President Obama prodded Congress to pass another piece of his jobs bill during a speech in Las Vegas Monday, adding that if the economy is going to speed up its recovery more will be needed than the mortgage refinance plan announced earlier in the morning.
The Federal Housing Finance Agency announced new changes to the Home Affordable Refinance Program that should help millions of underwater Fannie Mae and Freddie Mac mortgage borrowers refinance into a more affordable rate. Only borrowers who are current on their mortgage bills are eligible. But as a percentage of the estimated 11 million underwater borrowers, the results will be modest at best, according to most.
The changes include eliminating upfront fees, negative equity caps, appraisal requirements and even some representation and warranty risk on the new loans.
"These steps I’ve highlighted today will not solve all the problems in the housing market. Given the magnitude of the housing bubble, and the huge inventory of unsold homes in places like Nevada, it will take time to solve these challenges," Obama said. "We will still need Congress to pass the jobs bill – and even then, the housing market won’t be fully healed until the unemployment rate comes down and the inventory of homes on the market comes down."
Senate Republicans filibustered the overall jobs bill and a portion the White House said would have put 400,000 teachers and first responders back to work. Obama pressed Project Rebuild Monday, which he said would help the private sector employ out-of-work construction workers to rehab vacant foreclosed properties.
"There are hundreds of thousands of vacant homes and more than 1 million construction workers out of work. That doesn't make sense," he said.
Obama said his administration is working to do as much as it can through executive orders as Congress remains gridlocked. Part of that, he said, is restoring many foreclosures as rental properties to ease the inventory on the market – an initiative the White House announced was under development last month.
Top GOP leaders and candidates for a presidential run in 2012 have said reducing burdensome regulations under the Dodd-Frank Act and cutting extraneous government spending would push the economy back to recovery.
Obama said the HARP changes Monday shows the economy can't wait for Congress to act.
"Here in Las Vegas, almost the entire housing market is under severe stress. This is a painful burden for middle-class families," Obama said. "When a home loses its value, a family loses a huge chunk of its wealth. As long as this goes on our recovery could not take off as quickly as it could."
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The Federal Housing Finance Agency plan to allow more borrowers to refinance into lower-rate mortgages brought plenty of analysis from the industry about the plan's merits.
As part of the plan, the FHFA removed the 125% loan-to-value ceiling for Fannie Mae and Freddie Mac loans to qualify for a refi. The federal regulator also cut back on risk-based fees and representation and warranty risks that make lenders reluctant to accept certain loans. An appraisal also is no longer required as long as an automated valuation model estimate is already provided.
HousingWire CEO Paul Jackson shared his views on the plan during an interview with CNN American Morning Tuesday.
"There are 11 million mortgages underwater," Jackson said. "There's 4 million borrowers who might benefit from this. It's certainly a positive. I don't know how you can say it's not a positive to say, 'We're going to actually help people who are doing the right thing: They are underwater on their mortgage, yet they are still making payments'. Certainly giving them the ability access ultra low mortgage rates is a good thing. It's good for the economy and it's good for the mortgage market."
Tags: Federal Housing Finance Agency, FHFA, loan-to-value ration, mortgage, mortgages, refinance, risk-based fees, underwater borrowers
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