Analysts disagree over benefits of new mortgage rules
President Obama speaks in front of the Bonilla family's house on October 24 in Las Vegas, Nevada to announce a housing initiative to help homeowners with federally guaranteed mortgages refinance their homes. (Ethan Miller/Getty Images)
October 25th, 2011
03:21 PM ET

Analysts disagree over benefits of new mortgage rules

A day after President Obama announced adjustments to the rules governing his 2009 Home Affordable Refinance Program the independent analyses are now trickling in. CNN Money has a good write-up here, and this seems to be the crux of how they see the prevailing opinion:

The program is being touted as a way to help stabilize the housing market and stimulate the economy. But without addressing distressed homeowners and helping to clear the foreclosure glut, the effects will likely be limited, experts said.

"I would call it much to do about nothing," said John Burns, head of John Burns Real Estate Consulting. "It will help in such a small way, it's almost meaningless."

Mark Zandi, chief economist at Moody’s Analytics, disagrees. He predicted that under the old rules a total of 1.25 million homeowners would refinance their mortgages under HARP before the original end date in June 2012. The new rules will spur an additional 1.6 million homeowners to refinance before the end of 2013 when the program is now set to wind down, Zandi predicts.

That means that by his calculations, 2.85 million homeowners will participate in the HARP program, far short of the 4 to 5 million originally predicted by the administration. But Zandi doesn’t believe that this means HARP should be viewed as a failure.

“The program will ultimately provide a meaningful boost to the broader economy as financially stressed households will benefit from much lower mortgage payments,” Zandi wrote in an email to CNN. “It will also provide a bit of help to the housing market by forestalling some mortgage defaults.”

But there seems to be some disagreement among experts over exactly how “meaningful” that economic boost will be, and precisely how much help the new program will provide to the housing market.

CNN Money does well at summarizing the two sides of the argument:

The effort really is an economic stimulus program, experts said. By reducing homeowners' monthly payments, it will allow them to spend money on other things and spur demand.

"Hopefully, they'll be going out shopping instead, which the economy does need now," [Celia Chen, senior director with Moody's].. "Any boost will have a positive impact."

Not everyone, however, will benefit from the program. Mortgage investors will see the value of securities comprised of higher-rate loans reduced once they are refinanced. These investors, in turn, will have less money to spend.

"The benefit to the economy may be outweighed by losses to investors," said Mahesh Swaminathan, mortgage strategist with Credit Suisse.

The firm Macroeconomic Advisers released its analysis and took issue with the idea that this program will result in an effective stimulus. Because “risk-based fees are entirely eliminated only for those borrowers shortening their fixed-rate mortgages,” those borrowers may see “little change” in their monthly payments even with a lower interest rate, the firm wrote.

“Therefore, we view the new guidelines as aimed more at encouraging borrowers to rebuild balance sheets faster without reducing other expenditures than as a macroeconomic stimulus,” MA wrote in its analysis.

MA generally agrees with Zandi’s estimate that “HARP refinances might double under the revised guidelines,” but they do not believe that would “provide a major stimulus.”

“This does not mean the modifications to the program are not worth pursuing; they are,” MA wrote. “Just don’t expect macroeconomic miracles from them.”

While these two analysts might disagree over the value of a potential doubling – or more – in the number of homeowners refinancing their mortgages under HARP, Zandi and MA both agree that more needs to be done.

“While I think this was a very positive step, it isn't a magic bullet for the housing market and economy,” Zandi wrote to CNN. “Policymakers will thus very likely have to do more.”

Topics: Housing • President Obama

soundoff (12 Responses)
  1. terri

    We have had no luck finding a bank to do this loan for us. We have spent days being given the run around.

    October 25, 2011 at 3:36 pm |
    • Brittany

      Have you tried Wells Fargo?

      October 28, 2011 at 4:06 pm |
  2. Victoria AvgAm54

    well if the president could get some cooperation we could pass something like this for more then just fannie & freddie loans we could pass it for all loans for all homeowners who are playing by the rules but struggling to do it. I am a Realtor and I support the President's efforts.

    October 25, 2011 at 3:37 pm |
  3. steveo

    I can imagine this family will remember this for the rest of the lives! Not many of us will host a President and watch him or her speak in front of our homes! Regardless of party!

