Thursday, Feb. 21
Posted 4 p.m. EDT

DOWNDRAFT: Mortgage rates have been volatile lately, and today illustrates how. The 30-year fixed has fallen roughly an eighth of a percentage point today, judging by the rise in the prices of mortgage-backed securities.

In Bankrate's weekly rate survey, conducted yesterday, the 30-year fixed averaged 6.37 percent. That was an increase of 41 basis points over the previous week. Today, the average is probably around 6.25 percent. The index of leading economic indicators and the Fed's survey of Philadelphia-area factory output both yielded downbeat news, and that's probably what's giving us lower mortgage rates today.

FLOTATION VEST: Many homeowners face a vicious problem: They want to refinance their mortgages to escape a rate increase on an ARM, but they owe more than their houses are worth. Without cash to make up for the shortfall, they can't refinance. Some of these folks will end up in foreclosure.

Dina ElBoghdady of The Washington Post says the Office of Thrift Supervision is working on a plan to help these underwater homeowners. The OTS wants to prop their heads above water.

"Under the regulatory agency's proposal, still in its early stages, these borrowers would refinance into government-insured loans that cover the current value of their homes," ElBoghdady writes. "The refinancing would pay part of what's owed to the original lender. For the remainder, the lender would get what the plan's backers call a "negative equity certificate." The lender could redeem the certificate if the home is eventually sold at a higher price."

The OTS hasn't run this past the White House, Congress or the Federal Housing Administration, which would end up insuring a lot of these refinanced loans. It's an intriguiging idea, and I wouldn't be surprised if some form of this idea is implemented. There would be a lot of questions to answer and a lot of difficulties to be ironed out, and there would be winners and losers. But the same can be said for doing nothing.