Joe the Small Business Owner is a respected member of the Portland business community and does not wish to be identified because of the backlash against small businessmen and conservatives in this area. He sent me these thoughts on Senator Jeff Merkley's proposal to bail out homeowners (again). The Eugene Register Guard describes his plan:
Merkley proposes allowing all homeowners who meet underwriting criteria to refinance at 4 percent interest on a 15-year mortgage, or 5 percent interest on a 30-year note. Banks, credit unions and other lending institutions would write the loans. The mortgages would then be purchased by a federal Rebuilding American Homeownership Trust. The trust would finance the purchases with the sale of Treasury bonds.
Here is the issue with his project…run (and hold onto your wallet) when you hear the government say they will make money on something they are doing.
So here is my initial critique: under safe harbor would we be steering customers to a higher rate product? Then the only people who would do this is the very high loan-to-value loans because who in the hell wants 5% today when the market is at 3.5 ish..at no points…on a normal refinance?
Jeff, you're a master of financial wizardry, the 15 year loans are at 2.875%, so gosh, are we charging a higher rate to the people who can theoretically least able to afford it?
Further, this could be viewed as discrimination and steering and a violation of various regulations. Steering people who can least afford it to higher mortgage rates is legally shaky. A very big lender was just sued for discrimination and pulled out of the mortgage business in a big way.
Won't CFPB, Respa, Humda, Fair Lending, Ecoa, State, Federal regulators have a problem with this including whoever the hell administers Safe Harbor provision of Respa? Oh, but gosh it is a federal program so let's just make it exempt from every bureau you people have had us tripping over for the last 4 years.
Worse yet, this could this be the beginning of a new SUBPRIME MARKET that you claim to loathe! But now you’re the creator!
In short, you have no idea what the hell you're doing. Why don’t we not create a new federal bureau and just let Fannie Mae and FHLMC run the HARP program as a refi with no appraisals, regardless of loan to value. I like your charts, though, pretty colors.
And now you know why Joe the Small Business Owner doesn't want his name out there.