President Obama on Wednesday called on Congress to make it easier for millions of homeowners to refinance their mortgage at the current record-low interest rate, even if they owe more than their homes are worth. The average homeowner with a privately held mortgage could save nearly $3,000 per year.
“There are more than 10 million homeowners across the country right now who, because of an unprecedented decline in home prices that is no fault of their own, owe more on their mortgages than their homes are worth,†Obama said in remarks delivered in Falls Church, Va. “Here in Falls Church, home values have fallen by about a quarter from their peak. In places like Las Vegas, more than half of all homeowners are underwater.â€
The president also detailed a “Homeowner Bill of Rights,†which would ensure borrowers and lenders play by the same rules. It would require borrowers have access to a simple mortgage disclosure form to better understand the loans they are taking, as well as full disclosure of all fees, penalties and guidelines to prevent harmful conflicts of interest for homeowners. In addition, support provided to keep responsible families in their homes and out of foreclosure, and protection against inappropriate foreclosure, including right of appeal.
Homeowners could keep the savings or turn their 30-year mortgage into a 20-year plan at an even lower interest rate. It would enable them to build equity or get back above water quicker. The proposal’s fee requirement for large banks is a potential roadblock; a stipulation Congress has rejected in the past.
The plan, which the president referenced in his recent State of the Union address, would require congressional action.
“We need them to act,†Obama said, adding that he would not wait for Congress.
He also acknowledged that previous efforts initiated in 2009 didn’t work out the way the administration had hoped.
“The housing plan we launched a couple of years ago has helped nearly one million responsible homeowners refinance their mortgages and save an average of $300 on their payments every month,†Obama said. “I’ll be honest–it didn’t work at the scale we’d hoped. Mortgage rates are as low as they’ve been in half a century, and when that happens, homeowners usually flock to refinance their mortgages. But this time, too many families haven’t been able to take advantage of the low rates. Falling prices locked them out of the market.â€
Texas Rep. Jeb Hensarling left no doubt about how GOP lawmakers will respond.
“Even President Obama himself has acknowledged that his multiple housing programs have been failures,†said Hensarling. “Forget doubling down — he’s now quintupling down on his failed housing initiatives with yet another pricey program that could cost up to $10 billion.â€