Online Stock Trading - Obama Mortgage Buy-Out Plan Lifts Stock Markets
The Obama administration is apparently putting together a plan to subsidize mortgage payments for homeowners who have undertaken a standardized re-appraisal and affordability test. The DOW was down 210 points at the low point of the day but finished down just 7.
Art Cashin said yesterday that 822 was a critical point on the S&P - today it fell to 808 at one point before recovering to finish at 835 - so quite a recovery.
The Obama mortgage buy-out plan would be a major departure from existing plans which are only implemented once the mortgages are already in arrears.
The plan provides for mortgage companies applying a "uniform eligibility test" before a borrower goes into default.
The government would help subsidize a lower mortgage payment. The hope is that this will put a bottom on home prices.
Fannie Mae and Freddie Mac would apparently have a supporting role to play in the government's new plan, but they are not expected to expand securitization of any loans.
James Lockhart, the Fannie Mae and Freddie Mac regulator, said the mortgage finance industry was eager to have a standardized mortgage modification standard.
"I've talked to all the major servicers -- both the big bank ones and the big independent ones -- and they are all ready to go, they're chomping at the bit. The other thing they're asking for standardization."
Under the proposed plan homeowners would need to prove hardship to qualify for the loan renegotiation.
The thinking is that the mortgage market needs to put in a bottom so that people will once again be encouraged to consider real-estate investments.
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