Roger Schlesinger

The best way to cure a sick economy is to tax those who create the jobs. Really!

Cutting taxes costs the government money. Really!

Deficits are reduced in a high tax environment. Really!

Now that you have an idea of what this is all about, you might be surprised at what you might learn.

1. Fannie Mae and Freddie Mac own the most mortgage loans in the nation. They are the premiere lender of conforming loans up to $417,000. It is a given that a large amount of borrowers have houses that are worth less than the mortgages on them and therefore are considered "underwater". The other given is that these underwater borrowers have either adjustable-rate loans that are going to adjust higher, or they simply have higher interest rate fixed loans at this time. They cannot refinance because they do not have enough equity in their houses. We can currently make conforming loans up to 90% and FHA loans up to 95%, both with a required payment for mortgage insurance. If the new rate of these loans is low enough, it doesn't matter that mortgage insurance is required because the borrower can still save a substantial amount of money.

The government has implemented a new bailout plan for those who do not have the ability to refinance and who have stayed with their current mortgage, even though they did not have any equity in their homes. That has made them eligible for the bailout refinance, but only up to 105% of the value of their house. It is common sense that those who are without equity will reach the point, if they are straining to make the payment, where they will give up and move on.

Therefore, it is in the best interest of Fannie Mae, Freddie Mac and the whole country, to help those borrowers who have "played by the rules". In case you are not convinced, consider the fact that if Fannie Mae or Freddie Mac do not lower the rate and leave the borrower in a tenuous position, they are only endangering themselves because they still own the loan. When the borrower gives up and walks away, Fannie Mae and Freddie Mac will be the losers.

Therefore, as long as we are bending over backward to help those who didn't or couldn't play by the rules, and didn't or couldn't find a way to make their payments, why are we restricting those who did by setting a limit on the loan to value? This, unfortunately, is what the government considers help. Really!

Roger Schlesinger

Roger Schlesinger's Mortgage Minute is heard on hundreds of radio stations and daily on the Hugh Hewitt radio show and Michael Medved shows. Roger interacts with his hosts and explores the complicated financial markets in order to enlighten his listeners and direct them along their own unique road to financial freedom.