A lower rate won’t buy most of us much. 3 months of cash cushion might. Lets take Coronita’s argument for a test drive. Without giving details I’ll just say, my mortgage rate isn’t going to go much lower and certainly not enough to justify a refi. My family income is down quite a bit, though as of right now I’m certainly not looking over the abyss. I do have savings, I’m not a retard. However those savings are invested, nobody just keeps their money in a mattress not earning interest, the Fed has made sure of that.
So rubber, meet road. I apply for forbearance and miracle of miracles I’m granted it. I get 3 months to save up money I would have spent on my house payment. Sure in 3 months I’ll have to pay it, but 3 months is a long time in Corona-ville. I’ll have thousands more dollars of dry powder when I have to make a decision. Do I pay the money back or hold onto it and try whatever comes next.
What comes next you might add? I don’t actually know, but I suspect. If you were paying attention last time around the Fed played kick the can by allowing the banks to FLAT OUT LIE about their accounting. It also gave them massive cash infusions at below market rates. No perp walks, no cram downs, nothing. This time around the pressure is already mounting to make the relief more consumer oriented. I could absolutely see the govt saying, ok you’re arrears, we’ll buy down a bit of your mortgage or re-finance you at even lower more ludicrous interest to keep you paying something. It would allow the Fed to buy even more paper and not punish any of the people who need a giant financial ass kicking.
So in my fantasy world I’d get 3 months deferral as an intro to a refinance. Now if I were low on equity that is absolutely a bet I’d take. Especially if I were a student of real estate recessions and knew that bottoms were years away.
So why wouldn’t I take the forbearance? If there is zero or low cost it seems like nothing but upside. I mean seriously if you are arguing moral hazard you simply have not paid attention to the entire last decade. Every single entity that was on the Fed bailout tit has become larger and more systemically important at your/my/our expense. You aren’t going to fix that with elections, so the best you can do as a moral human is role with it and try not to drown in what’s coming.
Josh
