From the FINANCIAL TIMES:
…The Obama administration is eager to spur “refi” at today’s low interest rates as a way to put money into consumer pockets, while the US Federal Reserve has also identified the lack of refinancing as a barrier stopping its ultra-loose monetary policy from helping the economy….
When banks sold loans to Fannie or Freddie they promised that they were properly underwritten and not fraudulent. The warranties let Fannie and Freddie demand their money back if a loan quickly goes bad, but if there is a refinancing, either the agencies must give up the warranty or the new lender must take it on.
That often means that a borrower is restricted to refinancing with their original lender – who has little incentive to offer a good price – and even that may not be possible if the loan was originally made via a broker or correspondent that the bank might have a claim against…
Click here to read the full article.