    October 25, 2011 at 3:44 pm |
  4. steveo

    "analysts disagree". OK, I have no problem with that. Study the proposal to know if it is viable or not! The problem comes in when people do monkey flips and either instantly support or denounce it because a Dem or GOP suggested it!

    October 25, 2011 at 3:53 pm |
    • C-Lo

      Alright steveo, you need to be careful and consider removing yourself from this site. If your comments are not inflamitory, derrogitory, hate filled or emotional, you need to leave. There is no room for moderate comments, let alone ones that discuss topics logically. I cannot believe the moderators let these comments through 🙂

      Seriously, keep 'em comming!

      October 25, 2011 at 3:59 pm |
      • Trace

        @steveo, C-Lo,

        While steveo is taking bows for being a moderate and C-Lo is congratulating him on his bi-partisan comments, though if you look the insults in the next couple of posts, we all know you are both full of hot air....

        I do not consider it extremist that we as americans at least consider putting money towards helping fellow americans. We spent trillions trying to re-build a broken Iraq. REMEMBER THAT GUYS???? Yeah, we're just now ending that stupid war this Christmas. But I digress.

        anyway....let's stop saying its a liberal / democratic extreme position to want teachers, police and firefighters to keep their jobs. Actually its more patriotic than sending money to a foreign country to fix a huge policy blunder.

        Wouldn't you TWO MODERATES AGREE?

        October 26, 2011 at 1:26 am |
      • steveo


        I am speaking what I believe, imagine that!
        1. Not bowing, just what I believe
        2 I never said taking care of the poor is extreme but sooner or later even a baby gets off the breast!
        3. In another post I stated the half billion that was wasted on Solyndra could have hired many teachers, police, and firefighters
        4. I am glad the President got OBL! I am BUT how much time and money and lives might have been saved if Clinton got him when the Sudan offered him? I don't see that in your post!
        4. You said "Everybody knew there were no connections between Al Quaeda and Saddam Hussein, except our President". WRONG! You forgot to include England, Germany, and France! They all shared common intel
        5. You said " The GOP/Tea Pee Pants Party will never ever become a part of the drive to bring this country back to prominence. These people have proven that, and to say otherwise is simply naive" I say: Where is the proof the "Ds" will become part of that drive? You are eliminating a lot of good people simply because of the letter "R".

        October 26, 2011 at 8:31 am |
  5. steveo

    Thanks C-Lo. Extremism, no matter where it comes from is too extreme for me!

    October 25, 2011 at 4:03 pm |
  6. Trace


    It amazes me how well thought out OBL considered the destruction of this country. By attacking us on 911, somehow he knew we would go on a war rampage all over the middle east, which would destroy the US economy. Think I'm making it up? Do the research.

    What he didn't count on is, that just as our forces got close to him in Afghanistan, just as he is completing his will, we would back out and go after Iraq, a country with whom he had no alligiances. Everybody knew there were no connections between Al Quaeda and Saddam Hussein, except our President. Much to OBL's surprise, he was allowed to escape to Pakistan and acquire a mansion and live in relative seclusion, until the current president that somehow knew where he was all along as a candidate. Don't believe me? See the Presidential debate when Obama said "....if we have actionable intelligence that Bin Laden is in Pakistan, we should go in there and kill him" Well, that's what happened. Yet I digress.

    I'm all for bipartiship, doing away with party before country, but I will tell you now....The GOP/Tea Pee Pants Party will never ever become a part of the drive to bring this country back to prominence. These people have proven that, and to say otherwise is simply naive.

    Now, please correct me if I've stated any untruths here. I can prove every word of this post with facts and not based upon liberal editorials.

    October 26, 2011 at 1:39 am |
  7. A to Z Mortgage

    Is it ok with this mortgage ?

    June 6, 2012 at 8:28 am |
  8. Ramil

    The Congress should take out the... if you refinance your home "prior to 2009" then you are qualified for the HARP 2.0

    If someone has never missed or late on their mortgage payment since they have refinance their home after 2009 and have a 650 FICO score or higher then they should be able to refinance and take advantage of this HARP2.0

    February 14, 2013 at 6:42 pm |