Thursday, July 29, 2010

Re-Fi the World, Re-Fi the Children

Another setback today in the remodel as the electrical inspector decided he was not going to come in today. Hey, it is beach weather right? Unreal.

I should be doing a Friday Night post and as always get your requests in. Already have a couple of good ones.

I did get one interesting post on my Thought Experiment last night, but only one. It is beach weather right?

Re-Fi the World, Re-Fi the Children
You will need this song (Steve Perry's part is the BEST!) and then switch the words:
"Re-Fi the World, Re-Fi the Children;
Free rides are sure to make a brighter day;
So let's start handing"


Up front I have to tell you bond duration issues, pre-payments, held to maturity off sets and other bond stuff is way over my head and thus I cannot really comment on the nuts and bolts of today's biggest story. Luckily there are many smart folks out there that can help!

The big "rumor" that made pages all over the place was a proposal to do a blanket re-finance (re-fi) for ALL Fannie, Freddie, and FHA mortgages at the low rate of 4.5%, at least until that drops below 4% soon! I am always cautious now whenever I hear the term "slam dunk" if you know what I mean, so here is the proposal (via CR thanks to Kid Dynamite):
If it were possible to inject a significant amount of stimulus into the household sector of the US economy over the near term and this stimulus had zero impact on the budget deficit, did not require an exit strategy, did not distort the markets, and took effect almost immediately, wouldn’t it seem like a slam dunk? Such an option actually exists in the form of a change to mortgage refinancing requirements. The Fed – and market forces – have pushed mortgage rates to historic lows. However, many homeowners are unable to take advantage of the low rates because they are blocked from refinancing by a high loan-to-value ratio (LTV), appraisal problems, unemployment, and low credit score, etc. This problem could be addressed if the Government merely recognized the guarantee that already exists on the principal value of a very large portion of the mortgage market – specifically, the mortgages that are backed by Fannie, Freddie and Ginnie – and acted to streamline the refi process

The above is from a paper written by Morgan Stanley analysts (sorry no link yet) called "Slam Dunk Stimulus".

Now we will not bother talking about such things as moral hazard, fairness, or anything related because if we stop helping home-debtors the terrorists WIN!

Here is where I have to point you else where. Calculated Risk has an extensive item up on this topic from Tom Lawler which is comprehensive. Again here is the link. I will not even snippet the article as it's really too complex and well written.

Simplicity can be provided by Zero Hedge, as always, and with fun titles like:
Already Bought A 3D LCD In Anticipation Of QE "Instarefi" 1.999? You May Want To Consider A Refund
There is a great list of consequences at the link and it's also a must read.

In closing I cannot help but wonder how in the world bonds have dislocated from stocks so much, and thus 30 year mortgage rates are at 4.5%!? It almost fits too perfect. Perhaps some of the roll risk is already gone via re-fi at such low rates? Something smells bad and I have a few ideas as to what it is but I need to work on it a bit.

I would add that I have long argued low rates are now STRUCTURAL to the economy and I often have brought up that a fixed government backed mortgage rate (from 4-5%) WOULD BECOME POLICY but that's just to remind myself!

Have a good night.

19 comments:

GawainsGhost said...

Ha ha ha. Welcome to the wonderful world of remodelling, GYC.

When I remodelled my condo, it took three months. And I've had to extend more contracts on repos because the repairs took too long than I care to remember.

Anyway, yeah, it is a mystery. Mortgage rates the lowest they've been in decades, and sales are slumping. It's called deleveraging. Everyone's doing it.

Lurker said...

Be sure to read Mish's post: "Bill Gross Ponders 'Deep Demographic Doo-Doo'"

getyourselfconnected said...

WOWZA!
A Gawains sighting!

I thiught you were kidnapped by angry realtors! I had ransom money ready to pay!

Where you been?

Lurker,
read it, great stuff but Bill Gross = Glenn Beck; both selling sumthin
Please do more than request songs man! You got plenty to offer.

watchtower said...

GYSC

Would you consider putting this 'Bruce Lee: Enter the Dragon Top Ten Moments' vid on for Friday night?

http://tinyurl.com/3alsyfs

getyourselfconnected said...

At this point I would consider anything.

Dokemion said...

Those who are behind on their payments will need to consider the Home Affordable Modification program. In order to qualify for this program, the monthly payment on the mortgage must be equal to or more than 31 percent of the household’s gross monthly income, and the homeowner must not be able to afford the current mortgage payment due to a change in income or expenses.

GawainsGhost said...

