The Administration is playing the HARP once more

Today, in Las Vegas (appropriate place to announce this new gamble of taxpayer money), the President announced a reworked HARP (home affordable refinance program) that will allow for quicker/easier refinancing of underwater mortgages...no longer will HARP be encumbered by the measly 125% of market value...all restrictions are off!

Here are some of the details as reported earlier today:

• The changes announced Monday are intended to benefit homeowners who have continued to make mortgage payments, even as home values have sunk, but lack at least 20% equity to refinance and take advantage of today's low interest rates. The revisions could also help some owners who are underwater, owing more than their homes are worth.
• To be eligible, homeowners must have a mortgage sold to Fannie Mae or Freddie Mac on or before May 31, 2009. They also must be current in their payments and without any late payments in the past six months.
• Freddie and Fannie have also agreed to eliminate some fees on loans that run 20 years or less and lower them on longer-term mortgages. The exact amount won't be known for several weeks.
• In some cases, borrowers will also no longer need a new appraisal on the home, which should reduce refinance costs.
  DeMarco says the changes will not only help borrowers but will also lower risk to Freddie and Fannie because fewer borrowers will eventually default. (they actually think that refinancing a 50% underwater loan to save a few points off of an interest rate will have any measurable effect on default rates? they need to talk to the average person on that one). Freddie and Fannie own or guarantee almost half of all U.S. home loans and were taken over by the government in 2008 to prevent their collapse.

So...lets say you bought a $300,000 home here back in 2005. Financed 100% of it,as was all the rage back then...your payments of P and I are about $1800. Fast forward to today...that $300,000 home is now worth about $150k...you are upside-down $150,000. BUT, they'll refinance you at about 4.11% today...a payment of about $1450. Now, a $350.month savings is nothing to sneeze at...but is it enough to keep you writing those checks every month while still $150K upside down?

And here is the kicker: DeMarco says lender resistance is less likely now than in the past because there's less risk that lenders will be asked by Freddie and Fannie to take back loans that go sour if the mortgage-finance giants find that lenders made mistakes when they made the loans. So...what this means is that all of those millions of underwater loans with faulty paperwork (transfers/falsified affidavits and signatures etc) under risk for a buy-back call from Fannie and Freddie can now be wiped clean and fresh with a new refinance loan package that Fannie and Freddie will now give their blessings to and fully assume responsibility for (because it was re-financed and re-written to their new guidelines). Sooo...all those 'future defaulting loans' will now be fully on the backs of the taxpayers! Another back-door bank bailout.

As I have posted before...there are much better ideas for fixing this housing problem...I posted my own about 18 months ago...

But...it'll buy a lot of votes before anything hits the fan!

Is a SLARP next (student loan affordable refinance program)?

And that's just MY jaded view of it...

Thanks for reading,

Steve