But with mortgage rates rising again, how much of a bang for the buck will banks and the administration get out of these refi programs?
Well let's look at what's pushing rates up:
"First, Europe’s alleged debt bomb solution is pulling dollars out of Treasuries resulting in rising Treasury rates .. and mortgage rates," says Dr. Anthony Sanders, Professor of Finance at George Mason University. "Second, FHFA [Fannie and Freddie's regulator] is increasing Guarantee Fees for Fannie and Freddie loan purchases/insurance which adds to the mortgage rate. Third, mortgage rates have a risk premium component that follows the VIX (CBOE Volatility Index on the S&P500 ). And under just recently, the VIX has been rising."
That basically means that any benefit of these so-called "streamlined" refis by Fannie and Freddie or by a bank/AG settlement, "will have small impact and less desirability for the consumer," adds Sanders. That is if those borrowers can actually qualify.
On the other hand, Guy Cecala of Inside Mortgage Finance, argues that the bulk of the borrowers targeted by these refi plans have interest rates between 6 and 7 percent now. "I think the idea is that the group of borrowers the administration/AGs are looking at haven’t been able to refi for several years and would greatly benefit even if they “only” got a FRM at 5 percent. So relatively small changes in rates don’t impact the overall goal."