An automatic refinance program that would give millions of borrowers today’s lower rates might be under consideration by the White House.
A story about a hypothetical automatic refinance program was published a week ago by Mortgage Daily.
The story suggested that borrowers in agency mortgages who have not been 30 days past due during the last 12 months be automatically approved for a refinance at today’s low rates regardless of their home values, credit or income.
While some experts interviewed for the story voiced concern for current investors in agency mortgage-backed securities who would be forced to move out of higher-yielding investments into investments at today’s low yields, there was no disputing the positive economic impact from a program that would free up more disposable income.
An article Wednesday in the New York Times indicated that the Obama administration is considering a proposal that would enable millions of borrowers to refinance at today’s rates. Citing two unidentified people briefed on the proposal, the Times said the proposal was among several being considered by the administration.
The program could help borrowers save an estimated $85 billion a year, according to the story. Investors might already suspect a plan is in the works based on a sharp drop in agency bond prices this week.
Auto-Refi Could Stimulate Economy
A federal program that automatically refinances agency mortgages could inject some much needed cash into the economy by passing on the low cost of U.S. borrowing to homeowners — leaving them with more disposable income. But such a proposition would be loaded with hurdles and might have more luck as an administration initiative than as federal legislation.