Refinances and Loan Modifications: No Risk Attempts to Mitigate Taxpayer Losses

I can't understand why so many financial professionals think the new 125% LTV FNMA/FHLMC refinance program announced will cause more losses for tax payers.

Same goes for loan modifications.

The government is already on the hook for the existing mortgages owned by FNMA/FHLMC.

If these mortgage loans can be refinanced or modified so that homeowner payments are lowered enough to be affordable, less of them will end up defaulting.

How is that bad for taxpayers? No new debt is really being created!

To those that keep pointing to the data showing over half of all loan mods done so far end up redefaulting - please read the details! Every report I've read so far references loan modifications DONE IN 2008!

Loan mods done in 2008 were required to be 90 days down to be eligible and most were done as forbearance workouts that actually resulted in HIGHER PAYMENTS.

Hmm, let's see - homeowner can't make existing payment, so let's increase their payments for the next 12 months so they can catch up the amount they're behind on. Any surprise homeowners redefaulted?

ANYTHING that can be done to lower payments for homeowners will lead to less defaults and less losses for taxpayers.

I welcome your thoughts on this.

I'm actually very curious to understand why you may think refi's & loan mods would increase losses instead of mitigating them.

Comments

[loispoor:]

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Jul 06 07:23 AM