April 15, 2013

“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.

Posted by Jeff G. @ 9:21am
4 comments | Trackback

Comments (4)

  1. Sure it’s theft, but it isn’t theft theft.

  2. Heh. There’s suckers, and then there’s suckers: yesterday the 148th anniversary of the assassination of the biggest sucker ever born. And Zandi is just the man to prove it.

  3. 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?

    Indeed, yet in a perverse sense it could almost make sense if instead of the already-raped taxpayer being raped again, the global cartel’s banksters were. They pocket all our money; now take it back from the nice folks who own all the ink and the digits and the rules.

    Just the thing a Progg POTUS would do.

    Except no.

    No, it’ll be more of the same as everything ratchets to the creature from Jekyl Island. Same as it ever was. All that matters down here at the base of the crumbling pyramid is if we proles can get some asshole legislation passed that provides some appearance of selective relief, all Obama-phone like.

    Of course, our level of ignorance almost warrants it…

  4. The house that Wife of Slog and I live in is owned free and clear, while the one still owed on is going on the block as soon as we can make it marketable.

    Somebody up there likes me.

Leave a Reply