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Obama explores refinancing — again

By: 18 September 2011 One Comment

On Sept. 8, President Barack Obama made some references to revisiting the issue of making refinancing options available to home owners who are struggling with their mortgages.

We’ve heard such talk before and the result was the Home Affordable Refinance Program (HARP), which was put in place a few years ago in hopes of giving people with mortgages backed by Fannie Mae and Freddie Mac a way to refinance at lower rates. That program has helped fewer people than federal officials hoped in that approximately 883,000 home owners have been helped by the program.

One of the reasons more people haven’t jumped on the HARP bandwagon has to do with falling home prices. Under HARP guidelines, loans those home owners owing more than 125 percent of the value of their houses are unable to refinance through the federal program.

That restriction has left a good number of people out in the cold. RealtyTrac reports that about half of the nation’s home owners are underwater on their mortgages – they owe more than their homes are worth. Furthermore, RealtyTrac reports that about 9.8 million – 25 percent of all home owners – are underwater by more than 20 percent. The RealtyTrac numbers are silent about how many of those 9.8 million home owners are more than 25 percent underwater, but it’s not too far a leap to assume a good number of them are.

The problem for those homeowners that are more than 25 percent underwater becomes obvious. There are few conventional lenders willing to refinance a home for more than it is worth and federal assistance is unavailable for those who are underwater by more than 25 percent.

Of course, we know what is likely to happen to home values over time. Here in Arkansas and almost everywhere else, home prices tend to go up over time. Those home owners that can hang on until prices start rising again may well be able to refinance and save some money. Still, those “down the road” predictions don’t do much for people who are struggling with their mortgages right now.

The challenge, then, is to figure out what to do for those home owners who owe considerably more than their homes are worth. Will the Obama administration look at ways to extend HARP to those home owners who are 25 percent or more underwater? If so, how are issues such as risk going to be addressed as neither the government nor private investors have shown much inclination to take on loans in which borrowers are significantly underwater? What would a new or expanded refinancing program backed by the federal government cost American taxpayers, if anything?

Those questions remain unanswered, but count on those coming up soon. All we know for sure is that there are more than a few struggling home owners right now who could see their monthly payments cut considerably if they are able to refinance at current interest rates that are hovering around 4 percent.

How to make it possible for those home owners to refinance appears to be an issue that will attract quite a bit of debate in the weeks and months to come.

Home Sweet Home is written by Ethan C. Nobles and is sent weekly to publications throughout the Natural State on behalf of the Mortgage Bankers Association of Arkansas.

About: Ethan C. Nobles:
Benton resident. Rogue journalist. Recovering attorney. Email =

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