President Obama is in Fantasyland or in some alternate universe. He wants to strengthen the housing market provided





The plan helps a broad swath of homeowner

The plan stimulates the economy

The plan costs next to nothing

The Obama administration is considering further actions to strengthen the housing market, but the bar is high: plans must help a broad swath of homeowners, stimulate the economy and cost next to nothing.



One proposal would allow millions of homeowners with government-backed mortgages to refinance them at today’s lower interest rates, about 4 percent, according to two people briefed on the administration’s discussions who asked not to be identified because they were not allowed to talk about the information.



A wave of refinancing could be a strong stimulus to the economy, because it would lower consumers’ mortgage bills right away and allow them to spend elsewhere. But such a sweeping change could face opposition from the regulator who oversees Fannie Mae and Freddie Mac, and from investors in government-backed mortgage bonds.



Investors may suspect a plan is in the works. Fannie and Freddie mortgage bonds had been trading well above their face value because so few people were refinancing, keeping returns on the bonds high. But those bond prices dropped sharply this week.

Uninspiring Nonsense

"It almost seems to me you want to have some type of announcement or policy, program or something from the federal government that provides that clear signal that we are here supporting the housing market and this is indeed a good time to really consider buying," Mr. Nothaft said.

Holy Grail of Housing

Free Lunch Perpetual Motion Device Fountain of Youth Pain with No Gain

This is the best stimulus out there because it doesn’t increase the deficit, it accomplishes monetary policy, and it reduces defaults in housing

The government has already encouraged some refinancing through the Federal Housing Administration and through Fannie and Freddie, but participation is limited. For example, the Home Affordable Refinance Program excludes homeowners who owe more than 125 percent of the value of their house. To spur more refinancing, the government may decide to encourage Fannie and Freddie to lift such restrictions.



But government officials cautioned that Fannie and Freddie do not do the administration’s bidding, even though they are essentially owned by taxpayers.



A broader criticism of a refinancing expansion is that it would not do enough to address the two main drivers of foreclosures: homes worth less than their mortgages, and a sudden loss of income, like unemployment. American homeowners currently owe some $700 billion more than their homes are worth.

Got That?

American homeowners currently owe some $700 billion more than their homes are worth.

little to no cost

Bank Bailout in Disguise