--Refinancing program to be extended through 2013 --Cap of 125% of home value to be eliminated --Officials seek to encourage shorter-term mortgages (Updates with quotes in paragraphs 18, 19 and the final paragraph.)
WASHINGTON (Dow Jones)--The Obama administration and a housing regulator on Monday unveiled a revamped home-loan refinancing program, aiming to aid hundreds of thousands of Americans whose home values have fallen during the housing bust. The plan represents the latest federal effort to tackle a key impediment to the U.S. economy--a stagnant housing market caused in part by elevated numbers of homeowners who owe more than their homes are worth. It came after numerous Obama administration efforts to stabilize the housing market have struggled in an economy with stubbornly high unemployment. The overhaul will let borrowers refinance their mortgages regardless of how far their home prices have plunged, eliminating a previous restriction that shut out homeowners who owed more than 125% of their homes' current value. While some academic experts and Democrats had called for a more far-reaching refinancing program, administration officials emphasized they aimed to do what was practical without passing legislation through a divided Congress. "Any mortgage is a contract, and the government can't simply come in and override contracts and force refinancing of every mortgage," said Housing and Urban Development Secretary Shaun Donovan. "What we've done is to take the steps that we can take today." The plan is designed to streamline the refinancing process by eliminating appraisals and extensive underwriting requirements for most borrowers, as long as homeowners are current on their mortgage payments. The refinancing program is open to homeowners whose mortgages are owned or guaranteed by Fannie Mae (FNMA) or Freddie Mac (FMCC), the two government-controlled mortgage giants whose rescue three years ago has cost taxpayers $141 billion to date. Regulators are revamping a program rolled out in 2009, the Home Affordable Refinance Program, or HARP, which lets borrowers with homes whose values have dropped to refinance. So far, only 894,000 borrowers have used it, of which just 70,000 are significantly underwater. The FHFA said the changes could at least double the number of homeowners enrolled. Analysts at Barclays Capital, however, estimated that between 1.9 million and 3.1 million homeowners could be eligible for help. Officials said they are trying to encourage Americans to shorten the terms of their mortgages, by replacing 30-year fixed-rate mortgages with shorter 15- or 20-year terms in which the principal is paid off faster. Fannie, Freddie and the Federal Housing Finance Agency have agreed to waive fees for borrowers who refinance into loans with shorter terms, such as a 15-year mortgage. They will also reduce fees, but not eliminate them entirely, for everyone else. Edward DeMarco, acting director of the Federal Housing Finance Agency, said that, by moving to shorter loans, borrowers can regain equity in their homes. "Americans all across the country have been doing this calculus for a number of months now," he said. Currently, refinanced loans for those deeply underwater borrowers can't be sold into traditional pools of mortgage-backed securities issued by Fannie and Freddie. Officials are working on a way to sell these bonds, but officials say it isn't likely to happen until early next year. The HARP program will be extended through 2013, beyond its current expiration date of June 2012. The program, however, is limited to loans that Fannie and Freddie guaranteed before June 2009. Loans that have been refinanced in the past 2 1/2 years, including those through HARP, won't be eligible to refinance under the program. Under changes disclosed Monday, banks will be largely shielded from the risk that they will have to buy back HARP mortgages. They only will have to verify that borrowers have made their last six payments, have no more than one missed payment in the last year and have a job or another source of income. The mortgage industry has been facing stepped-up buyback demands from Fannie and Freddie for bad loans made during the housing bust, and the FHFA is not entirely eliminating the risk that lenders will be forced to take back loans that go into default. With the risk of buybacks still there, lenders are likely to tread carefully as they implement the program, said Brian O'Reilly, president of the Collingwood Group, a Washington-based mortgage industry consulting firm. That could limit how many borrowers can take advantage of refinanced loans. "Lenders will be cautious in their interpretation of those requirements," to avoid buyback requests, O'Reilly said. "They've been hit hard." Fannie and Freddie will issue final pricing information and other technical details by Nov. 15, and some banks have said they could begin taking applications under the new program by as soon as Dec. 1. Mortgage insurers have also agreed to make it much easier to transfer existing mortgage-insurance coverage, which has blocked many borrowers from refinancing. If you have any questions regarding refinancing or purchasing a new home please contact me (657) 229-3314
No comments:
Post a Comment