Government Refinancing Available For Up To 125% Of Home Value

I don’t have much to add to the news that Fannie/Freddie are allowing homeowners to refinance for amounts up to 125% of their home value that Yves doesn’t cover. The intention of the program is very clear: it’s meant to allow people to stay in their homes/have more money for consumption (or other debt payments) in circumstances when they should most likely just throw in the towel and leave. It is a highly psychological maneuver at best, and a cynical way to generate more money for banks at worst.

If you know of anyone that’s thinking of doing this (or just want to read about how awful of an idea this is) then check out this post that explains how it effectively creates a “debtor’s prison.”

One of the biggest hurdles I see for the economy in the coming decades is the emergence of extreme immobility as people are unable/unwilling to sell their homes or risk losing work provided health care by starting a new venture/joining a small business. Programs like this just exacerbate the problem.