2009-02-19 — businessinsider.com
The Bottom Line: In the market where homeowners will be most likely to qualify for refinancing—subprime—it’s not clear that refinancing will do much to prevent defaults. In markets where refinancing might have a better chance of preventing defaults, only about half the mortgages will qualify.
This is so stupid. The emphasis should be on principal reduction, not "refinancing" (lower interest rates). Refinancing doesn't solve the negative equity problem, so people stay unduly locked in their homes (which, arguably, many couldn't afford).
Imagine if the TARP funding had been directed towards banks taking principal reductions on these loans. Of course, that's not why banks wanted TARP: they wanted it to plug rapidly expanding holes in their derivatives exposure. And Congress, sadly, obliged, perhaps in no small part due to Paulson's veiled threats of martial law...
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