My earlier note misrepresented the new policy announced by Fannie Mae yesterday. They will NOT be allowing homeowners to get further underwater through refinancing as I wrote. Their new policy is to allow people who already owe more than the value of their home to refinance into a lower interest mortgage. This is exactly what we should want banks and other financial institutions to do. It effectively means taking some loss on the current loan in the hope that the homeowner will be able to meet the terms of a new loan.
--Dean Baker