October 25, 2011 in Nation/World

Obama unveils housing help

President expands mortgage program to let more homeowners refinance

LAS VEGAS – President Barack Obama offered mortgage relief on Monday to hundreds of thousands of Americans, his latest attempt to ease the economic and political fallout of a housing crisis that has bedeviled him as he seeks a second term.

“I’m here to say that we can’t wait for an increasingly dysfunctional Congress to do its job,” the president declared outside a family home in Las Vegas, the epicenter of foreclosures and joblessness. “Where they won’t act, I will.”

By easing eligibility rules, the administration hopes 1 million more homeowners will qualify for its refinancing program and lower their mortgage payments – twice the number who have already. The program has helped only a fraction of the number the administration had envisioned.

In part, that’s because many homeowners who would like to refinance can’t because they owe more on their mortgage than their home is worth. But it’s also because banks are under no obligation to refinance a mortgage they hold – a limitation that won’t change under the new plan.

Here are some of the major questions and answers about the administration’s initiative:

Q. What is the program that helps troubled homeowners?

A. The Home Affordable Refinance Program, or HARP, was started in 2009. It lets homeowners refinance their mortgages at lower rates. Borrowers can bypass the usual requirement of having at least 20 percent equity in their home. But few people have signed up. Many “underwater” borrowers – those who owe more than their homes are worth – couldn’t qualify under the program. Roughly 22.5 percent of U.S. homeowners, about 11 million, are underwater, according to CoreLogic, a real estate data firm. As of Aug. 31, fewer than 900,000 homeowners, and just 72,000 underwater homeowners, have refinanced through the administration’s program.

Q. Why did so few benefit?

A. Mainly because those who’d lost the most in their homes weren’t eligible. Participation was limited to those whose home values were no more than 25 percent below what they owed their lender. That excluded roughly 10 percent of borrowers, CoreLogic says. Another problem: Homeowners must pay thousands in closing costs and appraisal fees to refinance. Typically, that adds up to 1 percent of the loan’s value – $2,000 in fees on a $200,000 loan. Sinking home prices also left many fearful that prices had yet to bottom. They didn’t want to throw good money after a depreciating asset. Or their credit scores were too low. Q. What changes is the administration making?

A. Homeowners’ eligibility won’t be affected by how far their home’s value has fallen. And some fees for closing, title insurance and lien processing will be eliminated. So refinancing will be cheaper. The number of homeowners who need an appraisal will be reduced, saving more money. Some fees for those who refinance into a shorter-term mortgage will also be waived. Banks won’t have to buy back the mortgages from Fannie or Freddie, as they previously had to when dealing with some risky loans. That change will free many lenders to offer refinance loans. The program will also be extended 18 months, through 2013.

Q. Who’s eligible to participate?

A. Those whose loans are owned or backed by Fannie Mae or Freddie Mac, which the government took control of three years ago. Fannie and Freddie own or guarantee about half of all U.S. mortgages – nearly 31 million loans. They buy loans from lenders, package them into bonds with a guarantee against default and sell them to investors. To qualify for refinancing, a loan must have been sold to Fannie and Freddie before June 2009. Homeowners can determine whether their mortgage is owned by Fannie or Freddie by going online: Freddie’s loan tool is at freddiemac.com/mymortgage; Fannie’s is at fanniemae.com/loanlookup. Mortgages that were refinanced over the past 2 1/2 years aren’t eligible. Homeowners must also be current on their mortgage. One late payment within six months, or more than one in the past year, would mean disqualification. Perhaps the biggest limitation on the program: It’s voluntary for lenders. A bank remains free to reject a refinancing even if a homeowner meets all requirements.

Q. Will the new program work better?

A. For those who can qualify, the savings could be significant. If, for example, a homeowner with a $200,000 mortgage at 6 percent can refinance down to 4.5 percent, the savings would be $3,000 a year. But the benefit to the economy will likely be limited. Even homeowners who are eligible and who choose to refinance through the government program could opt to sock away their savings or pay down debt rather than spend it.

