Is Obama’s Refi Proposal DOA?

Analysts continue to ruminate on President Obama’s announcement that he will send Congress a plan that will allow responsible homeowners who are current on their payments to save $3,000 a year on their mortgage by refinancing.

If this plan requires Congressional approval, it will probably have a very low likelihood of succeeding in 2012.

And investors wonder if this plan impacts mortgages securitized in the agency MBS market (FN/FH/GN MBS), mortgages securitized in the non-agency MBS market, or mortgages on bank balance sheets in unsecuritized form.

Changes to help underwater borrowers refinance that could be made without Congressional approval, however, such as further easing of recently revamped HARP refis, further streamlining, eliminating LLPA’s, or further reducing buyback risk were seen as having a better chance.

Not that what anyone says in the mortgage industry matters anymore in Washington, but the FHFA director is likely to argue against a mass refi program of agency mortgages considering that such a program could actually hurts the retained portfolios of the GSE’s by up to $30-$35 billion.

But what if the government cuts the GSE’s preferred dividend payment to make up for some of it? Still, existing investors won’t be in favor of it.

And what if, in some miracle, the government used some of the $25 billion-or-so in the proposed settlement between the bank and the state AG’s to fund a plan? Stay tuned – maybe the government will just use that money to help fund the temporary payroll tax cut extension a few more months.
Analysts Think Obama’s Refi Plan Is Dead On Arrival: WSJ
Obama’s State Of Union Housing Proposals
-FHFA Head Says Banks Reducing Loan Balances Won’t Work (WSJ) (MortgageNewsDaily)