DISQUS

Fielding Mellish · 10 months ago

The Fed's unprecedented foray into manipulating mortgage rates, while costing $56 billion so far (and $444 B left to go), has not nudged many people into buying a home (for the obvious reason that prices are still falling). What's also interesting is how little refinance borrowers' cash flow is affected by refinancing: If someone has a $200k loan at 5.875% with 28 years left and they refi onto a $205,000 30 year fixed @ 4.875%, their P&I drops from $1,214.53 to $1,084.88. So their payment goes down by $130. That's a fairly minor payment adjustment, in my opinion. It certainly wouldn't incent many people to go buy an SUV and save GM from bankruptcy. Not to mention that the only people who qualify for conventional refinances nowadays are already sitting pretty with equity in their homes.

Whenever the Fed is done buying agency MBS's, rates will spike up, which means that the present value of those $500B in MBS's will drop to...?...$450B? That's a pretty big cost just for the government to subsidize the refinance rates of people who were already in pretty good financial shape - with lots of equity in their homes.

Constantine von Hoffman · 10 months ago

Who is this Fielding Mellish person and what does he keep saying things I agree with? That's the real mystery.