $40 billion a month is the perfect vehicle to provide a controlled boost to the economy. And could easily be withdrawn once the economy recovers.

What’s more, when a house is underwater long-term investments in them are put on hold. This would eliminate the need to wait for housing prices to recover before investments are made. Also in CA the average increase in property value of a house with a CV system is $17k.

Finally, PACE bonds enjoy broad bipartisan support at both the state and local levels.

By: Jared Bernstein

Jared Bernstein — Wed, 10 Oct 2012 23:40:40 +0000

Well, I try not to do retail here for good reason! But I used to be ensconced in this stuff and it does look like you’re in a weird situation that should be fixed–and policy makers are trying to fix it.

All major lenders have agreed to automatically resubordinate their second mortgages behind firsts for HARP refis. So this means you do not have to write down the first to refi. But with your first below 80, you’re stuck with too much equity to be eligible!!! Sen Menendez has legislation to fix this and so are Fan/Fred so check back with them soon.

By: mitakeet

mitakeet — Wed, 10 Oct 2012 22:57:58 +0000

Our conundrum is that we have a second mortgage that, when combined with the first, put us under water until just recently (based on Zillow, for whatever that is worth). We sought to refinance, combining the first and second, and thus save nearly $1K per month, yet it seems to pay off the second mortgage that is a ‘cash out’ scenario and thus falls under the 80% LTV situation. Somehow I don’t feel like we are alone in this situation, but as far as I can tell, there isn’t any sort of program to help us out. If someone knows something that might help I would love to hear about it. BTW, our loans are not held by Freddie or Fannie, we got them through our credit union, though the documents we signed did say they could sell the loans at any time.