by Ethan Handelman, National Housing Conference
This morning, President Obama announces a new refinancing plan to help homeowners lower their monthly payments. Early reports in the Wall Street Journal and AP say the program is aimed at privately held mortgages that could be refinanced with new loans from the Federal Housing Administration (FHA). In effect, this would broaden the Home Affordable Refinance Program (HARP) changes made last year to cover more than just Fannie Mae and Freddie Mac loans.
The new plan would require Congressional action—a tall order in an election year, especially if it has a budgetary cost. And it would demand even more of FHA, which has handled an already unprecedented volume of loans as other lenders have retreated during the housing crisis.
That said, it’s the kind of action we need. Over 22% of home loans, nearly 11 millions, are underwater. A refinancing program to help lower payments could help prevent foreclosures, keeping families in their homes and protecting neighborhoods from blight. Refinancing alone isn’t enough—we also need principal reduction for those that refinancing can’t help—but it’s a great step in the right direction.