Obama administration touts refinancing program as economic boost
Obama administration officials touted an overhaul of a program to allow more underwater homeowners to refinance as a boost to the broader economy, although they were unable to project how many people the initiative would help.
"Today’s announcement is a very significant step in moving more families who have met their responsibilities into a position to refinance at significant savings," Gene Sperling, the top White House economic adviser, told reporters Monday.
Sperling and Housing and Urban Development Secretary Shaun Donovan noted that with mortgage interest rates at record lows, a homeowner can save an average of about $2,500 a year by refinancing. The additional money in the hands of a consumer would help stimulate the economy, which in turn would help stabilize the housing market.
"It's the equivalent of a substantial tax cut for these families," Donovan said.
The independent Federal Housing Finance Agency on Monday announced major changes to the administration's 2½-year-old Home Affordable Refinancing Program, which has helped 894,000 homeowners refinance.
The most significant change is to expand eligibility to more people who owe more on their homes than it is worth. The FHFA will remove a limit that prevented participation in the program by borrowers who owed more than 125% of the value of their homes.
Borrowers would have to be up-to-date on their mortgages, with no late payments in the previous six months and no more than one late payment in the last 12 months. Only people with loans owned by seized housing finance giants Fannie Mae and Freddie Mac are eligible, and those loans must have been sold to the firms by May 31, 2009.
The administration officials stressed that the expansion of the HARP program was only one step in dealing with the struggling real estate market, but one that could be taken without requiring the partisan-gridlocked Congress to pass legislation.
White House Communications Director Dan Pfeiffer said President Obama was trying to find ways to help the economy that do not depend on Congress, which has balked at passing his new jobs package. Administration officials are calling the push for such executive action "We can't wait."
Obama will highlight the refinancing rules during an appearance Monday in Nevada, which is one of the state's hardest hit by the foreclosure crisis, along with California and Florida.
"When Congress won't act, this president will," Pfeiffer said.
Sperling said the administration was trying to find the right combination of programs to reverse the foreclosure crisis.
"The president is committed to attacking the housing crisis on all fronts," Sperling said. "This significant effort on refinancing … is an important part of that arsenal but it’s only one part."
— Jim Puzzanghera in Washington
Photo: Housing and Urban Development Secretary Shaun Donovan. Credit: Bloomberg