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Lawmakers weigh in on new home refinance plan

By Josh Richman
Monday, October 24th, 2011 at 5:10 pm in Anna Eshoo, Barbara Boxer, housing, Jackie Speier, Jerry McNerney, U.S. House, U.S. Senate.

Local members of Congress applauded President Obama ‘s announcement today of new policies meant to shore up the shaky housing market – a plan that could help a lot of Bay Area homeowners refinance “underwater” mortgages at historically low interest rates.

From U.S. Sen. Barbara Boxer, D-Calif.:

“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.”

From Rep. Jerry McNerney, D-Pleasanton:

“I am glad that a step has been taken in the right direction. I hope this has a positive effect, but if it does not deliver, I will continue to hold the Obama Administration accountable and demand relief for homeowners. We must do more to help the people of California who have been plagued by the foreclosure crisis from day one.

“For far too long, I have heard heartbreaking stories from people in our region: tales of people doing everything they can, and still being foreclosed upon. I will continue to fight for more real, commonsense solutions to the housing crisis and to keep the pressure on the folks in Washington to help our community.

“We need to relieve some of the financial burden for homeowners who are ‘underwater,’ not only to more foreclosures, but to generate more money that will go into our local businesses. Helping the people of our region stay in their homes is step one to restoring our economy.”

From Rep. Anna Eshoo, D-Palo Alto:

“The President took a positive first step today to help address the catastrophic housing situation in the country. It’s not enough though. Up to a million families nationally could be helped, but there are two million underwater homeowners in California alone.

“We need meaningful principal reductions on a large scale. It’s time to implement a Homeowner’s Bill of Rights that ends dual-tracking and creates a single point of contact for borrowers. The size and scope of this housing crisis requires us to think big. Our nation’s economy simply will not recover until the crisis of foreclosures is over.”

From Rep. Jackie Speier, D-Hillsborough:

“Finally, relief for the middle class families of America! I applaud the FHFA for taking bold and needed action. I and many of my colleagues had appealed directly to Mr. DeMarco, the head of FHFA, to take these actions to refinance middle class America, and he has responded. In particular, the decision not to put a cap on the loan-to-value ratio that is eligible to be refinanced via a fixed rate mortgage will mean that potentially millions of homeowners will be eligible. Given that Fannie and Freddie are owned by taxpayers, this decision is a win for them as well. There are reduced odds of losses from the guarantees issued by these two agencies, and there is no cost to taxpayers because Fannie and Freddie will fund this refinancing activity through new bonds. If the wave materializes, it could also help to stabilize the housing market in neighborhoods where refinancing occurs frequently, and could potentially put thousands of dollars into the pockets of a strapped homeowner who refinances. All in all, I only wish that this process could begin immediately, but I understand that banks aren’t set up to handle a wave of applicants. Hopefully, competition between lenders will force them to participate in this new program and drive them to get set up rapidly.”

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  • Elwood

    Sure, why not? This is just another dimmiecrat transfer of wealth, from people with common sense to dumb***es who took loans they couldn’t afford betting on the come.

    Guess what? Surprise! Sometimes the Pass line Don’t Pass.

  • Rick K.

    The article in the weblink says, “New rules announced Monday: … Apply to single family homes, condos, co-ops that are primary residences, second homes or vacation homes.” Why should people who have “second homes or vacation homes” be bailed out? Why should citizens who were sufficiently prudent not to buy homes during the bubble be forced to subsidize speculators/house-flippers (who now claim that their gamble was a “second/vacation home”)? Will the morons who took out “negative equity” loans (with initial monthly payments that didn’t even cover the interest, let alone a penny of the principal) or who took out HELOC’s to buy boats, fancy cars and other toys also be beneficiaries of this largesse?

  • John W

    Re: #1

    You’re making a generalization, Elwood. My brother in Detroit could probably qualify for this. His home was purchased responsibly and “by the rules” years before all the subprime stuff. But it’s Detroit. The mortage is current, but the home is worth about half the purchase price; and he’s stuck with a much higher interest rate than current market. This would allow him to trade in for a more reasonable cost of borrowing. This could give a lot of homeowners more disposable income, which would be good for the economy. I don’t see any “socialism” or “moral hazard” in this.

  • John W

    Bill Wattenberg (“Dr. Bill”) on KGO radio discussed something Sunday night that might make sense. Currently, lenders would rather foreclose than adjust principal to more realistically reflect market value. If they foreclose, they are protected by government guarantees. But, if they reduce principal, they have to write down the difference, which makes it more difficult for them to keep their capital reserves at required levels. The idea Wattenberg discussed would allow the banks to, in effect, reduce the principal without a writedown. The reduction amount would stay on the books as an asset, rolled into a separate loan that would be paid off when the house is eventually sold from any gains in value from the reduced valuation. There might be some flaws, but it seemed creative.

  • Elwood

    @ #3

    Here’s another generalization for you John W. Based on past performance, about half of the people who refinance will default.

    Guess who gets left holding the bag? Uncle Stupid! That’s your tax dollars and mine.

  • Elwood

    O’BUMMER’S BIG PLAN: TAXPAYERS LOSE

    “The government’s new plan to let more underwater homeowners refinance their mortgage is a good deal for homeowners who qualify, but for every dollar they save in monthly payments, someone will lose.

    That someone is whoever owns the mortgage being refinanced. Mortgage owners include Fannie Mae and Freddie Mac, the taxpayer-owned entities that own and guarantee home loans; the Federal Reserve, banks, insurance companies, pension funds, endowments and other investors worldwide.”

    Read more: http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2011/10/24/BU641LLO8F.DTL#ixzz1bp7ZuxIm

  • John W

    Re: #5

    I don’t think “half will default” applies to people who are current on their mortgage payments. Seems to me leaving these people stuck with 7% borrowing costs in today’s low interest environment increases the chances of more defaults. I’m not thrilled about this. I borrowed at 7%, made double and triple monthly payments and own free and clear. But I figure stabilization of the housing market and effectively increasing the disposable income of these borrowers to spend in the economy is in my self-interest.

  • Truthclubber

    John W: Re #3 — the issue is that Hellwoody doesn’t give a rat’s @$$ about anyone but himself — he’s a self-absorbed dittohead fascist whose mantra is “It’s not enough that I must win, you must lose…”

    He thinks the word “community” is the same as “communism” — and a great deal of today’s political dysfunction is due to moronic fascists like him…

    I feel for your brother — and (selfishly, since I want a better economy) want him to be able to contribute more to the consumption of goods and services by virtue of a lower interest rate and more discretionary spending money in his pocket, so I hope he is able to qualify for this refinancing program.