More Hot Air From the White House
Is the White House finally getting serious about helping underwater homeowners refinance their mortgages?
Not judging by the bond market.
Yesterday, mortgage-backed securities issued by Fannie Mae and Freddie Mac jumped in price.
Given how refinancing affects these bonds — borrowers who re-finance pay off their expensive loans, reducing investors’ return — the price jump reflects skepticism that large numbers of homeowners will actually refinance in response to the White House’s latest push.
“There was a big fear that you’d see a big rise in prepayments, and, based on what [Fannie Mae and Freddie Mac] said, that has receded. It doesn’t look like they’ve done anything big here.”
–Todd Abraham, co-head of the government-and mortgage-bond group at Federated Investors in Pittsburgh; The Wall Street Journal (11/17/2011)
So, there you have it.
Don’t listen to what the White House says.
Watch what the bond market does.