A relative of mine just got this in the mail from Bank of America Home Loans (ie: Countrywide) offering to refinance his home loan with a ten-year interest-only option ARM (well, it’s unclear if it’s actually an ARM or if it’s a fixed-rate mortgage, but I’d bet on the former). Also on offer: a second mortgage and a regular ARM.
Mind you this isn’t one of my Oklahoma relatives getting this offer in their non-bubble market. This one’s here in Seattle, a market that’s been hammered pretty bad in the crash (down nearly a quarter) and where house prices are still falling at an 8 percent clip year-over-year.
And my relative’s existing mortgage isn’t with BofA, so it’s not like they’re pulling a Wells Fargo here and trying to paper over losses and hoping the market rebounds in a decade.
So here’s a question for housing reporters out there: Why is BofA doing this and how widespread is it?
I wonder whether your relative is getting an offer under Fannie Mae's Refi Plus program or something similar Freddie may offer...see guidelines here:
https://www.efanniemae.com/sf/mortgageproducts/pdf/whatsnewproduw.pdf
Perhaps what we're looking at is the familiar MBS pass-the-buck problem, government-sponsored edition. Fannie promises to buy mortgages underwritten under these refi guidelines (guidelines likely developed with the intent to prop up real estate values), the Fed buys the securities, and BoA doesn't have to care what the home value trajectory in Seattle or anywhere else looks like. So instead of Wells Fargo kicking the can down the road, it's the FHFA.
#1 Posted by Alyssa Katz, CJR on Thu 25 Feb 2010 at 09:56 PM