Obama Calls for HARP Expansion (Misc News: February 2, 2012)
Following up on statements made during his 2012 State of the Union address, President Barack Obama announced his latest plan to reform the housing market. The plan includes ways to help responsible homeowners refinance their mortgages, along with other initiatives to address issues that have plagued the housing market since the onset of the financial crisis.
Obama said he wants to help homeowners who are current on their mortgages obtain refinancing at today’s low interest rates. In order to do so, he’s calling for an expansion of the Home Affordable Refinance Program, which allows borrowers with loans backed by government-affiliated mortgage giants Fannie Mae and Freddie Mac to refinance at lower rates.
To date, about 1 million homeowners have taken advantage of HARP to refinance, well short of the 4 million to 5 million the Obama administration had expected. Moreover, many "underwater" borrowers — those who owe more than their homes are worth — couldn't qualify.
The plan is expected to cost between $5-10 billion, and would be funded by a fee on the largest financial institutions that would vary based on the institution’s size and riskiness of its activities. These refinanced loans would be guaranteed by FHA, who would run the program.
Among the factors which make the plan’s implementation uncertain: it would require congressional action, and though Obama has urged Congress to pass the necessary legislation to enact it, there is no guarantee that will happen.
It’s unclear at this time what impact the plan, if passed by Congress, would have on the credit union industry. MCUL & Affiliates CEO David Adams said the league is still reviewing the plan, however there are some areas that are cause for concern.
“Any proposal that seeks out a few players in an industry and assesses a fee in order to help cover the costs of a program would appear to be problematic,” Adams said. “We also are concerned that certain elements of the proposal could create increased risk for the government and lenders with potentially more poorly underwritten loans.He added that the league will continue to study the proposal in conjunction with credit unions and CUNA.
The administration estimates that 3.5 million borrowers with privately held mortgages have high enough interest rates that they would have incentive to refinance under the new plan. That's in addition to 11 million borrowers who have Fannie- or Freddie-guaranteed loans who could be eligible for refinancing under the proposed changes.
The White House fact sheet with more specifics on the plan is available by clicking here.