Q. How many homeowners will be eligible or will choose to participate?

A. Not entirely clear. The government estimates that up to 1 million more people could qualify. Moody’s Analytics says the figure could be as high as 1.6 million. Both figures are a fraction of the 11 million or more homeowners who are underwater, according to CoreLogic, a real estate data research firm.

Q. Who will benefit most?

A. Underwater homeowners in the hard-hit states of Arizona, California, Florida and Nevada could be greatly helped. Many are stuck with high mortgage rates after they were approved for mortgages with little or no money as a down payment and few requirements. The average annual savings for a U.S. household would be $2,500, officials say.

Q. When will it start?

A. Fannie and Freddie will issue the full details of the plan lenders and servicers on Nov. 15, officials say. The revamped program could be in place for some lenders as early as Dec. 1.

21 comments on this story so far. Add yours!

DickAdams on October 25 at 7:06 a.m.
Any method to be reelected. This stunt is so transparent, Obama is grasping at straws. Look at the number of owners in the story who had a small down payment, even some with zero down and were over their head in debt, where even the payment was more than they could afford in the first place. They will skate and some where some how, and somebody will be left holding the bag.
Scoutster on October 25 at 7:07 a.m.
The scale of this problem is huge, and this move is welcome but slight.
Someone has to eat the losses. Haven’t heard anyone who’s figgered out how to do that painlessly yet.
Orphan on October 25 at 7:12 a.m.
Obama is president and does not have the authority to make or change law.
JBlim on October 25 at 7:22 a.m.
Obama is doing what he can do help the economy. The Republicans with their do-nothing, obstructionist congressional stranglehold refuse to aid the economy because they want to make Obama look bad. It’s sad the Republicans are so small-minded and petty. If they get Herman Cain or Romney in there, you can bet they quickly dispose of their phony aversion to government stimulation of the economy. It’s all about party over country. So the question is, why do Republicans hate America?
johnclarke on October 25 at 7:28 a.m.
This is within the power of the executive branch Orphan.
I agree DA, people that got themselves into trouble should have known better. However another way to look at this is a bail out for the common man. I myself put down 20% on everything and have watched the values drop to the point where the investment is under water. Rather than simply walk from the property (as many crooked landlords have done) this program actually allows refinancing for even rentals.
Keeping people in their homes is (probably) better for everyone, because evictions and empty homes are killing the market. Mortgage companies and banks have been all too happy to forclose because they collect the insurance then sell the property.
Prime time for investors tho - if you have cash.
IHike4Fun on October 25 at 7:41 a.m.
“Someone has to eat the losses.”
That someone is the homeowner (unless they default, of course). It’s no different than buying anything that goes down in value. The person that did the buying is left holding the bag. Even with this program the principle amount is still the responsibility of the home owner. I would think that for most who did the interest only - ARMs in 2006-2007 that they’d now have to borrow 200% (at least) of their current home’s value to refinance.
jddavis on October 25 at 8:55 a.m.
JBlim—How is the fault of a political party that some bought houses they couldn’t afford? You blame the Repulicans for making Obama look bad? He does a pretty fair job by himself. Obstructionist Congress? Harry Reid is a Democrat who won’t allow Obama’s grand plan to given a straight up- or down-vote.
The ARMs that IHike refers to are nothing than a tool to help people who can’t afford to buy the property in the first place be able to make payments in the short term.
johnclarke on October 25 at 9:53 a.m.
jddavis, the housing crisis - like every “bubble” - does not have a smoking gun. There were many factors that led up to the crash. No one wants to throw a bucket of water when everyone is making money. There were plenty of warnings, just like the last time. Super smart people are supposed to heed those warnings and do something about it, but that was not the attitude then. I myself think if it walks like a bubble, then someone ought to be considering what happens when that funding source is exhausted. The other place I focus is deregulation. If something worked so long, why change it? What is the motivation, and who wants it changed?
