What’s in the Latest White House Proposals on Housing?

Associated Press
President Barack Obama is set to give a speech on housing Wednesday.

President Barack Obama is set to give a speech Wednesday outlining his call for more help for the nation’s housing markets, according to administration officials. Here’s a preview of what’s on the White House wish list:

Extend refinancing options to more borrowers: Last October, the Obama administration and the federal regulator for Fannie Mae and Freddie Mac revamped a program, called the Home Affordable Refinance Program, that allows borrowers with loans backed by the mortgage-finance companies to refinance if they meet certain qualifications. The changes allow borrowers to refinance even if they owe far more than their homes are worth.

The latest push would require congressional action to make the HARP changes broadly available to everyone else who doesn’t have Fannie and Freddie-backed loans. Under the plan, homeowners would be able to refinance into new loans backed by the Federal Housing Administration.

Borrowers with privately held mortgages who have made their last six payments and have no more than one delinquency in the prior six months can participate. The program is open only to owner-occupants whose loans are within their county FHA loan limit. Borrowers who can verify current employment don’t need to otherwise go through the regular underwriting process. Banks have to agree to cut loan balances for borrowers who owe more than 140% of the value of their homes.

Improve refinancing for FHA borrowers: The new program doesn’t apply to loans that are already backed by the FHA, but the administration says the agency will take steps to ease restrictions that have inhibited refinancing of FHA loans.

Broaden HARP: Fannie and Freddie and their regulator didn’t make a handful of technical changes to HARP that had been sought by the Obama administration, which will instead ask for Congress to make those changes. Among other steps, it will seek to extent HARP to borrowers who have more than 20% equity in their homes. Currently, HARP is only open to borrowers with less than 20% equity.

New uniform standards for mortgage servicers: The administration is set to unveil a borrower “bill of rights” that would become an industry standard code of conduct for mortgage servicers.

Among other steps, the proposal will clarify steps to modify the so-called “dual track” process by which banks process foreclosures at the same time that they evaluate borrowers for a loan modification. Under the code, banks will have to certify in writing that they’ve taken all appropriate loss-mitigation steps before referring loans to foreclosure.

Converting some foreclosures to rentals: Given the huge overhang of distressed homes in some markets, officials are preparing a pilot program to turn foreclosures into rentals through bulk sales of the properties to private investors. The first pilot program, which would be conducted by Fannie Mae, is limited only to properties that Fannie has already rented out through a program that allows tenants to rent out homes when their landlords go into foreclosure, according to people familiar with the matter.

The first pilot covers real estate with an estimated value of at least $250 million that would be pooled into portfolios in six areas: Southern California, Las Vegas, Chicago, Phoenix, Atlanta, and parts of Florida.

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