The Federal Housing Finance Agency announced new rules Monday morning that will help homeowners who are deeply “underwater” refinance their mortgages.
The announcement comes the same day President Obama departs for Nevada, one of the states hardest hit by the housing crisis. He is scheduled to speak at 5:35 p.m. ET on the new rules after meeting with homeowners at a private residence in Las Vegas
We’ll stream video of the meeting at 5:10 p.m. and the president’s speech on 44.
The Associated Press reported on the administration’s new regulations and the timing of the changes in policy.:
Obama will promote executive branch steps his administration is taking to jump-start the economy, beginning with the new FHFA rules.
With the president’s jobs bill struggling in Congress, the White House is refocusing its efforts on steps Obama can take to address the nation’s economic woes without getting lawmakers’ approval. . . . The new push comes with a fresh catchphrase as the White House tries to push Republicans into action: “We can’t wait.” . . .
Last month, Obama announced a $447 billion jobs plan, filled with tax increases on the wealthy and new spending on education, infrastructure and aid to state and local governments. Efforts to pass the full measure were blocked by Senate Republicans, who see the president’s proposal as a second stimulus.
The Washington Post’s Zachary A. Goldfarb reported on the new FHFA regulations:
The announcement is a revision to the Home Affordable Refinance Program, which was rolled out in 2009 to help millions of borrowers refinance at lower interest rates. That program fell far short of expectations, in part because borrowers who owed 25 percent more than their home’s value did not qualify for refinancing.
The new rules eliminate the cap on debt, opening up the program to millions more homeowners. The original program “reached 822,000, less than a tenth of whom have been significantly underwater borrowers.”
Mortgage rates are at a near rock bottom of 4.11 percent. But most underwater borrowers, who have not been permitted to refinance or face significant barriers in refinancing, pay rates far above that. . . .
The Federal Housing Finance Agency, working with the Obama administration, said that up to 1 million “underwater” borrowers might benefit from an expanded program that targets homeowners who owe more than their properties are worth.
Larry Summers, Harvard economist and veteran of the Obama and Clinton administrations, explained “How to stabilize the housing market” in an op-ed in Sunday’s Post.
The central irony of a financial crisis is that while it is caused by too much confidence, borrowing and lending, and spending, it can be resolved only with more confidence, borrowing and lending, and spending. This is true, above all, of housing policies. Fannie Mae and Freddie Mac, government-sponsored enterprises (GSEs) whose purpose is to mitigate cyclicality in housing and that today dominate the mortgage market, have become a textbook case of disastrous and pro-cyclical policy. . . .
Unfortunately, for several years policy has been preoccupied with backward-looking attempts to address the consequences of past errors. While the focus has been on helping individual homeowners, decisions that are ultimately more important regarding the GSEs have been left to their conservator, the Federal Housing Finance Agency, which has taken a narrow view of the public interest. The FHFA has neglected its conservatorship mandate to ensure that the GSEs help stabilize the nation’s housing market. It has taken no account of the reality that the the GSEs’ health depends on a national housing recovery. Instead, the FHFA’s focus has been on reversing previous policies, heedless of changes in the environment and treating mortgage finance as a morality play. A better approach would involve a number of substantive changes.