“Why Zandi to FHFA could mean Obama mortgage principal reductions, mass refi plan”
Shit. And right after I refinanced, too. Jim Pethokoukis:
If Mark Zandi becomes the new regulator for Fannie Mae and Freddie Mac, it could potentially be one of the most significant economic events of President Obama’s second term. Unlike Ed DeMarco, the acting director of the Federal Housing Finance Agency, Zandi, currently chief economist of Moody’s Analytics, favors the use of principal reduction by Fannie and Freddie to help some of America’s 6-7 million underwater borrowers refinance their mortgages. Here is Zandi in March 2012:
Principal reduction works,” said Mark Zandi, chief economist of Moody’s Analytics. “If someone gets a reduction in their principal amount, it gives them a real powerful hook to really fight to try to hold onto the home, even if things aren’t going financially right for them.” The re-default rate for homeowners who receive a principal reduction is lower compared with the rate on other types of mortgage modifications, Zandi said. “It saves taxpayers money and makes homeowners less likely to default,” said Zandi. Given the Obama Administration’s policy changes, “I’m now perplexed why DeMarco is not more fully engaged” in supporting principal reductions.
Last May, Zandi outlined a plan of debt forbearance which would evolve into “earned” forgiveness if the homeowner kept current on the new mortgage for five years. Ace banking analyst Jaret Seiberg of Guggenheim’s Washington Research Group says “Zandi would be a strong leader who favors ideas that some conservatives oppose,” and thinks the White House will not make the pick unless quick confirmation seems likely.
The idea of mortgage principal reduction helped ignite the Tea Party movement. But certainly conservatives are not of one mind on the issue. Former Romney economic adviser Glenn Hubbard, along with Columbia University economist Christopher Mayer, have long advocated a plan to use the GSEs to refinance some $4 trillion of US mortgages, helping up to 30 million borrowers save $75 billion to $80 billion a year. As Mayer put it: “This plan would function like a long-lasting tax cut for these 25 or 30 million American families.”
In Ameritopia, of course you “deserve” to be bailed out by a government that doesn’t actually create money (well, it prints it, but that’s really not the same thing) — which means you are really being bailed out by taxpayers who made the financial mistake of not needing to be bailed out.
The country is broke. And this is more wealth redistribution. Principal reduction is a form of contract annulment; and rather than the government showing its largess on the back end with other people’s money, howsabout we try this, instead: stop with the subprime lending and the batshit crazy regulatory burdens placed on lenders that lead them to make the kind of risky moves that lead to collapses in the first place?
Which, that would likely work, but what it doesn’t do is paint the government as heroic and compassionate and all-powerful. And so it’s a non-starter for the Democrats, who operate under the perception that they fix problems — while hiding that it is they who created the problems they heroically fix to begin with.