President Obama’s plan will make it easy for homeowners who are underwater on their mortgage to refinance into a low-interest mortgage.
This is pushing down the value of mortgage-backed securities and increasing pressure for a rise in mortgage interest rates, which is presumably the opposite of what President Obama wants.
Politicians plan. The market laughs.
Dow Jones reports: But unlike recent changes to the Home Affordable Refinance Program, the changes sought by Obama would likely require legislation that analysts said would have little chance of passing in an election year.
“MBS are only slightly underperforming Treasurys this morning indicating the markets are skeptical of any broad refinancing being approved by the FHFA or Congress,” said Bryan Whalen, a managing director and portfolio manager at TCW in Los Angeles.
Barclays Capital said it wasn’t raising its forecasts for mortgage-bond principal prepayments, noting the plan may be “dead on arrival” in Congress.
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