Fannie and Freddie Fixes

Wednesday, September 21, 2011

Professor of real estate and co-director of the Richman Center for Business, Law, and Public Policy at Columbia Business School, Christopher Mayer delves into the new housing numbers and suggests that allowing all homeowners to refinance their mortgages would help the market.

For more information about Professor Mayer's proposal, click here.


Christopher Mayer

Comments [24]

In response to David from Boise, please do not make assumptions about a person's situation based on the little information you hear on the radio. I'd rather not go into all the details of my personal life, but please trust me when I say that I was NOT one of "those people"-- whom so many seem to like to refer to--who took on home ownership on a lark, or who bought beyond her means. We live in a modest ranch with 2 bedrooms, and that's all we need for a family of 3. My husband and I are hard-working and honest people, as are most, I believe, who live in the USA. I feel blessed that we both are employed! I feel blessed by good health. I have NEVER looked to anybody besides myself to take care of my finances. I simply believe that so very many of us are victims of a situation nobody ever predicted (that housing prices could actually fall!). I am not looking for a hand-out. I am not looking to abdicate my responsibility to pay a fair interest rate on our home. The "playing field" seems to have been "leveled" for the bankers and Wall Street with the bail-out dollars we taxpayers provided. The "playing field" has been altered for credit card holders ( at least somewhat for the better!)
I am simply asking that the "playing field" also be adjusted to help people so they do NOT have to pay exorbitant interest rates on a home that may have fallen in value by $20,000, or in our case, by between $80,000 to $90,000! A 6% maximum interest rate in the current market would still bring PLENTY of money to the banks and the hedge fund managers and the mortgage "servicers," et. al. who sliced and diced our mortgage in the first place. For myself and my husband, even a modest interest rate modification would help us to pay for the upkeep of our home, help us to save more for our child's future college expenses, help us to go out to BUY items that are not luxuries, but necessities, like food (you've seen food prices lately?!) This BUYING will stimulate the economy...or so they say.... Thank you.

PS: I've been told by more than several mortgage firms that it was a quite common practice for mortgage providers to "package' people with 2 mortgages during the boom years.

Sep. 22 2011 11:26 PM
Anne from Middletown

I am the realtor who called in today. I don't consider my comment "looking for a bailout," but simply asking the bank to collect less interest on a loan. They would not be forgiving any principal and would still make quite a bit of profit on interest. When the government bailed out the banks, maybe it should have been a condition of that bailout that they adjust interest rates on existing loans to make them more affordable. We are talking about stimulating the economy. We are talking about keeping people in their homes and not glutting the market with short sales and foreclosures. That only makes the situation worse - I deal with it every day. Even when there is an offer on a short sale property, banks take so long to respond that buyers lose patience and move on to other properties, and the prices keeps falling. I am hopeful something positive will happen soon.

Sep. 21 2011 04:13 PM

A year ago we qualified to refinance under the Making Home Affordable program because my husband lost his job. We were not under water and had never made a late payment. In order to lower our payment by $200 per month our mortgage holder (BofA) wanted to increase our debt by about 5% or $7,000. How can charging points and fees for a mortgage they already held be justified?

Sep. 21 2011 02:27 PM
Boof from Connecticut

A year ago we qualified to refinance under the Making Home Affordable program because my husband lost his job. We were not under water. In order to lower our payment by $200 per month our mortgage holder (BofA) wanted to increase our debt by about 7%. This was because BofA charged points and fees for a mortgage that had always been in good standing with no late payments at all. Of course we said no thank you to their "help".

Sep. 21 2011 02:17 PM
David from Boise

The last caller, Donna, stated she was "forced" into taking out both a first and second mortgage when she bought her house. The fact is, nobody forced her. It was her own decision. And a poor one at that. If you need a first AND a second mortgage to buy a house, you can't afford it & that should be obvious.

Sep. 21 2011 01:26 PM
David from Boise

The last caller, Donna, stated she was "forced" into taking out both a first and second mortgage when she bought her house. The fact is, nobody forced her. It was her own decision. And a poor one at that. If you need a first AND a second mortgage to buy a house, you can't afford it & that should be obvious.

Sep. 21 2011 01:17 PM
JT Ensted

I agree with Marc from Brooklyn. The real estate broker who called in is out of her mind.

She and her husband take out a jumbo loan at the height of the market to remodel their house. They are making their payments at 6% and now are looking for some sort of bail out? Are you kidding me?

Sep. 21 2011 11:42 AM
jgarbuz from Queens

To Jim

Only in America. IN Israel I needed at least THREE cosignors to get a mortgage. And there is still debtors prison, so technically you can also go to jail for walking away from debt, though it is rarely used. But it happens.

Only in America can you "walk away" from stupid debt, because we abolished debtor prisons in our constitution. Probably because there so many colonial Americans sitting in English debtor's prisons :)

Sep. 21 2011 11:32 AM

More evidence that it no longer makes sense to manage your personal finances responsibly. Take as much risk as you can. If you succeed you win. If you fail, walk away or get bailed out. If you try to make an honest stand everyday you will be bled dry.

