Commentators, bloggers, and the Twitterverse have been abuzz with praise for the rousing speeches coming out of the Democratic National Convention in Charlotte, N.C., this week, culminating Thursday night with President Barack Obama accepting his party’s nomination. But now that the political festivities have come to a close, where did housing fall in the ranks of Democratic priorities?
Although not as prevalently spotlighted as jobs, healthcare, or education, housing—specifically the mortgage interest deduction (MID)—did receive a nod in Obama’s acceptance speech.
“I refuse to ask middle class families to give up their deductions for owning a home or raising their kids just to pay for another millionaire’s tax cut,” Obama said in his acceptance speech. In a jab at what Democrats see as a Republican platform that favors the wealthy, Obama said, “I want to reform the Tax Code so that it’s simple, fair, and asks the wealthiest households to pay higher taxes on incomes over $250,000—the same rate we had when Bill Clinton was president, the same rate we had when our economy created nearly 23 million new jobs, the biggest surplus in history, and a whole lot of millionaires to boot.” Continue reading »
FHA is lowering its mortgage insurance premiums to help borrowers refinance into lower interest rates, President Barack Obama announced yesterday in a national press conference at the White House. The initiative also includes help to members of the military who’ve been wrongly foreclosed on or denied a chance to refinance.
Under the FHA initiative, the agency is reducing its up-front premium to .01 percent, from 1 percent, for streamlined refinancings of loans originated prior to June 1, 2009, and cutting the annual fee for these refinancings in half, to .55 percent, from 1.15 percent.
The Administration says the two fee reductions together should save the typical FHA borrower about a thousand dollars a year, which is “on top of the savings that they’d also receive from refinancing,” President Obama said at the press conference. “That would make refinancing even more attractive to more families. It’s like another tax cut that will put more money in people’s pockets. We’re going to do this on our own. We don’t need congressional authorization to do it.”
In a scenario of how this would work provided by the White House, a typical FHA borrower with $175,000 outstanding on a mortgage would be able to reduce the monthly payments to $915 a month, assuming a new mortgage at 4 percent. Without the fee reduction, the monthly payment after a refi would be $1,010 a month.
The fee cuts begin June 11. (Details from HUD.)
President Obama used the press conference to urge Congress to pass elements of a broader housing assistance proposal he outlined in his State of the Union speech in January and which was subsequently fleshed out a few weeks later in another address. That proposal would apply the administration’s existing HARP program (Home Affordable Refinance Proposal) to all loans, not just those backed by Fannie Mae and Freddie Mac. To pay for that expansion of the program, a fee would be charged to the country’s largest banks, which received public help after the mortgage crisis hit a few years ago.
Under HARP, lenders agree to modify mortgages, even if the borrower is underwater, as long as certain requirements are met.
Under the assistance to home owners in the military, the administration says it will take the following five steps:
1. Conduct a review of every servicemember foreclosed upon since 2006 and provide any who were wrongly foreclosed upon with compensation equal to a minimum of lost equity, plus interest and $116,785;
2. Refund to servicemembers money lost because they were wrongfully denied the opportunity to reduce their mortgage payments through lower interest rates;
3. Provide relief for servicemembers who are forced to sell their homes for less than the amount they owe on their mortgage due to a permanent change in station;
4. Pay $10 million dollars into the Veterans Affairs fund that guarantees loans on favorable terms for veterans; and
5. Extend certain foreclosure protections afforded under the Servicemember Civil Relief Act to servicemembers serving in harm’s way.
Read a transcript of the President press conference yesterday.
President Barack Obama today fleshed out a proposal he announced in his State of the Union speech last week to help boost the housing market by helping more underwater home owners than are being served now by lenders.
In the details he released today, the President said he wants to make the federal government’s existing mortgage refinance program, called HARP (Home Affordable Refinance Program) available to more home owners. It’s currently available to struggling borrowers with loans backed by Fannie Mae and Freddie Mac. For these borrowers, incentives are provided under certain conditions to make refinancing more attractive.
