Obama Refi Plan Wouldn’t be Hard to Implement

How easy would it be to launch the initiative to help underwater home owners that President Barack Obama talked about in his state of the union speech on January 24?

Policy experts speaking with politically active REALTORS® in Washington this week said it would be relatively easy to create the program if an agency like FHA or even if the two secondary mortgage market companies Fannie Mae and Freddie Mac were given responsibility to do it. As policy consultant and former HUD official Brian Chappelle put it, the program could be implemented “almost overnight” because FHA already has its lenders and refi procedures in place.

But Chappelle and others said if FHA or the GSEs undertook the program, it would be best for the government to create a separate insurance fund to cover the new refinanced mortgages. That way, the entities’ main insurance funds wouldn’t be at risk should a portion of the loans go bad.

Brian Gardner, a Wall Street analyst, said the program would require close coordination with the Federal Reserve, otherwise investors in mortgage backed securities would demand a risk premium in interest rates to account for future political uncertainty of the program.

Patrick Swire, a former Obama administration domestic policy advisor and now an analyst with the Center for American Progress, said Obama’s refi initiative is a logical extension of the administration’s previous efforts to help underwater home owners since the economic crisis hit several years ago. The Home Affordable Refinance Program (HARP) was a first attempt to give lenders, investors, and troubled borrowers an incentive to modify their mortgage before the house is lost to foreclosure. This new program would provide an opportunity to implement lessons learned from that earlier effort.

Would lenders even want to participate? Ann Schnare, a policy consultant who formerly was an executive with Freddie Mac, said lenders are worried about getting hit with loan repurchase penalties, which previously happened infrequently but since the mortgage market upheaval have become far more common. So, unless that issue is addressed, lenders would likely be worried about the risks of participating.

Of course, whether the program will even pass Congress is another matter altogether, and that remains the big question. But the panelists appeared to agree that implementation was clear-cut should it pass.

Under the refi initiative President Obama discussed in his speech, underwater home owners who are struggling to stay current on their mortgage would be able to refinance to take advantage of today’s historically low rates.

The video excerpt above shows the discussion, Wednesday, Jan. 26, among the panelists. At about eight minutes, the video is relatively long, but the discussion is substantive and interesting, so it’s worth the investment in time to watch if you’re interested in these policy issues. Session moderator is Alan Zibel of the Wall Street Journal/ Dow Jones News Wire.

Background on the Obama refi proposal.

Robert Freedman

Robert Freedman is director of multimedia communications for the NATIONAL ASSOCIATION OF REALTORS®. He can be reached at rfreedman@realtors.org.

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  1. President Obama has really tried to put the economy back into gear for those of us in the middle class. He should be commended for all of his efforts. This sounds like an awesome program that could really help homeowners to stay in their homes.

  2. James Sances

    Its sounds great but so did the Harp and Haffa programs but never really worked because banks didn’t co-operate. PUT ME IN COACH!
    I am a broker and in the business 25 years. I can help run this program.. They never consider all of us realtors who went out of business and lost our industry along with retirement. Lets a program that gives us a bailout on our credit hits they we have taken with no mercy by the very financial system we bailed out so they wouldn’t go broke. They hits in our pockets, our dreams, and our credibility. Tool it all away and never looked back. Sorry i got to ranting.

    I love Obama. He’s doing a great job but with no help from the republicans. I think if you make 3 million or more than pay more. All those sports players never would have anything if we stopped all this. They should be happy with 25 million plus a year. Remember they can make it back. We the people would take 3 life times.

  3. Joanna McDermott

    My question is this…..who is going to pay for it…where is the money coming from…we are in debt out the wazoo. It would be wonderful if the answer was so simple.

  4. San Diego

    Forcing lenders to refinance non Fannie/Freddie/FHA loans that are underwater will be paid for by a fee charged to the large banks meaning banks will have extra costs which will be passed on to THE MIDDLE CLASS. Even now with record low interest rates, owners can’t refinance because they can’t qualify…they can’t qualify because they don’t have the same income as they used to. The solution to the housing crisis is to get more people employed in meaningful jobs.

    So far, this administration has paid almost a trillion in stimulus money and has not achieved any real job growth. $800 Billion is like giving $100,000 to 8 MILLION PEOPLE! That would have resulted in a bigger boost to our economy than anything thats been done so far. Can you site where any of that “stimulus” money went to?

    I am not in the 1% and far from it but, if you want to continue to grow government costs, continue to have more than 50% of us paying no taxes, we will need an ever growing number of those millionaires to pay an ever growing % of their income to support what the government spends. And then, if you do a great job, the incentive is to not make a lot of money since it will be taken to cover the cost of government.

    My job is in Real Estate and Mortgage lending and most of us in this industry are not working or not selling or originating loans anywhere near enough that would allow me to refinance my home. If I took another job, I wouldn’t be able to refi for more than a year as lenders look for stable employment in the same industry over a two year period.

  5. S Maxwell

    Ok the plan sounds good, but like other comments presented her, the talk is just that talk.
    We have all been listening and waiting for our government to help ALL people, but the long and short of it is, that if you were a average wage earner, and things were moving along and then you got hit with less work, and less of everything else, and then payments slipped, your 2nd. home equity interest was out of line, and neither of your 1st. or 2nd. were fanny mae or freddie it is almost impossible for these individuals to get help. The Washington people must know that there are many many people that are caught in this loop hole, want to stay in their home and have pride of ownership, and they may loose their home. the money they used to have has been cut but less work, and they have to maintain their health insurance, and all so if they get sick they can get help. Many of these individuals are over 65yrs. of age. Help is needed and like one comment said, ask us REALTORS what we see and how we think Washington can help. We are the ones who work with these people to help them adjust and struggle thru this long red tape of paper work.
    we can help, let us.

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