President Obama, Federal Reserve Chairman Ben Bernanke, and plenty of other economists have been arguing in favor of allowing mortgage holders to refinance mortgages of nearly any type. The goal is to help underwater home owners and, indeed, just about any mortgage holder who qualifies under an ever-bigger tent.
The impact on retirees would be felt through mutual funds, pension plans, REITs, and insurance companies, all of which hold mortgage-backed securities in their portfolios. According to Bloomberg News, such funds hold about 27%, or $1.5 trillion, of the $5.4 trillion of mortgage debt. As one analyst put it, “Bond markets are people, too.”
The federal government could force Fannie Mae, Freddie Mac, and the Federal Housing Finance Agency to forgive a portion of mortgage debt, but the writedowns would come at the expense of US retirees.
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