More homeowners will be able to make the most of current low interest rates, after the Obama administration announced plans to expand the two-year old Home Affordable Refinance Program.
Addressing a joint session in Congress last week, President Obama said that the government would do everything it could to assist “responsible homeowners” in refinancing their mortgages, in order to lower their monthly repayments. By doing so, said Obama, “families will save more than $2,000 a year, which in turn will boost an economy which is still feeling the burden of the drop in home prices.”
Originally set up as a way to assist those homeowners who were unable to qualify for private loans, the Home Affordable Refinance Program has struggled to have much of an impact, with only 838,000 mortgages being refinanced under the initiative so far, despite a prediction from the government that millions would benefit when the program was first rolled out. This has led to heavy criticism of the scheme, with many suggesting that the program’s strict income requirement disqualifies many borrowers who would otherwise gladly have signed up.
Falling property prices have also contributed to the ineffectiveness of the program, which allows for homeowners owing more than 125% on their mortgage to apply for a loan from Fannie Mae and Freddie Mac at current low interest rates.
The administration is desperate to solve the housing crisis in order to kick-start a stuttering economy. Ben Bernanke himself, chairman of the Federal Reserve, has said that the reason for America’s slow economic recovery is down to the housing market holding everything else back. Businesses have long been pressing the White House for a solution to the housing problem, which they say will hold back economic recovery for as long as it continues.
Whether or not Obama’s rather modest proposal will have the desired effect remains to be seen, as does the proposed $15 billion investment into the rehabilitation of foreclosed properties currently lying vacant, which is supposed to help create jobs in the construction industry and revitalize blighted neighborhoods.
Details for the expansion of the Home Affordable Refinance Program have yet to be revealed, as the government will need to negotiate any changes with the Federal Housing Finance Agency, although the White House said it expects an announcement on new guidelines in the next few weeks.