There is an article in this morning’s New York Times by Shaila Dewan and Louise Story that suggests that the Obama adminstration may be pondering some sort of blanket refinance plan that may allow millions of homeowners to refinance their mortgages at today’s record low rates.
The article is very short on any specifics, which makes me dubious about the entire thing (not the veracity of the article, but the willingness of the administration to take any sort of action).
Apparently the nebulous plan may allow some unspecified number of people who have a mortgage that may or may not be owned or backed by Fannie Mae or Freddie Mac to possibly refinance. Again, there are no specifics whatsoever in the article, so it is unclear if the new program would allow those who are delinquent or underwater to refinance their mortgages (approximately 20-25% of homeowners with mortgages owe more on their mortgage than their home is worth). Those who have no home equity typically cannot refinance. Many who purchased homes at the peak of the market (2006-7) are underwater, and are stuck paying rates 2-3 points higher than current rates.
There are already some programs designed to help underwater borrowers refinance (such as the Home Affordable Refinance Program, or HARP). HARP is supposed to enable those who are up to 25% underwater to refinance, but the program has met with limited success. Part of the reason for this is that it costs money to close a mortgage. Many U.S. households are strapped for cash, and unless this new program is going to allow free refinancing, the cost of closing a mortgage is prohibitive to many.
Another problem is that refinancing doesn’t do a lot to help those who are unemployed or seriously delinquent on their mortgages. If you have no money, it doesn’t matter how much you reduce the monthly mortgage payments.
At the end of the day, I don’t hold out a lot of hope for this program (and we don’t even know what it is). Pretty much everything the Obama Administration has done to help homeowners has been ineffective at best. Between the indecisive/ineffectual President and the intransigent Republicans in Congress, I don’t see much of anything being done to help struggling homeowners.
This whole thing strikes me more as an attempt to appear to be doing something as the 2012 elections approach rather than actually doing something.
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CAS
August 25, 2011 @ 12:26 pm
“This whole thing strikes me more as an attempt to appear to be doing something as the 2012 elections approach rather than actually doing something”
YEP!
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