- The Washington Times - Monday, October 24, 2011

Mortgage bankers are hailing the Obama administration’s decision Monday to begin yet another attempt to help “underwater” homeowners who are current on their payments to refinance and avoid foreclosure.

“This might be just the incentive that you need to go, ‘Hey, maybe I’m going to keep this house,’” said Keith A. Luedeman, CEO of GoodMortgage.com. “I think it’s a good idea.”

The administration announced new rules with the Federal Housing Finance Agency, the regulator for Fannie Mae and Freddie Mac, to make it easier for borrowers to obtain cheaper loans even if they have little to no equity in their homes. The FHFA will loosen terms of the 2-year-old Home Affordable Refinance Program (HARP), which helps borrowers who have been making mortgage payments on time but who have not been able to refinance as their home values have dropped.

Among the changes are the elimination of certain refinancing fees, lower closing costs and the removal of the requirement that homeowners be no more than 25 percent underwater.

The initiative announced Monday by Mr. Obama is at least the 10th housing-relief program that the administration has introduced in the past three years, none of which has made much impact on the beleaguered market.

President Obama is greeted at McCarran International Airport in Las Vegas. An initiative he announced Monday is at least the 10th housing-relief program that the administration has introduced in the past three years. Nevada is the state hit hardest by foreclosures. (Associated Press)
President Obama is greeted at McCarran International Airport in Las Vegas. An ... more >

Mr. Obama promoted the changes in mortgage rules in Nevada, the state with the nation’s highest foreclosure and unemployment rates and a political “swing state” that has backed the winning candidate in the past eight presidential elections.

The president and his aides are calling the plan “We Can’t Wait,” claiming the executive action is necessary because Republicans in Congress are dragging their feet on measures that would help homeowners.

“We’re doing everything we can do to get the economy moving,” White House Communications Director Daniel Pfeiffer said. “[Republicans] have thus far resisted any effort to do so.”

House Republican leaders counter that 15 bills intended to help the economy have been passed in their chamber and are awaiting action in the Democrat-led Senate.

Borrowers are underwater if the value of their homes has dropped below the amount remaining on their mortgages. It’s difficult for homeowners who are more than 25 percent underwater — with homes worth 25 percent less than the balance on their loans — to refinance and get lower interest rates under these circumstances.

This has been one of the biggest problems during the mortgage crisis of the past few years. Home values jumped too quickly and caused buyers to pay too much several years ago, Mr. Luedeman said. So as the market collapsed, many homeowners found themselves underwater.

“You trapped a lot of people,” he said. “So they can’t move.”

Furthermore, the Great Recession has left many homeowners unemployed or underemployed and unable to make their payments, Mr. Luedeman said, also contributing to the increasing number of foreclosures.

By making it easier for these underwater homeowners to refinance to lower interest rates — which have dropped from about 6 percent in 2007 to 4 percent now — they are more likely to be able to afford their homes.

“This proposal today is going to slow the number of homes going into foreclosure, so it does address a very important piece of what does need to be done,” Mr. Luedeman said.

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