TPM: New mortgage program (HARP) applies only to GSE loans (no bank bailout)

[banned from Kos]

http://tpmdc.talkingpointsmemo.com/2011/10/economists-white-house-mortgage-plan-is-a-good-but-modest-plan.php?ref=fpb

The most significant of these, announced Monday, will allow people with underwater mortgages to refinance at favorable rates if their mortgages are backed by Fannie Mae or Freddie Mac. It will expand the existing Home Affordable Refinancing Program to all underwater homeowners, leaving people with more money in their accounts every month, and thus, as David Dayen has pointed out, functioning as a de facto stimulus.

They are willing to take principal write-downs - thus why it is limited to GSE loans only.

[kentuck]

1. What is GSE?

??

[TheWraith]

2. Government Sponsored Enterprise. Federal mortgage banks, in other words.

The twelve Federal Home Loan Banks, Fannie Mae, Freddie Mac, Federal Farm Credit Banks, and Federal Agricultural Mortgage Corporation.

Between them, the GSEs hold something like $5 trillion in mortgages.

[kentuck]

5. Why are they holding $5 trillion in mortgages?

Did they sell the houses to these folks that are underwater? Or did they take over the mortgages from the banks with the guaranteed Fannie and Freddie programs? Did the banks lie about any of these mortgages they handed off to Fannie and Freddie?

Are taxpayers responsible for the entire $5 trillion in the "GSE's"? Just curious as to how these entities work?

[girl gone mad]

8. This bad private debt was transferred to the public balance sheet.

It was another massive gift to the banks.

[kentuck]

20. That's the way I see it also...

I would like to see another explanation ...

[TheWraith]

26. They're govt. sponsored entities intended to provide reliable low-cost mortgages.

As such, they back a huge number of mortgages in this country, particularly for people who need favorable terms that for-profit banks would never accept, such as farmers and low-income families.

Think of them as the mortgage lending equivalent of the US Postal Service; in essence, a government backed nonprofit group designed to provide services at low cost.

[girl gone mad]

28. It's "Government Sponsored Enterprises," not entities.

Fannie Mae and Freddie Mac were privately owned corporations and their securities carried no explicit government guarantee of creditworthiness before the bailouts.

[TheWraith]

30. I know what the acronym means. Apparently, I know them better than you do.

Because I also know that the housing bubble crash and the subsequent conservatorship has absolutely nothing to do with guaranteeing creditworthiness.

[girl gone mad]

36. Your post did not address my point.

Moreover, your first post on this subthread incorrectly stated that GSEs were non-profit.

"Think of them as the mortgage lending equivalent of the US Postal Service; in essence, a government backed nonprofit group designed to provide services at low cost. "

Based on this comment you have no business asserting expertise.

[TheWraith]

3. Kicked and recommended. So much for the fresh anti-Obama propaganda. nt

[TheWraith]

4. Aaaand the unrecs have gotten here. Must protect the narrative of OBAMA BAD!

It's amazing how much some DUers are desperate to help out the Republican and media narrative about how terrible Obama is.

[trumad]

6. Uh---yeah it is:

The newly expanded program would expunge legal liabilities associated with mortgages refinanced through the program for the original lenders of the mortgages. Each time a bank sent a loan to Fannie and Freddie, it certified that the loan met Fannie and Freddie's safe lending criteria. But many loans sent to the mortgage giants did not, in fact, meet those criteria. Currently, when borrowers default on those ineligible loans, the mortgage giants can "put back" the resulting losses onto the banks that pushed the loans.

Under the modified plan, "put back" liability at banks will be erased for any underwater mortgage that is refinanced through HARP, eliminating Fannie and Freddie's ability to sack lenders with losses in the event that the mortgage does not pan out.
http://www.huffingtonpost.com/2011/10/24/foreclosure-plan-obama-harp-refinancing_n_1028554.html

[banned from Kos]

9. That is only logical. The GSE's have finished their putbacks and once

the GSE writes down the principal in HARP to help the homeowner it owns the new re-fi.

[trumad]

12. Dude---really?

That's your reply to my post?

[girl gone mad]

13. This logic only works for one-percenter bankers.

For everyone else, it's a bad deal.