Under the new proposal, this HARP program would be expanded to include borrowers with loans that aren’t backed by Fannie and Freddie. These are the borrowers whose loans were securitized in private-label securities without any federal backing, and they would be allowed to refinance into FHA-backed loans, the same as the Fannie and Freddie borrowers. The administration has estimated that borrowers would save $3,000 a year in mortgage costs.
Key points: 1) More underwater home owners would be able to tap federal refinance assistance than can do so today, 2) mortgage servicers would be restricted in their ability to foreclose until after they’ve exhausted efforts for borrowers who’ve make a good-faith effort to modify their mortgage, and 3) efforts to reduce the inventory of foreclosed homes through bulk sales to investors for use as rental housing would be tried in a pilot program.
To be eligible, borrowers would have to have made their mortgage payments over the last six months with only one delinquency, and their loan amount couldn’t exceed the FHA loan limit for their area. If borrowers owe more than 140 percent of the value of their home, the lender has to agree to reduce the loan balance. Also, borrowers wouldn’t have to submit a full file of paperwork for the refinancing as long as they can verify their employment. The proposal also would enable borrowers who still have equity in their home—up to 20 percent—to participate.
The changes will require legislation, so Congress will have to agree to them for the expanded program to take effect.
In his State of the Union speech last week, Obama said he would pay for the expanded program using a fee charged to the country’s largest banks so the initiative wouldn’t add to the deficit. But some members of Congress have said they oppose charging banks a fee to cover the cost.
The Obama plan would also introduce a Bill of Rights for home owners, part of which is intended to smooth the mortgage modification and foreclosure processes, which today can be contentious and difficult for borrowers to understand. A key part of this is an effort to curb banks’ practice of undertaking a mortgage modification while at the same time proceeding with a foreclosure—a process called dual tracking. Before they can start foreclosure, banks will have to show they took all reasonable steps to modify a borrower’s mortgage.
To help ease inventories of foreclosed homes, the plan would give a green light to Fannie Mae to implement a pilot program to make foreclosures available to investors in bulk purchases for conversion to rental housing. Under the pilot, Fannie would package for sale foreclosed homes in a limited number of markets and require them to be used as rental properties for a period of time.
NAR has concerns with this proposal and has been talking with federal regulators to ensure that the program is carefully tailored to the communities who can truly benefit from it, that small- and medium-sized investors be able to participate, and that real estate professionals continue to play a role in the disposition of the homes.
In a statement released after the President outlined the details of his proposal, NAR said it’s urging the regulator of Fannie and Freddie, the Federal Housing Finance Agency, “to proceed cautiously with the REO-to-rental program since housing markets are complex and varied.
“NAR believes an overly aggressive REO-to-rental program that is not privately administered by local entities and does not involve substantial participation of local market experts, especially licensed real estate professionals, could be disruptive and counterproductive to communities already suffering from high foreclosure inventories and lower housing values.”
President Obama in his third State of the Union speech last night called on Congress to pass a plan to help millions of underwater home owners refinance into loans with historically low interest rates by charging banks a fee to help expedite these transactions.
“I’m sending this Congress a plan that gives every responsible homeowner the chance to save about $3,000 a year on their mortgage by refinancing at historically low rates,” Obama said. “No more red tape. No more runaround from the banks. A small fee on the largest financial institutions will ensure that it won’t add to the deficit and will give those banks that were rescued by taxpayers a chance to repay a deficit of trust.”
Congress has previously looked at a proposal to charge banks a fee to help home owners who remain underwater, but it’s not clear from the details Obama provided how similar this plan is to the one Congress has already considered.
NAR, without weighing in on the merits of the fee, says it stands ready to help with any effort to streamline the mortgage refinance process. Beyond that, NAR calls for making the struggling housing market a national priority, because until housing recovers, the economy can’t recover. “REALTORS® believe that more must be done to stem the rising inventory of foreclosed homes and address the lack of available and affordable mortgage financing, which is inhibiting a meaningful housing market recovery,” NAR President Moe Veissi said in a statement released last night.
