Obama Extols Impact of Lower Mortgage Rates
Friday, April 10, 2009
President Obama touted his administration's efforts to lower mortgage interest rates in a round-table discussion yesterday with Washington-area homeowners who have benefited from refinancing into more affordable loans.
The discussion in the White House's Roosevelt Room included Gail Johnson, a registered nurse from the District who discovered in June that the payments for her adjustable-rate mortgage were about to increase dramatically. She saved $400 a month after refinancing.
It also included Woodbridge couple Pedro and Luz Cruz, who reduced their payments by $700 a month in February. That was enough to compensate for a cutback in Pedro Cruz's work hours.
Cruz said he had used up most of his savings to keep up with his mortgage payments before receiving a prized 4.75 percent interest rate and extending the terms of his loan to 20 years from 15 years. Without refinancing, Cruz said in an interview, he feared he would behind in his payments and possibly lose his home.
"The main message we want to send today is, is that the programs that have been put in place can help responsible folks who have been making their payments, who are not looking for a handout," Obama said, "but this allows them to make some changes that will leave money in their pockets and leave them more secure in their homes."
Obama pointed to a boom in refinancing that has accompanied lower mortgage rates, which were at an average 4.87 percent for a 30-year, fixed-rate loan this week, according to a survey by Freddie Mac. Refinancing applications have risen 88 percent since February, according to the Mortgage Bankers Association. And Fannie Mae has said that its refinancing volume jumped to $77 billion in March, twice the level of the previous month.
Obama's round table also included Jeffrey and Shelby Haggray, who refinanced the mortgage and home-equity line on their District home in January. Their monthly payments had risen by hundreds of dollars a month over time and became unaffordable, Jeffrey Haggray said. The new mortgage lowered their payments and helped extinguish several debts including a car loan, lowering their household expenses by about $1,200 a month. "Over the course of the 30 years, it will save us thousands of dollars annually," he said.
He said the new loan has an adjustable interest rate, which is at about 6 percent now, so the couple is likely to refinance again. "We're already anticipating refinancing in the future to secure an even better rate," he said.
Despite the uptick in refinancing, the president's housing program, launched last month, has yet to have a significant impact. Additionally, homeowners with jumbo mortgages -- loans higher than $729,750 in the Washington area and $417,000 in most of the rest of the country -- still struggle to take advantage of lower rates.
The program Obama launched last month allows borrowers with little or no equity to refinance as long as their mortgage is backed by Fannie Mae and Freddie Mac. Lenders began delivering refinanced loans under that program to Freddie Mac on April 1, and Fannie Mae received several thousand applications on Monday when its computer systems were updated for the program. But not all banks have implemented the program.
It is taking even longer for some lenders to launch the foreclosure-prevention part of Obama's housing program. Under that program, the government will pay lenders to reduce payments to affordable levels for troubled homeowners.
The administration is finalizing agreements with lenders and is still working on the details of the part of the effort that will deal with borrowers who have two loans.
"We are in the process of rolling out some additional phases to the program," Obama said.