It could well be that the new government refinancing program announced last week will turn out to be the turning point in the recovery of the home loan industry.
Government programs are usually well-meaning but too hard to implement (look at how proprietary loan modifications have handily outstripped government mods), but this one sounds as if it has been designed to get out of the chute quickly and down to the bottom of the hill.
It is targeted to underwater borrowers whose notes are held by Fannie Mae or Freddie Mac (that's a big majority of all loans) and it seems to have stripped out a lot of the detritus that made the existing HARP program hard to do.
Since underwater borrowers are clear candidates for strategic defaults a successful program will help lessen the shadow inventory that sits atop the massive amount of REO properties already listed for sale.
Reduction in fees and appraisal requirements, and waiving loan-to-value requirements will make it a lot easier for underwater borrowers to get refis (previously they had, in effect, only the possibility of refinancing with their current servicer). Waiving buybacks is certain to remove a key obstacle to the refi process.
All origination fees will be waived for those refinancing into 20-year-or-less terms.
There's nothing that changes the fortunes of the mortgage industry faster than a refinancing boom.
Estimates of $1 trillion in new refis may be wishful thinking but half of that would go a long way toward getting the industry cranking once again.
After all, mortgage rates are as low as anyone can remember and home prices are attractive after years of losing value. A refi program determined to make it easy to do refis may be the last ingredient for the pie.
The boon to the national economy of a bubbling refi market will be measurable in addition to the easing of pressure on the foreclosure mess.
The steady reduction in mortgage rates over the past several years (continuing downward when no one thought they could get any lower) never seemed to produce anything more than a refi boomlet for the snakebitten mortgage industry.
Now, with incentives for lenders to lend and borrowers to refinance, the next words you may hear will be gentlemen, start your engines.
