- 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.

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.

Others in the housing industry agreed Monday.

“We’re excited about it,” said Scott Talbott, senior vice president for government affairs at the Financial Services Roundtable. “We think this will be a big help.

“These are borrowers that are current on their payments, they want to stay in their homes, and allowing them to refinance will actually reduce their risk. That makes them stronger as borrowers and actually helps the economy.”

“We welcome the administration’s continued attention to housing, and today’s announcement was a good step,” John H. Dalton, president of the Housing Policy Council, said in a statement.

Housing and Urban Development Secretary Shaun Donovan told reporters Monday that borrowers could save more than $2,500 a year with refinanced mortgages.

“It’s the equivalent of a substantial tax cut for these families,” Mr. Donovan said.

Gene Sperling, director of the president’s National Economic Council, said the White House cannot estimate how many people ultimately will benefit from the new rules, but he noted that the Federal Reserve has projected that up to 4 million homeowners could qualify.

Since March 2009, the Obama administration has tried various efforts to relieve homeowners who owe more than their homes are worth. But the Home Affordable Modification Program, the Home Affordable Unemployment Program, the Principal Reduction Alternative and several other plans have failed to have much impact forestalling market forces that have sent foreclosures soaring since the housing bubble burst. Home prices have dropped about 40 percent since their peak in 2007.

“Unfortunately, there is no silver bullet,” said White House press secretary Jay Carney. “There is no simple, fundamental restructuring that will wipe away the damage done by the bursting of the housing bubble.”

Even Mr. Obama has acknowledged that his administration’s efforts have been “not enough.”

“The continuing decline in the housing market is something that hasn’t bottomed out as quickly as we expected,” Mr. Obama said at a town-hall meeting this year.

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