This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Refinance Bill Drastically Alters Market

NEW YORK ( TheStreet) -- In a drastic effort to assist troubled homeowners, a California lawmaker plans to introduce legislation on Tuesday that would let just about anyone to refinance a mortgage into historically low interest rates.

Rep. Dennis Cardoza (D., Calif.) wants to allow all homeowners with traditional, 30-year fixed mortgages backed by Fannie Mae (FNMA.OB) and Freddie Mac (FMCC.OB) to refinance into market rates, according to spokesman Mike Jensen. Unlike other government initiatives to help troubled borrowers, Cardoza's idea would ignore income, credit history or loan-to-value ratios to lower the cost of owning a home for up to 30 million homeowners.

According to Freddie Mac, those mortgage rates are now running 4.37%, on average, down more than half a percentage point from April and far below rates in the years leading up to the mortgage crisis. Yet a recent study by the mortgage-information site Zillow found that nearly one-third of Americans can't qualify for a mortgage at all because their credit scores are too low, while more than half must pay above-market rates.

A sweeping plan by the Obama administration called "Making Home Affordable" sought to help mortgage borrowers by plunging hundreds of billions of dollars into the mortgage-backed securities market to lower rates, and incentivizing banks to work out loans for distressed borrowers. Yet the plan has come under attack for its limitations that excluded millions of borrowers, and for failing to move many from "trial" modifications into "permanent" ones.

Meanwhile, borrowers have complained - loudly and often - that they aren't getting enough help from big banks like Bank of America (BAC), JPMorgan Chase (JPM), Wells Fargo (WFC) and Citigroup (C), which service the vast majority of U.S. mortgages. From the point of view of banks and investors, it's not worth making a mortgage cheaper if a borrower can afford payments, and it's not worth modifying a loan if the borrower is likely to default anyhow.

The situation has become a sticky Catch-22 for Democratic lawmakers and the Obama administration. Democrats face a tough election battle in November and want to connect with Main Street voters. The public feels as though banks received hundreds of billions of dollars' worth of taxpayer funds, while ordinary consumers are still struggling with massive financial woes.

Cardoza is one of many House Democrats facing a challenge this fall. His proposal is part of a sharp change from his roots as a member of the "Blue Dog" coalition, a group of Democrats who insist on keeping the fiscal house in order. Although Cardoza voted for the $700 billion TARP bailout, stimulus funds and the Dodd-Frank financial-reform measure, he's also been railing against bank bailouts. He's also been issuing statements and funding for small-businesses and foreclosure relief.
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $93.24 0.00%
FB $117.81 0.00%
GOOG $701.43 0.00%
TSLA $211.53 0.00%
YHOO $36.94 0.00%


Chart of I:DJI
DOW 17,660.71 +9.45 0.05%
S&P 500 2,050.63 -0.49 -0.02%
NASDAQ 4,717.0940 -8.5450 -0.18%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs