Homeowners with underwater mortgages in U.S. states worst-hit by foreclosures are leading refinancings after the government expanded programs to aid borrowers, strengthening the weakest link in the housing recovery.
Investors should avoid taking risk in all categories of U.S. securitized debt because American and European policy makers may damage financial markets as they respond to a slowing economy and government deficits, according to Bank of America Merrill Lynch analysts.
Sales of U.S.-backed mortgage bonds soared to a three-year high as steps by the Federal Reserve and Obama administration to make home ownership more affordable propelled a 34 percent jump in refinancing.
Demand for the Federal Reserve’s sales of mortgage debt assumed in the 2008 government bailout of American International Group Inc. may add to reasons the central bank won’t soon expand its balance sheet again, according to Bank of America Corp.
President Barack Obama’s re-election is fueling investor concern that homeowner refinancing is set to increase after debt yields tumbled and amid speculation his administration will pursue more aggressive measures to boost the housing recovery.