yeah, I _know_ you don't want a bailout
May. 10th, 2008 06:00 pm![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
walkitoutAnd good news for you! The House bill is probably going to die a sordid and slow death between Bush's threat to veto, and Bernanke and Paulsen doing waffle imitations on whether they support/fail to oppose it.
From the WSJ today, here's what Fannie Mae is _going_ to do, vs. what the bailout bill would do:
"The plan is the latest twist in efforts to contain the surge in foreclosures on homes in much of the U.S. It differs from a bill approved by the House on Thursday that would authorize the Federal Housing Administration to insure loans for distressed borrowers only after the lender has written down the principal -- something many lenders are reluctant to do. Fannie's refinance plan would result in new loans of equivalent size, leaving the borrower underwater but giving him or her a lower monthly payment or at least a fixed rate."
Right. What a great idea this is. Yay, reduced and/or fixed rate. But refi on someone underwater and guarantee it through FHA which is essentially us as taxpayers. And this is _better_ than the bailout bill? Not.
ETA: To be fair, there's a cap.
"The program will allow refinancing loans of as much as 120% of the property value. Fannie officials project that 150,000 households could qualify for such refinancings." Unclear whether this applies to conforming, pseudo conforming, jumbo, wtf loans.
From the WSJ today, here's what Fannie Mae is _going_ to do, vs. what the bailout bill would do:
"The plan is the latest twist in efforts to contain the surge in foreclosures on homes in much of the U.S. It differs from a bill approved by the House on Thursday that would authorize the Federal Housing Administration to insure loans for distressed borrowers only after the lender has written down the principal -- something many lenders are reluctant to do. Fannie's refinance plan would result in new loans of equivalent size, leaving the borrower underwater but giving him or her a lower monthly payment or at least a fixed rate."
Right. What a great idea this is. Yay, reduced and/or fixed rate. But refi on someone underwater and guarantee it through FHA which is essentially us as taxpayers. And this is _better_ than the bailout bill? Not.
ETA: To be fair, there's a cap.
"The program will allow refinancing loans of as much as 120% of the property value. Fannie officials project that 150,000 households could qualify for such refinancings." Unclear whether this applies to conforming, pseudo conforming, jumbo, wtf loans.
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no subject
Date: 2008-05-11 01:05 am (UTC)difficult question to answer
Date: 2008-05-11 01:41 am (UTC)1.2X = 417000 (so max out the loan, which is a worst case, ASSUMING these are conforming; if they are pseudo conforming or jumbo, this is _not_ the worst case).
But what we really want to know is what is 417000/1.2 - X, which is 69500 (how much is the over-value).
Multiply that by the projected homeowners who _could_ take advantage of this, and it looks like 10.4 billion or so. That's the amount of money being loan-guaranteed/refied over and above the current value of the home, which a lot of people think will continue to drop for a while, but will presumably eventually recover, but with an unknown foreclosure rate despite this attempt at keeping people in their homes. The Bear Stearns swap was on the order of $30 billion.
I have _no mortal clue_ if the math I did is (a) reasonable or (b) done correctly (I would not be surprised I screwed up turnign it into algebra, or if someone thinks my assumptions are wrong). Among other things, I'm treating only the 20% over value as "bailout" cost. Arguably, substantially more should be treated as "bailout" cost, but I don't know what. You would about double the cost if you assume the LTV on the underlying new loan "shouldn't" exceed 80%.
In any event, the Bear Stearns bailout (which was massively unpopular) is substantially greater by any reasonable comparison.
Of course, I don't know if that's the comparison you were thinking of. For example, the House bill includes, IIRC, the ability for home builders to extend backwards in time their current losses against previous years profits (4 years instead of the current 2, I think) for tax purposes. I have no mortal clue how to evaluate the dollar value there.
Re: difficult question to answer
Date: 2008-05-12 01:33 am (UTC)