Someone can correct me but I am pretty sure that April 9th is the date that there will be a hearing to review Barney Franks proposal to permit the FHA to provide up to 300B in loan guarantees for refinancing. Basically in exchange for having lenders accept substantial write-down of principal, lenders would RECEIVE payment fom the proceeds of a new FHA loan if the restructured loan resulted in terms that the borrower can reasonably be expected to pay.
Let’s not forget that the government would be on the hook for these loans.
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I hate posting long quotes but this one from Doug Noland was good regarding last weeks shenanigans…
“As far as I’m concerned, much of the U.S. mortgage market was this week essentially Nationalized. I’ll take the dramatic narrowing in agency debt and MBS spreads as support for this view. Additional support arrived from comments from Mr. Lockhart, Mr. Paulson, and actions by the Federal Reserve. Having lived contently for years with the markets’ interpretation of the (grey-area) “implied” government backing of the GSEs, our policymakers are surely today satisfied with the inferred market acceptance of mortgage industry Nationalization. To be sure, the Fed’s Splashy “Sunday Night Special” bailout of Bear Stearns is rather trivial in both its implications and consequences when compared to Thursday’s Quiet Coup.
Let’s look at the Fed’s denial one more time: “The Federal Reserve is not involved in discussions with foreign central banks for coordinated buying of MBS (mortgage-backed securities).”
Reading carefully, that statement is not a denial of having discussions (I presume they are). It is only a denial of “coordinated buying of MBS”. What about uncoordinated buying? Still, such action would have to come from Congress, not the Fed.
And (for now anyway), I doubt that Fannie and Freddie are going to go on a garbage mortgage gobbling spree. Just because there are new higher limits at Fannie and Freddie, that does not mean that Fannie and Freddie will be taking every loan in sight.”
