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Mortgage Refinancing

February 9, 2012 by staff 

Mortgage Refinancing, “It’s time to apply the same rules from top to bottom: No bailouts, no handouts and no cop-outs. An America built to last insists on responsibility from everybody.”

Thus President Obama laid down the gauntlet in his recent State of the Union address. Yet he remains committed to subsidizing industries. And mortgage lending is high on his priority list. In his speech, he announced a plan that “gives every responsible homeowner the chance to save about $3,000 a year on their mortgage, by refinancing at historically low rates..

.A small fee on the largest institutions will ensure that it won’t add to the deficit, and will give banks that were rescued by taxpayers a chance to repay a deficit of trust.” Last Wednesday, Obama unveiled the specifics of this demand-side bailout, which would require congressional approval.

Lawmakers should think about some likely consequences.  Let us digress for a while and look at the big picture. The U.S. housing market has been in a deep recession since the Great Financial Meltdown of 2008.

This is despite the fact that interest rates for 30-year conventional, constant-rate mortgages lately have hovered slightly below 4 percent, the lowest level in at least a half-century. If a recovery has occurred, it has been modest and then only limited to high-income markets such as metro Boston and San Francisco.

Federal Reserve Flow of Funds data released in December reveals disturbing indicators. The Fed concluded that U.S. households are sitting on $13.2 trillion in debt, slightly more than the current $13.1 trillion in total government debt and more than 85 percent of GDP. Since 2007, household net worth has shrunk from $66.8 trillion to $57.4 trillion, with $2.4 trillion of that decline alone occurring during Third Quarter 2011. What’s more, composite home value during this time dropped from $21 trillion to $16.1 trillion.

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