Anywho, I think anything that keeps joe six pack in his home is good. Hell, we bailed out everyone else. Who has been arrested or lost their job on Wall Street, or the rating agencies or the banks? Those guys, for the most part have not suffered. Yeah, there might be some fines and blah blah, but mostly they are meaningless. Obama’s efforts - while the jaded may call it pandering for votes - are well intentioned. What has Congress done for the common man?
jddavis on October 25 at 10:04 a.m.
“Homeowners must also be current on their mortgage. One late payment within six months, or more than one in the past year, would mean disqualification. Perhaps the biggest limitation on the program: It’s voluntary for lenders. A bank remains free to reject a refinancing even if a homeowner meets all requirements.”
JC—seems to me that the people who are eligable for the program aren’t having trouble making their payments. These people made a purchase, financed on terms they agreed to, and are keeping up with the payments. Those that qualify for this program are not in danger of losing their houses. Call me “jaded”, but this program does nothing to help people stay in their houses and is just a political ploy.
I do agree with your first paragraph though… :)
wobble506 on October 25 at 10:19 a.m.
And the taxpayers continue to bleed, because the government continues to use your tax dollars. They bailed out Freddie and Fannie who encouraged these subprime loans, then they bailed out the banks, and then that money was used to pay exhorbitant bonuses, and then the taxpayers bled more with HARP, and now they are going to bleed some more with this new bailout with your tax dollars.
When do we get to quit paying for other people’s mistakes?
I’m not living in a house above my means. I did not go out and buy more house than I could ever possibly afford, hoping my salary and the value would go up forever.
Why do I have to bail out the common man, that has no common sense? Why does the gov insist on bailing out homeowners, with tax dollars they don’t have?
Oh that’s right, its the “democrat way”. Lets spend more tax dollars to buy votes, because it sounds really good on an a 30 second spot on the local news. We’re doing something, even if its just digging a bigger hole.
The first program was a disaster, and this one will be no better. More tax dollars wasted at banks, banks sitting on the money, who may or may not loan it to people that should not be borrowing money.
Dazzeetrader1980 on October 25 at 10:34 a.m.
Soory fellas….don’t look now but Obama is trying to do exactly what began this mess: Give mortagaes to people who shouldn’t own homes..not like the home’s they’re in anyway. I read a comment yesterday in the blog who was spot on.
He asked if those who are in trouble or “under water” should be bailed out. I didn’t hink so. Why? Because they spent like drunks and now the economy isn’t rosey? Well those are the risks.
I’ve sold homes before when the debt was too great. It doesn’t hurt. HARP =TARP. Well you see how TARP turned out. Never should have happened. HARP is good for banks and bad for the country. Just because the tourble assets were help, it doesn’t mean it should happen again to the homeowners. Nice way of gettng the banks more money though. Doesn’t solve the homeowner getting things they STILL can’t afford and aren’t qualified to own.
It’s a bribe to the voters and it’s very temporary. Ask Barney and Dood when they pull this stunt in 94. It just doesn’t work. PAYOFF……election and Obama’s in trouible as are most of his blue dems. Anything to get elected. How about jobs so people can buy houses without this FDR socialism? Business sits……no jobs…..it’s Obama folks. And there won’t BE jobs as long as his overbearing government control stunts are gone.
greenlibertarian on October 25 at 2:40 p.m.
What should have been done long ago to help the truly struggling was to amend the BK laws so BK judges could write down mortgage balances to reflect the market.
Didn’t happen as the GOP filibustered it to death.
DickAdams on October 25 at 3:25 p.m.
I`ve wondered for a long time, how come some of the comments continue to blame the teabaggers and the republicans only, when the career politicians from both parties smell up the place, i. e. both the house and senate? And why Obama has not sent a few bankers to the Iron Bar Hotel when he knows good and well they broke the law? And why Obama appointed the CEO of GE recently to head up his new committee to fix the unemployment numbers and start hiring again? And why Obama`s bud, old folksy Warren Buffett, is a major stockholder in GE when GE paid zero federal taxes? And then Buffett has the audacity to brag to the world he is not taxed as much as he should be? If you believe Buffett wants to pay more taxes (the devil is in the details) and Obama should tax the heck out of GE, and break up his friendship with the folksy one. And how come Obama can`t even get his own party to back him up when he is merely asking for another half trillion dollars for another taxpayer stimulus money plan? And Obama is partly to blame for the inflation that is occurring as we speak. You can bet the farm the inflation will really screw up the economy like nothing the US has ever experienced. It will be far worse than the Carter administration pulled.
