It means that U.S. homeowners who owe more than their properties are worth got new help on Monday with the government’s expansion of a refinancing program in a step that could help up to 1 million borrowers.
“These are important steps that will help more homeowners refinance at lower rates, save consumers money and help get folks spending again,” President Barack Obama said in remarks to the press and a handful of neighbors standing outside of a house in Las Vegas, where he had met with a family that benefited from his housing programs.
The Obama administration sees lowering mortgage payments as a way to free up cash for other spending that could help support the economy’s tepid recovery.
The overhaul, which would only help a fraction of the country’s 11 million underwater borrowers, is the latest government effort to breathe life into the crippled U.S. housing market.
The Federal Housing Finance Agency said it was scrapping a cap that prohibited borrowers whose mortgages exceeded 125 percent of their property’s value from refinancing loans backed by Fannie Mae and Freddie Mac under the government’s Home Affordable Refinance Program (HARP).
House Financial Services Committee Chairman Spencer Bachus was critical of the administration’s move, saying it would be a new burden for taxpayers.
“It has the added negative effect of transferring consequences, liabilities, and risks from the financial institutions which entered into loans that are now underwater ultimately to taxpayers,” Bachus said in a statement.
“Such modifications are no panacea, but they would move us in the right direction for housing-related stimulus for the economy,” said Janaki Rao, vice president for mortgage research at Morgan Stanley in New York.
The FHFA said it wanted to focus on loans made between 2004-08, when borrowers typically locked into rates above 5 percent. Currently, 30-year fixed mortgage rates are hovering just over 4 percent.
With political gridlock blocking legislation addressing the housing crisis, the administration had urged the FHFA to widen HARP to more borrowers. The regulator had moved cautiously, wary of piling too much risk on Fannie Mae and Freddie Mac.
“This is an appropriate balancing of risk that’s being borne by Fannie and Freddie, and hence the American taxpayer,” FHFA’s acting director, Edward DeMarco, said in a conference call with reporters. “This will make HARP more available.”
Meanwhile, President Barack Obama visited the house of Melanie Griffith and Antonio Banderas Monday as he hit the California fundraising circuit in one of his busiest donor outreach trips of the season.
Before that Mr. Obama participated in the dinner at the home of producer James Lassiter and his wife, Mai. About 40 contributors, including actress Hillary Duff, Will Smith and Earvin “Magic” Johnson contributed $35,800 each for a cozy dinner and a chance to chat with the president.
Others at Lassiter’s Hancock Park home included Troy Carter, the manager of Grammy award winner Lady Gaga.
“Sometimes I think people forget how much has gotten done,” the president said as he urged his backers to rally once again, at the same time joking, as he often does, that he is older and grayer now. “This election won’t be as sexy as the first one.”
The Lassiter dinner, followed by a larger affair at the home of Griffith and Banderas, were part of a three-day, fundraising-rich swing through Nevada, California and Colorado.
Touching a re-election theme, Obama also told donors that the country is suffering from an economic crisis and political crisis. “People are crying out for action,” he said.
The Las Vegas fundraiser attracted about 240 people who paid from $1,000 to $35,800 toward Obama’s re-election campaign and to the Democratic National Committee.
The Griffith-Banderas event attracted about 120 donors and was aimed at Obama’s Latino supporters. It featured guests such as actress Eva Longoria and mayors Antonio Villaraigosa of Los Angeles and Julian Castro of San Antonio.
Barack Obama also pointed to elements of his $447 billion jobs plan that was rejected by Republican lawmakers. He said they likely would linger as campaign issues in 2012.
“This is the fight that we’re going to have right now, and I suspect this is the fight that we’re going to have to have over the next year,” Obama told about 240 donors at a fundraising event earlier Monday at the Bellagio hotel and casino in Las Vegas. “The Republicans in Congress and the Republican candidates for president have made their agenda very clear.” [via Reuters and Huff Post]