Obama also talked about efforts to hold lenders to account for making loans during the housing boom they knew households couldn’t afford. He said he’s asking the U. S. Attorney General to create a unit of federal prosecutors and state attorneys general to expand investigations into the abusive lending and packaging of risky mortgages that led to the housing crisis. “This new unit will hold accountable those who broke the law, speed assistance to homeowners, and help turn the page on an era of recklessness that hurt so many Americans,” he said.
He also pointed to provisions in the big Wall Street reform law enacted two years ago that’s intended to make future bank bailouts unnecessary by requiring financial institutions to provide the government with a plan for the orderly wind-down of their operations should they become insolvent. “The rest of us are not bailing you out ever again.” he said.
To help create what he called more tax fairness and to help reduce the federal deficit, the President talked about tax code changes so that “millionaire” taxpayers pay tax rates of at least 30 percent, while taxpayers earning under $250,000 wouldn’t face any increase in taxes.
More broadly, Obama spoke about tax code changes to encourage businesses to keep manufacturing and other jobs in the United States or return them to the country if they’re already outside it.
In the video clip above, President Obama describes his plan for helping underwater home owners refinance theur mortgage.
We don’t know if President Obama is going to talk about housing in his State of the Union speech tonight, but with the economy still struggling it’ll be important to hear his take on things—and, just as importantly, there’s an opportunity for you to share your views after the speech.
The White House has announced that, as it did last year, it’s hosting a panel of advisors after the speech to answer questions about the address from a studio audience and also from you via three social media channels: Facebook, Twitter, and Google +.
It’s impossible to know how many question will actually get answered. No doubt just a tiny fraction, but that shouldn’t stop you from voicing your opinion. Apparently questions will be taken for several days after the speech, so the process won’t end tonight.
The panelists will be—
- Mark Zuckerman, deputy director of domestic policy
- Roberto Rodriguez, special assistant on domestic policy
- Brian Deese, deputy director of the National Economic Council
- Ben Rhodes, deputy national security advisor, and
- Jennifer Palmieri, deputy communications director
The speech tonight is at 9 pm,. Eastern Time. Following its conclusion, at 10 p.m., Eastern Time, you can pose your questions via twitter (use #WHChat & #SOTU) and on Facebook at the White House page, and on Google +.
If you’re not near a TV tonight, you can watch the speech on YouTube at this page.
By Robert Freedman, Senior Editor, REALTOR® Magazine
The $447 billion jobs initiative President Obama introduced last night, called “The American Jobs Act,” contains some pieces that aim to boost home mortgage refinancing, rehab homes, cut taxes for small businesses, boost road, bridges, and other public-works spending, in part through an infrastructure bank, and otherwise inject momentum into the stalled economic recovery. Many of the specifics are still to come. Here’s a thumbnail summary of the key provisions provided by the White House:
1. Cut in half the taxes paid by businesses on their first $5 million in payroll, targeting the benefit to the 98 percent of firms that have payroll below this threshold.
2. Give a payroll tax holiday for adding workers or increasing wages. The benefit is capped at the first $50 million in payroll increases.
3. Extend 100-percent expensing into 2012.
4. Institute regulatory reforms to help entrepreneurs and small businesses access capital.
5. Offer tax credits from $5,600 to $9,600 to encourage the hiring of unemployed veterans.
6. Institute reforms to prevent up to 280,000 teacher layoffs and “to keep police and firefighters on the job.”
7. Modernize at least 35,000 public schools and supporting new science labs and Internet-ready classrooms.
8. Invest in infrastructure, in part through a National Infrastructure Bank.
9. Launch “Project Rebuild” for rehabilitating homes, in part by leveraging private capital, “scaling land banks,” and encouraging other public-private collaborations.
10. Expand access to high-speed wireless.
11. Institute reforms to prevent layoffs and give states greater flexibility to use unemployment insurance funds for work-sharing and other programs, including programs in which displaced workers take temporary, voluntary work or pursue on-the-job training.
12. Offer a $4,000 tax credit to employers for hiring long-term unemployed workers; prohibit employers from discriminating against unemployed workers in hiring and training programs.
13. Cut payroll taxes by 50 percent, for an average tax cut of $1,500 per worker.
14. Increase home mortgage refinancing.