I am no expert in this. I really have no experience in this, so I can just tell you my opinion. The point of this bill isnt to refi bad morgages from the bubble and put the added risk on the american taxpayer. The point of this is three fold.
1) This is about the apperarence of doing something, this is an election year, and the pols need to be infront of the talking heads telling everyone that they got this one as much as possible.
2) Spurring demand. The idea is that there are alot of people who want to buy, but think price drops are still out there (they are correct) and dont want to catch falling meat cleavers. This is the cattle prod to get them off the fence and buy now, “before they miss the future appreciation.” Remember, CA is expected to see a “mini-boom” according to the NAR as soon as this passes.
3) It is convient that this time line starts at the bursting of the bubble. The worst loans were written in late 2006 early 2007, so dont count. The rest of the truly horrible morgages dont qualify on the basis of income, LTV, etc. This will lower the default rate on the morgages actually purchased by the GSE’s, giving them ammo to make these prices longer term. You didnt think they would actally let the conforming limits fall back to 417000 again did you?
The NAR couldnt get this past congress, unless it is a stimulus to an ailing economy in an election year. However once it is inplace, it is alot easier to “keep the status quo” or “not do anything to hurt the US economy”. And if they get to help the ailing banks and wall streeters by takeing morgages they shouldnt be, that is just improving liquidity right? no harm done…..
