There’s chatter yet again about a government-sponsored major refinancing program to help underwater homeowners. Here’s the trail of how the latest story crept from a trade mag, through Wall Street mortgage trading desks, and to the New York Times. In this case, the trader is the most reliable source.

Brian Collins with National Mortgage News seems to be the source of the latest chatter, although “industry officials” are quoted. But “at this point in time there are few specifics on the table regarding the plan.” The story goes on to say:

Mortgage executives say the White House is finally realizing they cannot get the economy rolling again until they provide some payment relief for the estimated 11 million under water borrowers…’My best guess is the administration will offer incentives to lenders to allow borrowers who are current, but under water, refinance,’ one source said. This source also added the refinancing program will focus on Fannie Mae and Freddie Mac guaranteed loans as well as mortgages in private-label securities. The GSEs already have a special refinancing program for borrowers with loan-to-value ratios above 105% — but the effort has not reached many underwater borrowers.

Tom Harmon, a mortgage trader with Cantor-Fitzgerald, quickly wrote,

The National Mortgage News ran a headline, ‘White House Contemplating Major Refinancing Program?’ Prior to today, I have not heard of the National Mortgage News. Their ‘sources’ offered no details. There is nothing new here. The administration and some in congress will continue to make headlines of home issues. As the administration has run out of economic bullets, this is likely to be a talking point ahead of the elections. Don’t be distracted. Focus on handicapping any major enhanced streamline refinancing program rolled out by Fannie or Freddie or one mandated by congress without substantial GSE reform/changes. Congress has had a few years to tackle the tough housing issues we face. None may be tougher than the ultimate fate of the GSE’s and guidelines under which they operate. A national refinance program makes a nice headline; however, the implementation is not a simple flip of the switch. This is not a ‘no cost’ fiscal stimulus as many claim. Presuming the government is willing to let the private investment community take the hit on the trillions of 30-year Fannie & Freddie-issued MBS’s currently trading over a 109 dollar price, don’t forget the $542 billion agency MBS at the GSE’s. While one could argue that the GSE credit book would be in a better position, the GSE itself may not be. For the above reasons, we are unlikely to see an endemic large scale enhanced refinance program. Thus, we return to a congressional solution. The budget debate renews in the fall and will take the front and center position. While it is likely we will see continued focus and execution on HAMP/HARP type programs, do you think congress will introduce and pass a major GSE bill ahead of next year’s elections?

Well said.

Then the New York Times picked up on the article, and ran this piece.