CBO casts doubt over Fed refinancing plan

The Housing Wire reports:

A federally induced mortgage-refinancing plan would cost private bond investors $13 billion to $15 billion, while doing little to improve the overall mortgage default rate, the Congressional Budget Office said in a new report.

The proposed refinancing plan suggests the process of moving borrowers into refinanced mortgages will save homeowners with federally insured loans from defaulting while creating economic stimulus in the form of enhanced household liquidity.

The CBO conducted a cost-benefit analysis of the federal refinancing plan that showed it will result in 2.9 million mortgages being refinanced but only 111,000 fewer defaults.

In terms of total cost savings for Fannie Mae, Freddie Mac and the Federal Housing Administration, the CBO said the agencies will save about $3.9 billion on their credit guarantee exposure. However, those gains will be offset by losses incurred by investors of agency mortgage-backed securities.

It's time to separate housing from state.