How Do You Refinance A Mortgage On An Underwater Home?

Why would any bank refinance a mortgage on an underwater home? It makes no sense. But Senator Barbara Boxer has found a Republican to cosponsor legislation to do just that.

Economist Mark Zandi supports the proposal.

Banks are going to want guarantees before they extend such refinancing.

Bloomberg reports: Of 27.5 million mortgages owned or guaranteed by Fannie Mae and Freddie Mac, more than 8 million carry an interest rate at or above 6 percent, according to Boxer, whose proposal would only apply loans backed by the companies. The average offered on a typical new 30-year loan was 4.6 percent last week, according to data from Freddie Mac.

This program is likely to raise mortgage interest rates for new mortgages.

If the program were broadly used, rates on new mortgages for home buyers and refinancing may be driven up, he said. That’s because the supply of low-coupon securities would increase and mortgage-bond investors would demand greater yields to compensate for extra uncertainty about repayment patterns, he said.

About Luke Ford

Raised a Seventh-Day Adventist at Avondale College in Australia, Luke Ford moved to California in 1977. He graduated from Placer High School in 1984, reported the news at KAHI/KHYL radio for three years, attended Sierra College and UCLA, was largely bedridden by Chronic Fatigue Syndrome for six years, and converted to Judaism in 1993. From 1997-2007, Luke made his living from blogging. Living by Beverly Hills (Alexander90210.com), he now teaches the Alexander Technique (moving the way the body likes to move). Lessons cost $100 each and last about 45 minutes. In 2011, Luke completed a three-year teaching course at the Alexander Training Institute of Los Angeles. His personal Alexander Technique website is Alexander90210.com. Luke is the author of five books, including: » The Producers: Profiles in Frustration » Yesterday’s News Tomorrow: Inside American Jewish Journalism
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