Mortgages Blog

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We need interpreters to explain what our politicians really mean, like the Kremlinologists used to do whenever a Soviet leader delivered a speech (with or without shoe-pounding).

In last night's State of the Union speech, the president said:

(R)esponsible homeowners shouldn't have to sit and wait for the housing market to hit bottom to get some relief. And that's why I'm sending this Congress a plan that gives every responsible homeowner the chance to save about $3,000 a year on their mortgage by refinancing at historically low rates. No more red tape. No more runaround from the banks. A small fee on the largest financial institutions will ensure that it won't add to the deficit and will give those banks that were rescued by taxpayers a chance to repay a deficit of trust.

I'll be your Capitologist and unpack this quote phrase by detail-free phrase. Naturally, I could be totally wrong.

• Responsible homeowners = Reliable voters who have made their last 12 mortgage payments on time.

• Shouldn't have to wait to get some relief = Should enjoy lower house payments before November, just as irresponsible homeowners have been getting lower payments through mortgage modifications for three years.

• The chance to save $3,000 a year = On average, $250 less a month. That's a lot, considering the median principal and interest payment in this country amounts to $954 a month, according to the Council for Economic and Community Research.

• By refinancing at historically low rates = The government will do its best to keep mortgage rates this low through November at least and expand the number of people who can refinance.

• No more red tape or runaround from banks = Lending standards will be lowered from today's too-stringent levels.

• A small fee on the largest financial institutions = This stumps me. I don't know how we can charge a fee to banks without it being passed on to consumers. Maybe President Obama has dreamed up a way to do that. A fee on "the largest financial institutions" would, by definition, make smaller lenders more competitive.

• Ensure that it won't add to the deficit = These refinanced loans might be money-losers.

I'm intrigued by the notion that levying a fee on big banks will make them more willing to lend to underwater homeowners. I can't wait to see the details of how that's supposed to work. I don't expect the banks to complain much about this. After all, they make plenty of fee income when you refinance.