Wednesday, February 1, 2012

Obama announces new housing refinance plan

By Zachary A. Goldfarb and David Nakamura,
Wednesday, February 1,

President Obama on Wednesday rolled out new proposals aimed at helping troubled homeowners, including a plan that would allow more borrowers to take advantage of record-low interest rates and lower their monthly mortgage payments.

Up to 3.5 million people who do not currently have federally backed loans might be eligible for the program, administration officials said. Another 11 million people who currently hold government-backed loans from Fannie Mae and Freddie Mac also could potentially benefit.

The renewed efforts, which the president announced late morning at the James Lee Community Center in Falls Church, were foreshadowed during Obama’s State of the Union address last week. They mark another of a series of initiatives aimed at lifting the nation’s ailing housing market as consensus is growing rapidly that the housing woes are holding back the economic recovery.

ANALYSIS: When will housing bounce back?
“It triggered the worst economic crisis of our lifetimes,” Obama said of the housing bubble that burst four years ago. “And it has been the single biggest drag on our recovery from a terrible recession. Crushing debt has kept millions of consumers from spending. A lack of building demand has kept hundreds of thousands of construction workers idle. The challenge is massive in size and scope.”

A central piece of the president’s plan would allow qualified homeowners to refinance their mortgages at current historically low interest rates. Unlike earlier proposals, the new refinance measure would cover not only home loans guaranteed by federal mortgage giants Fannie Mae and Freddie Mac but also those owned by private investors, according to senior administration officials. The cost of undertaking those refinancings, Obama said last week, would be paid for by a fee on large financial firms to ensure “it won’t add to the deficit and will give those banks that were rescued by the taxpayers a chance to repay a deficit of trust.”