CBO Casts Doubt on Mortgage Refinancing Plan
CBO Casts Doubt on Mortgage Refinancing Plan
Private investors would be hit with twice as much in losses as home owners would receive in payment relief under a mass refinancing plan, finds a Congressional Budget Office working paper.
The one-year model plan shows that refis of 2.9 million mortgages worth $428 billion would save borrowers $7.4 billion through lower payments and avoid 111,000 defaults at a cost of about $600 million.
However, investors would lose as much as $15 billion from prepayments on securities yielding above-market rates. The refinancing effort would have little impact on economic output and the housing market and only a minor effect on future home prices, according to the CBO.
Source: "CBO Casts Doubt on Mortgage Refinancing Plan," Financial Times, Shahien Nasiripour (Sept. 8, 2011)
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