>>> So when we refinance, the USG is paying off these original
>>> mortgages off at full face value?
>>
>> We call that 'payoff value' but, yes.
>
> Why on Earth are they doing that?
My reasoning is that they should do that because it will stabilize the housing market, the mortgage market, and probably would also have a positive impact on ending the recession.
> It seems to me they should be refusing
> to touch the "securities", just buying mortgages cheap.
Not sure if you've been following this thread, but I'm not talking about the government intervening in the securitized part of the market, only in actual mortgages, and then only for owner-occupied residences. I don't know how "cheap" is "cheap" for you, but there is an implied haircut in that it's not an all-cash deal. See my original post for details. It also "solves" the twin problems of default/foreclosure on the one hand and "windfall to those irresponsible people" on the other hand.
/jordan