President Obama announced on Wednesday yet another attempt at helping financially beleaguered homeowners.
The proposal would allow more borrowers to take advantage of record-low interest rates and lower their monthly mortgage payments, reports The Washington Post’s David Nakamura and Brady Dennis.
This time around, homeowners whose mortgages are not federally backed may be eligible. As Nakamura and Dennis report, a key part of the plan would allow qualified homeowners to refinance their mortgages at current historically low interest rates. Unlike earlier proposals, the new refinance measure would cover not only home loans guaranteed by federal mortgage giants Fannie Mae and Freddie Mac, but also those owned by private investors, according to senior administration officials.
The criticism was quick.
“The Republican National Committee mocked Obama’s plan Wednesday, predicting that it would get tossed into the ‘alphabet soup’ of housing proposals the administration has offered over three years that have ‘failed to keep millions of Americans in their homes,’” Nakamura and Dennis wrote.
I’ve heard from homeowners and housing advocates about the problems with previous programs. People mostly complain that lenders haven’t been willing to participate in the government programs or that the modifications they offer are of little help. Borrowers and advocates complain that lenders or servicers take too long to make decisions and repeatedly lose applicants’ paperwork.
I certainly hope this program will have a greater impact than the earlier efforts.
But what do you think? This week’s Color of Money question: What do you think of Obama’s new plan to help homeowners? Send your responses to colorofmoney@washpost.com. Be sure to include your full name, city and state. Put “New Housing Refinance Plan” in the subject line.
The Real Culprit in the Housing Crisis
Who is responsible for creating the mortgage mess that wreaked havoc in the housing industry?
Fingers should be pointing at the private mortgage market, says Mark Zandi, chief economist at Moody’s Analytics and a columnist for The Washington Post’s Real Estate section.
Many have put most of the blame for the housing crisis on the two giant housing-finance institutions, Fannie Mae and Freddie Mac. But when you look at the numbers, that blame is misplaced, Zandi says.
Between 2004 and 2007, private lenders originated three-quarters of all subprime and alt-A mortgage loans. These were loans to financially fragile homeowners with credit scores under 660, well below the U.S. average, which is closer to 700. But only one-fourth of such loans were originated by government agencies, including Fannie, Freddie and the Federal Housing Administration.
“The biggest culprits in the housing fiasco came from the private sector, and more specifically from a mortgage industry that was out of control,” Zandi wrote. “These included lenders who originated home loans, investment bankers who packaged them into securities, rating agencies that misjudged these securities, and global investors who bought them without much, if any, study.”
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