Should the U.S. Government Refinance All Mortgages at 4%?

Fixing the Mortgage Finance Market was the talk of the week. HUD held a huge half-day seminar to try to get a sense of how all the players feel about the mortgage market and what role Fannie Mae and Freddie Mac should play. The event was broadcast live, on the HUD site. We did live blogging of the governments Fannie Mae/Freddie Mac event.

Then, came the suggestion from Bill Gross, the PIMCO bond market maven, that the government should think about refinancing all performing loans at 4 percent, saving homeowners $46 billion in payments per year, which will give a boost to the economy. Will that work?

It’s an interesting concept. Imagine, if you’re on-time with your loan payments, the government would refinance your loan into a new 30-year mortgage at 4 percent. The loan would be government-backed, but you’d actually have a better loan quality because only homeowners with performing loans (who were on-time with their payments) would qualify. And, because they’d be paying significantly less each month, there would be more money for the economy.

Gross said that it would be a great solution for a Congress that is fractured and that can’t abide the thought of increasing the deficit, even if it means getting the economy going again.

It’s clear to almost all that the housing industry has completely fallen off a cliff. I’ve been talking for two years about how the government had the housing industry on life support. Pull back the support – like cutting off the $8,000 first-time home buyer tax credit and $6,500 long-term home buyer tax credit – and home buyer demand falls 50 percent, even with mortgage interest rates that are low as they’ve been in maybe 60 years.

The housing industry has drunk its own Kool-Aid (R) for a long time. Maybe too long.

Please leave your comments on the below.

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READ MORE ON THE EQUIFAX.COM PERSONAL FINANCE BLOG

Here are the links to this week’s posts on the Equifax Personal Finance Blog

Tax Tips for Commercial Real Estate Owners

Can Equifax Decline My Credit Application?

6 Biggest Estate Planning Mistakes You Can Make

Insurance Agents vs. Insurance Websites: Where Will You Get The Better Buy?

Is Now The Right Time To Buy A Vacation Home Along The Gulf of Mexico?

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2 Responses to Should the U.S. Government Refinance All Mortgages at 4%?

  1. Gene Poschman says:

    We have been trying to get our loan modified for over a year. We are at 6 % and we do not qualify for a loan at 4%, because I am unemployed. We match all the federal criteria, but strange enough, if the government would refinance our home at 4% we wouldn’t need a loan modification at all. We are current for now, but I am not sure for how much longer.

  2. Dorothy Kaminski says:

    LUV it when someone comes up with CREATIVE ideas! I would luv a 4% mortgage.

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