The administration's proposed changes are meant to boost participation in HARP, which began in 2009 and had refinanced 894,000 mortgages through August. Once implemented next month, the update will nix HARP's cap of 125 percent loan-to-value ratio. It also will reduce or eliminate many refinancing fees and allow most homes to be appraised automatically -- reducing costs and wait time. It also will lower barriers for homeowners to refinance with a new lender, which administration officials said would spur competition and even better rates.
Secretary of Housing and Urban Development Shaun Donovan said in a conference call with reporters that HARP was designed to help homeowners "who have done all the right things" but are plagued by plunging home prices and interest rates. Most mortgages are carrying interest rates between 6 percent and 7 percent, Donovan said, while current rates are near 4 percent. He said refinancing could save homeowners $2,500 or more per year in mortgage payments, helping them stay in their homes and spend more on consumer goods, which will stimulate the economy.
Isakson's bill mirrors the administration proposal and he said he's pleased to see it implemented by executive order. He said Obama is right not to try a more interventionist and costly program to combat foreclosures.
"I think it’s most notable that we’re giving the chance to refinance at the lower rate to the people who have been making payments and staying in their houses," said Isakson, who ran a real estate brokerage company before running for Congress. "... This is the right middle ground because it doesn't have any negative impact on taxpayers."
But it could have negative ramifications for the housing market, said Georgia State University real estate professor Alan Ziobrowski. Keeping people in overvalued homes would just extend the time until the market finds its bottom, he said.
The biggest problem facing housing remains rampant joblessness. Georgia’s unemployment rate rose to 10.3 percent in September, above the 9.1 percent national average.
John Bartholomew, an attorney for the Atlanta Legal Aid Society, said the remade HARP program will be little help to his clients, most of whom are already behind on their payments.
"Unemployment is the major driver of foreclosures nowadays, and certainly the main reason we see people come to us for assistance," he said.
Obama's jobs proposals have been stymied in Congress, and Monday's announcement was the first in a series of executive branch initiatives the White House has dubbed "We can't wait." The approach is intended to spotlight the programs Republicans (and some conservative Democrats) are blocking -- primarily because Democrats propose to pay for them with higher taxes on top earners -- and the smaller steps the administration can take on its own.
“Given the magnitude of the housing bubble and the huge inventory of unsold homes in places like Nevada, it's going to take time to solve these challenges,” Obama said in a speech Monday, according to a White House transcript. “… But that’s no excuse for inaction.”
Who is eligible for the new program?
Homeowners can refinance their mortgage under the Home Affordable Refinance Program if they meet the following criteria:
* The mortgage must have been sold to Fannie Mae or Freddie Mac on or before May 31, 2009.
* Homeowners must be current on their mortgage with no late payments in the past six months and no more than one late payment in the past year.
*The current loan-to-value ratio must be greater than 80 percent.
*The mortgage cannot have been previously refinanced under HARP, unless it is a Fannie Mae loan that was refinanced under the program from March 2009 to May 2009.
Source: The Federal Housing Finance Agency