REAL ESTATE: Obama's mass refinancing proposal called ...

In swift response to Obama?s State of the Union address, James Pethokoukis, a columnist for American Enterprise, characterized Obama?s housing proposal as ?a housing policy bombshell? for the real estate and banking industries.

The President was sketchy about the details but talked about giving every responsible homeowner an opportunity to refinance at today?s historically low interest rates. He said on average each homeowner who refinances would save about $3,000 a year that could be spent on other needs, thus bolstering the economy. A small fee on the largest financial institutions was also proposed to ensure the mass refinancing plan would not add to the deficit and would give banks that have been rescued by taxpayers a chance to repay a deficit of trust.

Pethokoukis quoted analyst Jaret Seiberg of Guggenheim Washington Research Group as saying such a mass refinancing could harm holders of mortgage-backed securities when prepayment of mortgages accelerate. Also he said the move could permanently drive housing financing costs higher because burned investors are likely to demand a higher premium in the future. Seiberg said he believes the President?s plan would help more than 20 million borrowers refinance their mortgages regardless whether their loan is backed by the government and whether they owe more on their mortgage than their house is worth.

Seiberg also surmised that the Obama?s plan, which Congress would have to approve to become reality, would apply only to borrowers who have been current on their loans for at least six months, possibly as long as a year. So it is meant for borrowers who can afford their mortgages.

Article source: http://www.pe.com/business/business-insider-headlines/20120125-real-estate-obamas-mass-refinancing-proposal-called-bombshell.ece

Source: http://delmaeproperties.com/2012/02/real-estate-obamas-mass-refinancing-proposal-called-bombshell/

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