So, the government is going to cause a ginormous refi wave in resi-land, at least that has been the rumor for well over a year now. Instead of demanding MORE collateral from homeowners who owe mortgage debt that is no longer protected adequately by the underlying collateral's value, you constantly hear some politician babble on about saving the poor non-delinquent mortgagor from having to meet obligations that he agreed to in writing and backed with the most precious collateral (the roof over his family's head) - I find the entire affair somewhat disgusting if you cannot tell. You agreed to make payments, you put up collateral in the event you cannot pay, and those are the terms.
I'm sure I will not be consulted for my opinion, but the rumors are now starting to crescendo, and I am really interested in your thoughts on how this might be structured and how to gain from it in the market... PLEASE LEAVE YOUR THOUGHTS IN THE COMMENTS!
- Do they only allow Agency mortgages to refi? (Ginnie too, or just the two in conservatorship?)
- What credit characteristics are allowed? Low FICO? Underwater mortgages? Currently not-late?
- Do borrowers have to pay additional amounts to help protect the mortgages (they have higher LTVs, do they pay higher PMI? Is there some new product to help protect the lender against the greater sensitivity to both credit and systemic valuation changes?)
- Who gets to originate the mortgages? and thus receive the origination fees?
- Servicer? Can BOA originate and service them but put the risk to the Agency?
- Will they be securitized - who is going to buy this, and what type of protections are there going to have to be (obviously at a cost to the taxpayer) to protect these new investors?
- Who else benefits?
- Who gets hurt? Does my Ginnie IO from 2009 origination, low coupon, ramp up and flicker out? How about my Fannie IO from 2005, high coupon? What about POs (they seem a little rich)?