Fannie Mae’s new initiative, dubbed “Keys to Recovery” looks great at first blush. Those with mortgages underwater can refinance them, up to 120% of the current home value. Wow.

 But a closer look shows this isn’t the rescue effort it appears to be. First, the loan has to already be on Fannie Mae’s books, and the refinance has to improve the borrowers’ position, either by fixing their adjustable rate or lowering the payments. But Fannie Mae loans haven’t been the main source of borrower misery in this country–people in Fannie Mae loans aren’t having the payment shock and other problems others have had because these people qualified for prime loans at conventional terms. And rates and indexes haven’t gone up all that much. So, Fannie Mae is taking a loan it owns and making it a little less likely to end up in default. And using the PR to paint it as some kind of ‘rescue’ effort.

 Maybe for its own shareholders…..

This entry was posted on Monday, July 28th, 2008 at 3:09 pm and is filed under Daily Pick. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.