As might be expected, the American Bankers Association is none-too-thrilled with a new White House plan to tax banks to pay for a new government refinancing program.
"The refinancing proposal, unfortunately, includes a tax on banks, which will directly reduce lending capacity and banks' ability to lend up to $100 billion," said ABA president and chief executive Frank Keating.
Keating also noted the "uncoordinated and ever-changing government programs" are creating uncertainty in the marketplace and reducing the availability of mortgage credit.
The White House estimates the Federal Housing Administration will need between $5 billion and $10 billion to fund the president's new refi program for mortgages in private-label securities and create a separate mortgage insurance fund.
But some analysts expect FHA will need much more than $10 billion to cover the risk of refinancing these high LTV mortgages. The private label MBS market is roughly $1 trillion in size. Bonds trade at 60% to 75% of face value -- which means FHA would be absorbing the losses implied in the pricing when it refinances the underlying mortgages.
The Mortgage Bankers Association is also wary of the bank tax.
Getting this legislation through Congress will "clearly be an uphill battle," MBA president and chief executive David Stevens told reporters.
However, MBA is willing to work with Congress to find the "most appropriate way" to pay for the refinancing program, the MBA CEO said.
Conceptually, the program would "certainly help a lot of Americans who don't have access to a refinancing program today," Stevens added.
The National Association of Realtors is backing the President Obama's plan, claiming it will help the housing market and struggling homeowners. "Realtors are eager to work with Congress and the administration to put this plan into action," said NAR president Moe Veissi.
