2012-08-13nytimes.com

``With principal writedown no longer an option, the government needs to find a new way to facilitate mass mortgage refinancings. With rates at record lows, refinancing would allow homeowners to significantly reduce their monthly payments, freeing up money to spend on other things. A mass refinancing program would work like a potent tax cut.

...

Senator Jeff Merkley, an Oregon Democrat, has proposed a remedy. Under his plan, called Rebuilding American Homeownership, underwater homeowners who are current on their payments and meet other requirements would have the option to refinance to either lower their monthly payments or pay down their loans and rebuild equity.

....

A government-financed trust would be used to buy the mortgages of homeowners who had refinanced at an interest rate that was about 2 percentage points more than the record-low Treasury rates at which the government borrows. This would generate enough interest income to cover the costs of any defaults, administration of the trust and other expenses. Families would have three years to refinance; after that, the trust would stop buying loans and eventually wind itself down as homeowners repaid their loans.


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