Fix For Underwater Mortgages

[Schneibster]

Obama has directed the FHFA to start a program to allow "underwater" mortgages- those whose face value is higher than the value of the house- to refinance at today's extremely low rates, around 4%. While this will not address the mortgage face value, and I believe that will have to be addressed eventually, it will start to remove the "overhang" that is preventing demand from increasing, even with the increase in the private job market.

As an overview, the private job market has added millions of jobs due to the stimulus, but the Republican Teagagger Party has decimated the public job market by fucking up the finances of many states and forcing them to lay off millions of firefighters, school teachers, and police. While the stimulus has indeed created jobs, as it was supposed to, and likely prevented the Great Recession from turning into a full-blown depression, those jobs haven't had the expected multiplier effect. The reason is that families are dealing with debt overhang; their mortgage face value is greater than the value of their home, and this makes them much less likely to spend freely. A solution to this problem is necessary for any future stimulus to work properly, and the Republican Teagagger Party will therefore oppose anything that helps with it since they oppose jobs.

This is only a start on the problem; of the 10 million "underwater" mortgages out there, only about a million will be eligible. In addition, the banks are foreclosing as quickly as they can to avoid having to pay their fair share of the price collapse. So how this goes should be pretty interesting, and is likely to have heavy political impact in the coming year. In addition, this overhang problem has started to be noticed by OWS, and is likely to become part of their eventual platform of issues.

Read all about it.

[Schneibster]

Joe Gagnon, a pretty serious macroeconomist, says this could work pretty well if done properly. It needs to be combined with purchase of Mortgage Backed Securities by the Fed.

Have a look for yourself.

[Gawd]

Take their homes. It was their own fault for being so greedy and spending more than they can make.

[maiforpeace]

[Gawdzilla Sama]

Take their homes. It was their own fault for being so greedy and spending more than they can make.

You forgot to blame the Joos. Here: It's the Joos' fault.

Better?

[Schneibster]

Wow, don't get too close, 'zilla. Ya might get some on ya.

[Gawdzilla Sama]

Wow, don't get too close, 'zilla. Ya might get some on ya.

I survived the Nixon Misadminstration.

[Schneibster]

Another part of why this was not done before is that there was an FHFA regulator who would not approve it because of a policy conflict. He has now been brought to recognize that he will have to sacrifice his policy in order for the FHFA to do its job, and that the banks, loan consumers, and FHFA will share the moral hazard and financial hazards equally.

You can read about that here.

[Gawd]

Take their homes. It was their own fault for being so greedy and spending more than they can make.

You forgot to blame the Joos. Here: It's the Joos' fault.

Better?

Oh, you senile cutie you, don't yah know that the Lehman brothers are Jewish?