Written by Lily Leung
Oct. 24, 2011
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AP file photos — AP |
Real estate thinkers, industry experts and politicians throughout the country expressed relief when the Obama administration on Monday announced major changes to a federal program that could help more homeowners who are underwater on their mortgage. But some have adopted wait-and-see attitudes since lender participation in the program is voluntary and implementation could vary.
The changes will affect the Home Affordable Refinance Program, which aims to help certain borrowers refinance their home loans and reap the benefits of historically low mortgage rates. The program, as of August, has helped almost 894,000 people refinance their mortgages and lower their monthly payments. The administration estimates it could double that number with the new adjustments, a government-issued FAQ says.
The shifts include:
--Encouraging people to refinance into home loans with shorter terms by nixing certain fees.
--Taking away the 125 percent loan-to-value cap for fixed-rate home loans, something that kept many borrowers from taking advantage of the program.
--Getting rid of new appraisals and instead using what government officials call "automated valuations models."
Will this work?
"I doubt it will have a large effect nationwide," said Michael Lea, director of real estate center at San Diego State University. "And the question remains as to how banks will implement." Government enterprises Freddie Mac and Fannie Mae, who were part of Monday's announcement, will unroll more exact details on the changes by Nov. 15. Lenders are not required to take part in the program.
"Implementation schedules will vary as individual lenders, mortgage insurers and other market participants modify their processes," the FAQ says.
Lea, of SDSU, says the program could help qualified borrowers lower their mortgage payments, which may bode well for the U.S. economy. On the flip side, he said the changes don't address "the main problem of negative equity" and that refinancing could cost investors.
"Investors see refinance as a prepayment creating a loss relative to what they assumed they would earn when they invested in the mortgage (i.e., their investment at 5 percent is now one at 3.5 percent," Lea said, in an email to the Union-Tribune.
Greg McBride, an analyst at Bankrate.com, called the changes "long overdue," and "better late than never" in a tweet on Monday.
Here are some other reactions:
The banks
“Bank of America will participate in the enhanced Home Affordable Refinance Program announced by the Administration today and which is expected to go into effect December 1. Since the inception of HARP in 2009, Bank of America has helped more than 250,000 homeowners through this program; more than any other lender. Despite ongoing economic challenges, nearly 90 percent of our customers remain current on their mortgage. HARP helps these homeowners who remain current on their mortgage with options to lower their monthly payment when, otherwise, conventional funding options are limited.”
--Jumana Bauwens, spokeswoman for Bank of America, in a written statement.
"Wells Fargo welcomes the addition of the new HARP features to the existing offerings we provide our customers. We remain committed to responsibly making affordable and sustainable home loans available to consumers. We are waiting for the specific guidelines from Fannie Mae and Freddie Mac that will be required to put the changes into practice. Once we have the guidelines in hand, it will take us some time – depending on the complexity of the guidelines – to make the necessary systems changes to begin offering the new enhancements to our customers."
--Julie Green Rommel, Wells Fargo spokeswoman, in a written statement.
The politicians
“I am very pleased that the administration is taking these steps to help responsible homeowners refinance at historically low interest rates. Allowing these homeowners to refinance at today’s record low rates will keep families in their homes and boost the economy by putting thousands of dollars back in the pockets of borrowers. I urge FHFA to move swiftly to assure that these new policies will help as many homeowners as possible.”
--U.S. Senators Barbara Boxer (D-Calif.), in a statement to the media.
"The changes announced today will provide additional relief for middle-class Americans and an important boost for our economy. But we must not stop here. Economists warn that the housing crisis is ‘ground zero’ for the economy and jobs, and this is only one modest step towards addressing it."
--Congressman Elijah E. Cummings, also ranking minority member of the Committee on Oversight and Government Reform (D-Maryland)
The builders
"...For the many families who have fallen behind in their payments because of the weak job market, the changes to HARP will have no benefit. HARP is only open to mortgage borrowers who have remained current with their payments. Clearly, additional policy initiatives are urgently needed to prevent foreclosures and deal with the inventory of foreclosed homes."
--Bob Nielsen, National Association of Home Builders Chairman
