A boost for refinancing mortgages

The following is a piece I wrote for the News and Observer and that it where it was originally posted.

Since January 2009, decision-makers in Washington have been hit or miss when it comes to solving the housing crisis. Perhaps a more accurate portrayal is that there have been a lot more misses than hits.

During this political season it is common for both parties to talk about what they will do after the election for jobs, the economy and the housing market. What they seem to forget during the election season is that work can still be done.

In the coming weeks, North Carolina Sens. Richard Burr and Kay Hagan will have a chance to do that work and assist struggling homeowners in this state by helping them to lower their interest rates.

Nationally, almost a third of homeowners are “underwater” on their mortgages, meaning they owe more than the house is worth. Despite historically low-interest rates right now, these homeowners are often saddled with higher interest rates because they cannot refinance while underwater. Many other families cannot refinance either, because the closing costs and fees are too high.

Burr and Hagan will have a chance to act on a package of three bills in the Senate – Sens. Barbara Boxer and Robert Menendez’s Responsible Homeowners Act, Sen. Dianne Feinstein’s Expanding Refinancing Opportunities Act and Sen. Jeff Merkley’s Rebuild Equity Act – that would impact the economy and the housing market.

This package would allow all homeowners to refinance into today’s low rates, including Fannie Mae and Freddie Mac loans, by expanding the Home Affordable Refinance Program to remove restrictions on who is eligible. Homeowners would also be allowed to refinance to a 20-year mortgage and keep the same payment; this allows underwater homeowners to get “above water” faster with more money going to principal.

Finally, the high closing costs that prevent many from refinancing would be eliminated because the federal government would cover them. All homeowners who are current and have a 580 FICO score would qualify.

In North Carolina alone, 368,962 families would qualify and save on average $2,900 a year, according to a recent report by the Center for Responsible Lending. That is a savings of over $1 billion in lower mortgage payments that can affect our state’s economy. Across the nation, over 4 million homeowners would be able to save over $10 billion; this not only saves homes from potential foreclosures and abandonment but also puts millions of families on more stable financial ground.

The mortgage crisis isn’t over yet, and the decision-makers in Washington need some hits to make up for all their misses. This is work that can be done now, and is more important than empty campaign promises. Homeowners can’t wait until after the election, while the housing market drags down our state’s economy.

This is not an end-all solution, but a first step in the right direction. If we want to truly address the housing crisis, we can’t just help those behind on their mortgage; we must also help those who make their payments despite higher rates and being underwater. Burr and Hagan need to take a stand for our state’s homeowners and economy and support this package of bills.

Why Obama’s refinance plan is still missing the point

Yesterday, President Obama announced that he used an executive order to revamp the rules for the Home Affordable Refinance Program. The hope is to make it easier for struggling homeowners to refinance their mortgage and take advantage of historic low interest rates.  The new rules include allowing homeowners who owe more than 125% of the value of their home to refinance their homes as long as they are current on their mortgage. The process is also supposed to be streamlined and eliminating some of the fees. White House officials estimate these new changes will help 1 million homeowners (14 million are underwater) get some relief.

Forgive me if I sound skeptical.  The last time the administration announced a refinance plan, they estimated 5 million people would be helped. So far, less than one million have been through the program. Once again there is a lack of standing up to the banks.  The only loans that qualify for the program are those held by Fannie and Freddie.  The reason why the initial version of this plan and other plans to confront the crisis have failed, is because they lack any real pressure on the banks.

I am sure a decent number of homeowners will get relief from this move, but the impact on the crisis will be minimal.  These loans are not the ones hurting the housing market, since they aren’t sitting empty or for sale.  These are homeowners who while underwater are still current on their mortgage and not in danger of facing foreclosure.  The administration has said this will be the first in a series of moves, but once again I will not be holding my breath.

Until the President and Congress are willing to stand up to the banks, hold banks accountable, and force them to  help fix the crisis, any program will have minimal impact.  We can’t continue to use a spray bottle on a wild fire when it comes to finding solutions.  Until someone is willing to stand up to the banks that is all we will be doing.