Sep. 21 2011 11:30 AM
Marc from Brooklyn

I'm sorry, but sometimes you loose on a bet. Some investments don't pan out. It happens. Now this realtor calling in -- who made her bones telling people that real estate can never go down -- got caught believing her own tripe. I fail to see how it's someone else's responsibility to bail these people out of investments that were entered into in an emotional state, aka "irrational exuberance."

Some days you get the bear, other days the bear gets you. Live with it.

Sep. 21 2011 11:26 AM
jgarbuz from Queens

Look, the real bottom line is this. Americans in good times bought more square footage than they really needed,and now that energy prices and other costs, and need of the government for revenues has increased, people are not going to have to move to smaller premises, mostly apartments. The good old days are over. The American dream has turned into a nightmare. The only answer is wake up, smell the coffee, and adjust your life to accord with reality,and forget the past!

Sep. 21 2011 11:26 AM

hope i live long enough to see what people *are* willing to take to the streets over... or at least call their congresspersons...

Sep. 21 2011 11:26 AM
jgarbuz from Queens

My GUESS as to why refinancing downwards has become more difficult, is probably because a lot of bondholders and mortgage holders push back politically, because many other things depend on those higher interest rates.

Lenders used be able to make up lost income from lower mortgage rates with other fees, but that is no longer the case. So I believe there is strong resistance against revising down the interest rates they offered at one time - if they can't make up the lost income in other ways.

Sep. 21 2011 11:22 AM
Marcos from the Bronx

The fundamental problem: Thanks to the successful attacks on working people's earning power over the past 30 years, housing prices are greater than working peoples earning power can bear in the long term. So either the working classes agregate earning power must increase or housing costs must fall a lot more in the future.

Sep. 21 2011 11:20 AM
Janet from Westchester

The banks - who caused this problem in the first place - are now sitting on millions and even billions of dollars of ill gotten cash and refusing to release it to help their victims.
Greed is disgusting!

Sep. 21 2011 11:19 AM
Jay from Minneapolis (formerly of Sunnyside)

What about a requirement that banks need to keep certain foreclosed properties in excellent repair and condition? In that case, not only would neighborhoods benefit from a decreased decine in property values, but banks would be incentivized to lend because the foreclosed homes would be an increased financial burden on their balance sheets.

Sep. 21 2011 11:18 AM
jacqui from Riverdale

Just contacted by Chase re my 7% coop mortgage. They pursued me to refi a HARP loan. I have TERRIBLE credit due to economy, but have not missed mortgage payments. They want no income verification, don't care credit tho no crisis exsists!

Sep. 21 2011 11:18 AM
Bryony from Park Slope

I have to say, as a renter, that this discussion reminds me a little of the corporate bailouts. In the prior decade, when homeowners were cashing in big on their real estate purchases they were not offering to give any of that back. So why should the taxpayers, including renters like me, bail out people who essentially made imprudent investments?

Sep. 21 2011 11:18 AM
Jackie Goodrich from Brooklyn

What is the real reason that it is so difficult to refinance a mortgage now, especially for those of us who are self-employed but show steady income? My husband and I were turned down for a refi of our Brooklyn house, appraised at three times the mortgage amount. My brother and his wife, in California, were turned down for a refi of $250,000 on their house, appraised at $1.6 million, and with savings that could easily make 2 years' worth of payments. Their income is around $100K and they have excellent credit, as do we. What gives?

Sep. 21 2011 11:18 AM
Walter from Essex County, NJ

We tried to refinance. We're in an underwater mortgage. But there are so many foreclosed homes selling below market value, we couldn't find decent comparables - therefore no refinance even with fabulous credit scores and ability to pay

Sep. 21 2011 11:16 AM from Queens

After WWII, the US strongly subsidized the housing industry, to get soldiers back to work fast. And then came the baby boom, which further stimulated housing.Then we began to let in a lot of immigrants, and that further stimulated housing, a lot of which was built by illegal immigrants.That is all over. There is no baby boom, but rather a baby bust. We need more old age homes than new houses. Of course the housing construction industry has do downsize, except for those building apartments and old age homes :)

Sep. 21 2011 11:14 AM

What I would like to see happening, and indeed what I expect to happen over next generation, is more tax being directly shouldered by renters and leasers in addition to "owners" or to be more accurate, deed holders.

Sep. 21 2011 11:12 AM
asdf from Somerset County, NJ

Here in NJ the housing prices are once again fine, in general, and seem fair. Fixed.

The problem for the would be buyer is the taxes are now much higher than mortgage payments and just going up. The risk is now the taxes and lack of trust in government officials to combine towns or otherwise take control of spending.

Sep. 21 2011 11:09 AM

Take the negative equity and delinquent subprime loans, novate the interest rate to 4.5 or 5% and term the loan out to 50 years. Monthly payment becomes more affordable, people can keep home and pay off principal 100% in the decades to come when they sell.

Sep. 21 2011 11:04 AM

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