Well, GYC, if you must know, I've been frantically filing accuracy reports. This is a feature on Navica MLS by which a realtor can file a report on a listing that contains inaccurate information. Problem is it's done anonymously.

We have to put a lot of information on MLS listings-- pictures, lot size, square footage, bedrooms, baths, special features, zoning, schools, grid page, directions, and so on. If the information is inaccurate or incomplete, and an accuracy report is filed, the realtor has two days to correct the listing. Or the board will shut down MLS access for the entire office. Then only the primary broker can make the corrections by calling the board.

Well, some stupid realtor filed an accuracy report on one of our listings, and I didn't correct it because the accuracy report itself was inaccurate. Said that we had the wrong lot size on this house. Um, the house is on two lots, idiot. The listing is accurate. Kicked the whole office off of MLS. Now no one can get any work done until my mother calls the board and corrects the problem.

This really pissed me off. So I decided to become a suicide accuracy report filer. Yeah, that's right, I'm a terrorist. In my spare time, I just randomly search through MLS looking for listings to file accuracy reports on.

No picture? Accuracy report! Misspelled street name? Accuracy report! Wrong directions? Accuracy report! I can do this all day and all night. And I'm not going to stop until I've kicked every other office off of MLS.

I am the angry realtor.

getyourselfconnected said...

Gawains,
I was rolling this morning when I read that one! Awesome job! That is something I would do for sure.

GawainsGhost said...

By the way, for Friday Night Entertainment, I'd like to suggest some Stevie Ray Vaughn.

http://www.youtube.com/watch?v=tWLw7nozO_U

Ever seen someone play a guitar behind his back before?

getyourselfconnected said...

Sure I have, Marty McFly in "Back to the Future", HAHA!

scharfy said...

I know i'm not ranked high enough to suggest friday hits but this bertie higgins classic must be considered?

http://www.youtube.com/watch?v=Ru2tsT32pHA

Key Largo...

getyourselfconnected said...

scharfy,
not sure where the ranking idea came from, I gladly accept all requests, but not all can make the show. As it is your pick happens to be a song my Dad used to play on the 12 string guitar so I would imagine it will make the cut!

scharfy said...

Thanx man. (for some reason I thought you had to "win" the song requests by intelligent posting, and I am but a lurker, oh well )

FYI

I have read you are a boxing fan, as am I. As it happens I stumbled on this article at Ringside Report of all places, an Interview with Bertie Higgins. It lead me to request the song on your blog. Bertie, he's a boxing fan..

http://ringsidereport.com/?p=2087

funny stuff..

getyourselfconnected said...

scharfy,
yes indeed I am a huge boxing fan, but my interest really died off around 1998 so anything after that I have little idea about. I do love boxing though, what's your favorite fight?

scharfy said...

Riddick Bowe Evander Holyfield Trilogy gives me goosebumps to this day. Any one of those will suffice and of course the famous round 10.

Big james Toney fan, despite his antics.

Of course Gatti/Ward - what can you say?

True though, the 90's was unknowingly a golden era for boxing.

Other notable favs:

Pernell whitaker - just so pure
Ray Mercer- brutal pucher and Army Veteran


My sleeper pick Gerald "G man" McCellan.

:Check out the you tube on this guy if you never have:

One of the most brutal punchers of all time (from my hometown) and was paralyzed in a fight with Nigel Benn. His punching was ferocious.

Any comments on your tastes in fighers?

getyourselfconnected said...

I could go on all night but...

My favs were:
Marvin Hagler
Alexis Arguello
Roberto Duran
Julio Cesar Chavez

Hagler vs Hearns was obviolsy an epic, but Aaron Pryor vs Arguello in their first fight may have been the best fight I have ever seen.

Chavez knocking Taylor out in round 12 was wild to see live on TV!

I remember when Pernell Whitaker beat Greg Haugen for the title, what a performance.

I know of McClellan. Nigel Benn was a crazy man! Have you seen the last fight between Watson and Eubanks? Sad ending but what a finish.

Ok, gotta post!

scharfy said...

AHHHHHHHHHHHHH aaron pryor.

HAWK TIME!!!!!!!!

He was coked out of his mind for that fight. What a war...

Sad about Arguello.

getyourselfconnected said...

Yeah, I actually got to spend an entire evening with Alexis at a charity boxing event. He talked to me all night and he would only say "Pryor won, I lost, that is all" but it was clear Pryor was given something. Alexis hit him with a shot in the 13th round that put Pryor's head on his own back and he did not even blink. Sure, no drugs! What a class act Arguello was.

getyourselfconnected said...

Save any new comments for the next post, up in a bit.