If borrowers go through HARP, but decide after several months that the modest monthly savings do not outweigh owing tens of thousands of dollars more than their home is worth, taxpayer-owned Fannie and Freddie will have to take the full loss. Even if the original loan was sent to Fannie and Freddie with false or fraudulent guarantees from the bank -- promises that may directly be tied to the borrower's current financial problems -- banks will be immune from liability. Fannie and Freddie plan to charge banks "a modest fee" to extinguish this liability, but the administration has yet to determine what that fee will be.

While the revised program seeks to lower mortgage payments for underwater homeowners, the program does nothing to address the core problem -- owing more than the home is worth. Though borrowers may save hundreds of dollars a month in lower payments by refinancing, they routinely owe tens of thousands of dollars more than their homes are worth, even after receiving aid.

"In most cases people would probably be better off walking," said economist Dean Baker, co-director of the Center for Economic Policy and Research.

http://www.huffingtonpost.com/2011/10/24/foreclosure-plan-obama-harp-refinancing_n_1028554.html

[banned from Kos]

14. Any new re-fi replaces the old one - Big Deal!

If the original one is fishy - don't re-fi with HARP! You know these are done on a case-by-case basis, don't you?

The GSE is not going to re-fi a non-conforming loan of theirs. They will put it back to the originator first.

[dkf]

29. "In most cases people would probably be better off walking,"

Exactly and they still have the option.

But if they want to keep their house, then they can get a lower payment. It's a win win for the homeowner.

The downside is to the government and the taxpayer, but maybe that is the incentive the banks need to do this. You don't think the banks are going to do it out of gratitude do you?

[kentuck]

31. What do you mean?

"You don't think the banks are going to do it out of gratitude do you?"

Why should they seek gratitude? They are the ones that screwed up.

[dkf]

38. They aren't seeking gratitude...we are. It's not something they are capable of.

[slipslidingaway]

33. Link needed to the write down under this program. TIA n/t

[dkf]

22. Yikes is this meant to help out the banks?

[TheWraith]

34. No, it's meant to help homeowners avoid foreclosure. nt

[girl gone mad]

7. This is blatant disinformation.

Luckily, DUers aren't as dumb as the people posting comments at TPM are.

[banned from Kos]

10. Would you care to inform us how TPM is deceiving us?

Please?

Or HUD?

[Name removed]

11. Deleted message

Message removed by moderator. Click here to review the message board rules.

[dennis4868]

15. You ruined the DU narrative...

of the Mortgage program...IT'S A FUCKING BANK BAILOUT DAMN IT! That's what we have to keep saying here god damn it (even if it's not true)...this is DU for crying out loud, we need to make shit up here.

[kentuck]

17. Can you explain how it is not a bailout?

Can you explain it in simple terms for us simple-minded folks?

[dennis4868]

19. go read Krugman, he can explain it better than me.

[kentuck]

21. Krugman has a lot of articles on different matters...

Do you have a link?

[TheWraith]

32. Krugman: "Joe Gagnon, someone I take very seriously.... thinks that this could be huge"

Krugman: "Joe Gagnon, someone I take very seriously. And Gagnon thinks that this could be huge, especially if combined with a Fed program of buying mortgage-backed securities. He’s talking maybe 4 million jobs!"

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=433x805365

[Skidmore]

18. Apparently so.

[trumad]

23. really...then

Read this...

http://news.firedoglake.com/2011/10/24/fhfa-refi-plan-helps-banks-reduce-liability-on-bad-loan-origination/

Nobody is making shit up.

[kentuck]

24. You must be trying to make Obama look bad

It makes my head hurt when I have to think...or read...or comprehend... :sarcasm:

[dennis4868]

25. yes you are making shit up....try again!

[TheWraith]

35. Nobody other than FireDogLake is making shit up.

But hey, we can always trust a website whose owner openly works to elect Republicans. :eyes:

[girl gone mad]

37. What is FDL making up?

Care to be specific?

[Crabby Appleton]

16. There is no principle write-down in this program.

[banned from Kos]

27. That makes sense. Details were light as I got to this today. n/t