Obama seeks to broaden U.S. mortgage refinancings
Reuters
7:10 p.m. EDT, September 8, 2011
WASHINGTON (Reuters) – The White House is seeking
to broaden U.S. homeowners’ access to mortgage refinancing in a
plan aimed at reducing home foreclosures and help the ailing
housing market.
President Barack Obama was poised to mention the effort in
his speech to Congress Thursday unveiling a $447 billion
jobs package, senior U.S. officials told reporters.
“We’re trying to do every single thing we can on housing,”
one U.S. official said, adding the administration was “working
around the clock” on the refinancing initiative.
“We’re hopeful that over the next … several weeks that we
will have progress in that area,” the official said.
The White House officials said the U.S. Treasury was having
talks with both Fannie Mae and Freddie Mac
and their regulator — the Federal Housing Finance Agency — on
ways to broaden refinancings. The aim is to is to “remove the
barriers that exist in the current refinancing program.”
While mortgage rates however at record lows, many U.S.
homeowners have been shut out of the refinancing process
because they owe more than their homes are worth or have
less-than-perfect credit histories. The average rate on a
30-year fixed loan was 4.12 percent last week, the lowest level
in six decades, according to Freddie Mac.
“Refinancing puts money back in the pockets of consumers
without costing the government directly in tax revenue,” said
David Abromowitz, a Senior Fellow at the Center for American
Progress. “The barriers really have a lot to do with concerns
about how investors in the mortgage market might react. You are
weighing costs and benefits.”
Some argue that changing the rules for refinancing would
put Fannie and Freddie at greater risk of financial losses but
the administration contends it could bolster the agencies by
strengthening the overall housing market.
The refinancing initiative under consideration by the Obama
administration would need final approval from the acting head
of the Federal Housing Finance Agency, Edward DeMarco. Those
close to DeMarco say he is acting as an independent regulator
with the goal of conserving the assets at Fannie and Freddie, a
position he has staunchly defended before lawmakers since the
two firms were taken over by the government three years ago.
Fannie and Freddie, combined with the Federal Housing
Administration (FHA), support about 90 percent of the mortgage
market. The Congressional Budget Office estimated in a recent
report that defaults prevented by a refinancing plan would save
the FHA and the two government-sponsored enterprises about $3.9
billion.
Offsetting any savings for lower monthly payments for
homeowners are objections from holders of mortgage bonds, who
would take a hit if loans are paid off early. The CBO said that
a government push to spur refinancing would cause private
investors to lose about $13 billion to $15 billion.
The nonpartisan group estimated a government refinancing
initiative would likely provide $7.4 billion in savings for
lower mortgage payments in the first year. The plan could
amount to refinancing of 2.9 million mortgages in its first
year, totaling $428 billion, and would prevent 111,000 defaults
that would otherwise occur, the CBO said.
However, the CBO argued that estimated benefits would be
”small relative to the size of the housing market, the mortgage
market, and the overall economy.”
(Writing by Caren Bohan and Margaret Chadbourn; Editing by
Eric Walsh)
Leave your response!