Can Obama cut my mortgage?

This was an interesting question:

Why doesn’t our President lower all mortgage interest rates to 4.25 percent for everyone who refinances?

That would stop a lot of foreclosures.

My interest rate is 7.25 percent on a house purchased in 2008. I struggle to make the $3,000 monthly payments.

Dad’s rate is 8.25 per cent. He struggles, but manages to make his payments. His bank won’t let him to modify. What sense does that make? D.O.

Answer:  First of all, both of you should have tried to refinance a long time ago. Mortgage rates have been lower than the ones you have for a long time.

You probably can’t modify the loan because your house isn’t worth what it was in 2008. But I assume your father has lived in his house for a longer time and still has equity in the property.

Of course your father’s bank won’t refinance!

Dad is struggling, but he’s making the payments. So what’s the incentive for the bank to cut his payments nearly in half?

He needs leverage. If his bank won’t listen to reason, then your father should approach other banks about a new, lower-rate loan. And he should tell his bank unofficially that he’s doing so.

But, remember, sometimes it’s not the bank’s fault when a mortgage isn’t refinanced. More often than not, the bank that issued your father’s mortgage is no longer the owner.

And that gets me to your first question.

First off, the mortgages you and everyone agreed to are binding contracts. I’m not a legal expert but it seems to me that the President would be trampling over contract law if he unilaterally cut interest rates.

Your gain, remember, is someone else’s loss. And the people who invested in the securitized mortgages have a right to get the rates they were promised.

But let’s say President Obama went ahead and cut rates anyway. If the sanctity of the mortgage-backed securities business is breached, the housing market may never thrive again.