homesmillbrae.com » Treasury Secretary

Obama Gets Big ‘No’ On Slashing Mortgage Debt

Wed, 01 Aug 2012 05:30:16 +0000

Despite strong pressure from the Obama administration, a federal regulator will not allow Fannie Mae and Freddie Mac to reduce mortgage principal. The Federal Housing Finance Agency’s Ed DeMarco has previously opposed the program, which uses taxpayer money to pay lenders to reduce loan balances of severely troubled borrowers, but had not made the final decision until now.

“After much study, I have concluded that Fannie Mae and Freddie Mac’s adoption of HAMP PRA [the government's Home Affordable Modification Program Principal Reduction Alternative] would not make a meaningful improvement in reducing foreclosures in a cost effective way for taxpayers,” DeMarco wrote in a letter to the chairman and ranking member of the Senate Committee on banking, Housing and Urban Affairs.

DeMarco concludes that the program presents the risk of more losses to taxpayers, not to mention operational challenges to the GSE’s. He cites moral hazard, suggesting that as many as 19,000 borrowers who are current on their mortgages could strategically default in order to qualify for debt forgiveness. Even more significant, he goes on, could be long-term consequences for mortgage credit availability.

“Fundamentally, principal forgiveness rewrites a contract in a way that other loan modification programs do not. Forgiving debt owed pursuant to a lawful, valid contract risks creating a longer-term view by investors that the mortgage contract is less secure than ever before,” writes DeMarco in the letter to lawmakers.

Treasury Secretary Timothy Geithner responded immediately in a letter to DeMarco:

“I do not believe it is the best decision for the country, because, as we have discussed many times, the use of targeted principal reduction by the GSEs would provide much needed help to a significant number of troubled homeowners, help repair the nation’s housing market, and result in a net benefit to taxpayers.”

A study of the program by Treasury’s Michael Stegman showed that mortgage modifications that included principal reduction had a far lower re-default rate than those without the debt forgiveness.

“Fannie Mae’s analysis suggests that using principal reduction to reduce the loan-to-value- (LTV) ratio not only increases a borrower’s ability to pay, but for these selected borrowers, it also increases the likelihood that they will continue to pay,” writes Stegman in the analysis.

The FHFA estimates that up to 500,000 Fannie and Freddie borrowers could have been eligible for principal reduction. The Treasury’s current program pays lenders large incentives to write down loan balances, using unspent money from the $700 billion TARP (Troubled Asset Relief Program). But FHFA says despite a positive financial benefit to Fannie and Freddie, it is really just a transfer of taxpayer funds, adding “to the over $188 billion in taxpayer support the Enterprises have already received.”

Some lawmakers, however, may not be done fighting yet. Several have been pushing for more action to help homeowners, and the heat is on with the election less than 100 days away.

“It is incomprehensible that Mr. DeMarco would reject the chance to save up to a billion dollars in taxpayer funds while helping nearly half a million homeowners stay in their homes,” said Rep. Elijah Cummings (D-MD) in a statement. “He should immediately withdraw this reckless and misguided letter and start following the law Congress passed.”

Questions? Comments? And follow me on Twitter @Diana_Olick

Article source: http://www.cnbc.com/id/48425201?__source=RSS*blog*&par=RSS

Plunging Mortgage Rates Won’t Juice Housing

Thu, 04 Aug 2011 16:58:13 +0000

Page 1 of 3 | Next Page
Show Entire Article

The one positive in all the uncertainty surrounding the nation’s debt was a plunge in Treasury yields, which in turn sent mortgage rates to record lows.

The 30 year fixed hit a near-low of 4.45 percent last week from 4.57 percent, and the 15 year made a new low of 3.52 percent, according to the Mortgage Bankers Association. Those low rates pushed refinance applications up 7.8 percent and purchase applications up 5.2 percent (both seasonally adjusted).

So are we housing geeks now jumping for joy? All good? Maybe not so much.

“Refinance application volume increased, but even though 30-year mortgage rates are back below 4.5 percent, the refinance index is still almost 30 percent below last year’s level. Factors such as negative equity and a weak job market continue to constrain borrowers,” notes the MBA’s VP of research and economics, Michael Fratantoni. “Purchase activity increased off of a low base, returning to levels of one month ago, but remains weak by historical standards.”

So even ridiculously low rates are not exactly boosting the housing recovery; that’s because rates have been historically low for a while.

Page 1 of 3 | Next Page
Show Entire Article

Euro Zone Policymakers Fail to Extinguish Market Fire

Pressured by White House, Treasury Secretary Is Expected to Stay at Post

Trichet: Euro Zone in Better Shape Than US, Japan

Italian Prosecutors Seize Documents from Moody’s, SP

ECB Buys Bonds in Secondary Markets as It Holds Rate

More Top Stories

Article source: http://www.cnbc.com/id/44004035?__source=RSS*blog*&par=RSS

The Debt Crisis and Mortgage Rates

Tue, 17 May 2011 07:36:08 +0000

Page 1 of 3 | Next Page
Show Entire Article

If you’re not talking about the head of the IMF today, then the only thing left really is the debt ceiling, which we officially reached today ($14.294 trillion for anyone who’s counting).

