So, How's the Obama Refi Plan Shaping Up?

Does the Federal Housing Finance Agency have the right to change credit standards? That appears to be one argument MBS investors are making against a massive government-backed refinancing program being contemplated by the White House. By now you know the story: FHFA and GSE executives are worried about MBS investors whose securities will lose value if underwriting rules are loosened, allowing borrowers with negative equity to refinance. These investors include the GSEs themselves, who own their own MBS. One industry veteran had this to say about the situation: “If MBS investors are so dead set against government involvement, then I suggest the government reverse the [GSE] bailout and the investors can hold trillions of dollars of bonds in default, which would dwarf any early prepayment paper losses.”