johnclarke on October 25 at 3:50 p.m.
GOP housing help plan detailed below, right after you can find the details of their jobs program.
Dazzeetrader1980 on October 25 at 4:04 p.m.
Don’t need one Clarkie. GOP doesn’t giveaway someone else’s money. They do what’s good for the country…sometimes they hit foul balls but they don’t strike out much. Obama’s ruining the country this type of thing. I do not understand how you liberals cannot see that this is a bailout of bad paper for the banks. Sure people will be pleased with it but it’s a loser for the country AND for those of use who pay for this garbage.
If Obama had any brains about him, he should have aimed the stim I money at this issue. He didn’t and he doesn’t. He should let the lower tier banks die off of their own making.,, This though is a full fledge bailout for the banks and mortgage companies. And YOU pay for it. How shortsighted to think anyone BUT banks will benfit. Have you no wits about you???
FREE everything for votes!!!! Those idiots will vote for me because they think I hleped them. I REALLY helped the banks’ bad paper! haha,.,,and Guess who pays for it!! Redistribution or just an economy gone bust. I hope someone with some common sense impeaches this loser. Clinton did this for votes in 1994 and 1995…and this was the single thing that began our economic downfall. Nice going. And you lil cheerleaders party on….not for long.
johnclarke on October 25 at 4:09 p.m.
GOP doesn’t giveaway someone else’s money.
ppfffffft ! What ? Are you at happy hour already ? What in the name of the martini in front of you are you talking about? What the hell do you call the TARP?
johnclarke on October 25 at 4:10 p.m.
Oh Dick, you and Warren Buffett.
JBlim on October 25 at 5:15 p.m.
jddavis says: “How is the fault of a political party that some bought houses they couldn’t afford?”
Anyone in the lending business knows that making loans is easy! Deadbeats and idiots apply for loans all day long. But the problem was that the banks sold all the loans off, and the appraisers and mortgage brokers all got paid up front. There was no incentive to make good loans. And Greenspan let it all happen because he believed that the market will take care of fraud, no need for regulations. So thanks, Republicans, for your bankrupt dogma.
jddavis on October 25 at 5:49 p.m.
JBlim—Just because a “deadbeat” applies for a loan doesn’t mean they’ll get it. Interest rates are directly associated with the risk of the loan. For instance, you may get better terms on a mortage than your neighbor because your credit score is better; meaning you are less of a risk to the lender providing you the loan. Banks and other financial institutions routinely buy/sell blocks of mortgages (grouped by terms) as investments.
I am not sure where Alan Greenspan “let” it happen. If you want to look for specific politicians to blame, look no farther than Christoper Dodd and Barney Frank. The problem originated with the government leaning on lending institutions to make loans to people who were high-risk or that they otherwise would not approve for a mortgage. With that, the housing market became a sellers market (increased demand) and prices went up. When the people who “over purchased” defaulted on their loans, the financial institutions took a major hit. With an increase of houses in foreclosure, the values of houses dropped (supply exceeded demand).
To say the Republicans are to blame, or the Democrats are to blame, is short sighted at best. Fastfood workers buying $300K houses didn’t work out so well.
Scoutster on October 25 at 9:54 p.m.
jdavis…
You are right that there is no one party to blame. It’s just that I have not heard a single, new idea from the GOP for years now. Which makes me think they still believe the same things that got us here.
My objection to what the GOP is selling is only partisan insofar as it’s practical. I’m not in the market for buggy whips.
JBlim on October 26 at 6:16 a.m.
jddavis says: “Just because a “deadbeat” applies for a loan doesn’t mean they’ll get it.”
Private banks, not covered by CRA or Barney Frank etc, were giving no-doc loans to any fool that walked in the door, that was the problem. The government didn’t require they do that. The overwhelming majority of bad sub-prime loans had nothing to do with Barney Frank. It was all about greed. Sorry, those are facts.