President Obama broadens federal refinance program
Kai Ryssdal: There is non-European news to catch you up on today. Seeing as how his jobs plan is still tied up in Congress, President Obama’s on the road again — Nevada today — to announce new rules to help homeowners refinance their mortgages.
Nevada wasn’t a happenstance. It’s got the highest foreclosure rates in the country. The president’s plan — which, it’s worth mentioning, does not need a congressional OK — is aimed at helping homeowners who’re underwater on their mortgages. But our Washington bureau chief John Dimsdale reports there are some restrictions.
John Dimsdale: The problem with previous federal efforts to fix the housing mess is lenders still won’t refinance loans that are worth more than a property’s value. So many of the nation’s 11 million underwater home buyers haven’t been able to take advantage of record low mortgage rates.
For example, Ken Port’s mortgage in Stillwater, Minn., is 40 percent higher than the home is worth. Still he’s current on his mortgage and tried to refinance.
Ken Port: In essence, it was $1,000-a-month shift.
But he was so underwater that he didn’t qualify for federal help. Obama’s new rules lift the cap on how underwater you can be, if you keep your payments up. And they make it less financially risky for banks to refinance.
In Las Vegas, where over half the homes are underwater, Southern Fidelity mortgage broker Carl Arakawa is skeptical. It’s still easier, he says, for lenders to foreclose and collect insurance.
Carl Arakawa: And then when they go to re-selling the property, then they’ll get money back that way.
But the secretary of housing, Shaun Donovan, says by clearing away some bank liabilities, the new rules give lenders incentives to refinance rather than foreclose — and that helps everybody.
Shaun Donovan: As a booster, to put more dollars in the pockets of homeowners around the country, that does have an effect on improving the housing market more broadly.
Several housing economists estimate the changes could help between one and two million homeowners refinance. That’s only a modest dent in the number of homes in danger of foreclosure.
In Washington, I’m John Dimsdale for Marketplace.
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