While estimates are that it will take until August for the US to actually default on its debt obligations, the concern in the short term is how Wall Street sees the situation and how that will be reflected in the bond market and in mortgage interest rates.

So I asked a few experts:

Michael Barr/Fmr. Asst. Treasury Secretary for Financial Institutions

“If the US continues to bump up against the debt limit but Treasury uses “extraordinary measures” to keep the US from exceeding the limit, then the damage is likely to be modest and short-term. I would expect rates to rise, temporarily, by up to low single-digit basis points.

It is a bit hard to forecast exactly what the effect will be. Prior experience suggests low single digit bps, but there are a number of factors in play today that were not present in previous debt ceiling crises: fragile economy, fragile housing finance sector, fragile home prices and sales, F/F in conservatorship, no securitization to speak of, higher debt to GDP ratio, turmoil in Europe (exacerbated by DSK’s arrest), extremely high levels of US dollar reserves already in China, extremely low Treasury rates.

Page 1 of 3 | Next Page
Show Entire Article

BP’s Arctic Oil Deal With Rosneft Collapses

Conspiracy Theorists Feast on Strauss-Kahn Arrest

Queen’s First Visit to Ireland Clouded by Threats

Germany’s Merkel Rejects Greek Debt Restructuring

Will Nasdaq Now Bid for the London Stock Exchange?

More Top Stories

Article source: http://www.cnbc.com/id/43049863?__source=RSS*blog*&par=RSS

Government’s Mortgage Bailout Under Attack

Fri, 04 Mar 2011 12:04:34 +0000

Page 1 of 4 | Next Page
Show Entire Article

Today House Republicans will take up arms against a sea of government housing bailouts, voting to abolish the Federal Housing Authority’s (FHA) $14B Short Refi program and the $1B Emergency Mortgage Relief Program. Next week they will take up the $29B Home Affordable Modification Program (HAMP) and the $7B Neighborhood Stabilization Program.

The argument is that none of these programs are working and that they are a waste of taxpayer dollars. The mortgage modification program, a particular thorn: “Not only is this a failing program, it’s a failing program that causes real financial pain to the very people it was set up to help,” writes Rep. Patrick McHenry (R-NC), Chairman of the Oversight Subcommittee on TARP, in a press release.

Administration officials have tried to defend the programs, admitting they haven’t performed as expected, but urging that they be given a longer life. “These programs are continuing to help people, and we don’t see that the critics are offering any alternatives,” said Tim Massad, Acting Asst. Treasury Secretary for Financial Security, on a conference call yesterday.

Page 1 of 4 | Next Page
Show Entire Article

ECB April Rate Hike Would Be ‘a Mistake’: Roubini

London School of Economics Head Quits in Libya Scandal

Control of Libyas Hidden Wealth May Be Next Battle

Libyan Capital Braces for Anti-Gaddafi Protests

Goldman CEO Could Testify in Galleon Trial

More Top Stories

Article source: http://www.cnbc.com/id/41889784?__source=RSS*blog*&par=RSS

‘Renter Nation’ for Low Income Americans

Wed, 02 Mar 2011 00:13:48 +0000

Page 1 of 3 | Next Page
Show Entire Article

After decades and decades of the ownership society, and all the trouble it exacted on our economy, the Obama administration is and has been pushing the premise that, “Our goal is not for every American to become a homeowner.”

That latest pronouncement comes from prepared testimony of Treasury Secretary Timothy Geithner before the House Financial Services Committee this morning.

In a hearing about the future of housing finance, i.e. the wind down of Fannie Mae and Freddie Mac, Geithner re-outlined the plan to take government out of housing. Part of that plan includes providing more government assistance for rental housing.

The home ownership rate has fallen precipitously since the housing crash began, from over 69 percent in 2004 to now 66.5 percent. The bulk of that loss comes from low and middle income Americans who lost their homes to foreclosure and from younger Americans who can no longer qualify for a mortgage, thereby dropping out of the household formation equation.

It makes sense that an administration governing during the worst housing crash in memory would take a policy shift, especially given that, as Secretary Geithner told the House panel, “We did not do a good job in helping low income Americans get access to sustainable housing finance options; we left them with a system where it was easy for them to be taken advantage of.”

Page 1 of 3 | Next Page
Show Entire Article

Jump in World Factory Costs Raises Inflation Risk

Rajat Gupta: Bigger Than Madoff?

Ex-Goldman Director Accused Of Leaking Inside Information

How SP Responds at 1275 Could Be Huge Market Tell

Cost of Fed Actions Starting to Offset Benefits: El-Erian

More Top Stories

Article source: http://www.cnbc.com/id/41851303?__source=RSS*blog*&par=RSS