Market players at the ASF2012 conference in Las Vegas this morning expressed little concern over President Obama’s State of the Union speech last night, in which he called on Congress to pass legislation allowing homeowners current on their mortgages to refinance. The securitization sector has long bemoaned the possibility of a government-sponsored refinancing wave allowing borrowers to refinance at rock-bottom rates (SI, 8/5/10). But most attendees said the president’s proposal, light on details, was largely an election year political move that had little chance of passing into law.
Janaki Rao, analyst at Morgan Stanley, said the likelihood of a mass refinancing program is still very low, “given the low probably of any such legislation passing, as well as scarce origination capacity that would limit the program’s effectiveness.” But he cautioned: “We cannot rule out further changes to HARP and thus view the president’s remarks as negative for higher coupons. Investors have become used to such headlines in the past, and the near-term impact on higher-coupon valuations is likely to be muted.” The president last declared he was readying plans to help underwater homeowners in the second half of 2011 (SI, 9/15/11).
One attendee agreed with the idea, noting the private sector has no incentive to let underwater homeowners staying current on high interest rates to refinance. “It actually makes a lot of sense,” he said.