Will Obama’s Refi Plan Be on Congress’s To-Do List?

Associated Press

President Barack Obama is ramping up his election-year push to let more Americans refinance their home loans.

Mr. Obama on Tuesday called on lawmakers to take several actions to aid the economy — including legislation to spur more refinanced loans. He announced this plan in January during his State of the Union address.

“Congress needs to help the millions of Americans who have worked hard, made their mortgage payments on time, but still have been unable to refinance their mortgages with these historically low rates,” Mr. Obama said in a speech in Albany, N.Y. And Mr. Obama plans to continue beating this drum in an appearance Friday in Reno, Nev., a White House official said.

The refinancing plan is part of what Mr. Obama termed a “handy little to-do list” of economic initiatives for lawmakers. “Hopefully we’ll just be checking off the list; just like when Michelle gives me a list, I check it off,” he said.

Things, of course, aren’t that simple in the nation’s capital. Most analysts doubt that the administration’s plans will wind up being enacted due to Republican opposition, particularly in the House. The issue, however, could make for useful politics as the presidential campaign heats up over the summer.

“Most of this is political theater designed to show troubled borrowers that lawmakers and the president are fighting to provide them with relief,” wrote Jaret Seiberg, a Washington analyst with Guggenheim Securities.

Last year, the Federal Housing Finance Agency, which regulates mortgage giants Fannie Mae and Freddie Mac, expanded the existing Home Affordable Refinance Program, or HARP, which helps borrowers refinance if they owe more on their homes than their properties are worth.

At least 750,000 homeowners have now applied to take advantage of those refinancing changes, nicknamed HARP 2.0, Housing and Urban Development Secretary Shaun Donovan told Senate lawmakers Tuesday.

And the administration is pressing for more changes, including several ideas that the housing regulator did not support last year. Legislation to be introduced by Sens. Robert Menendez, (D., N.J.) and Barbara Boxer (D., Calif.) would enact several changes, including making it easier for homeowners to refinance with a new lender by limiting the risk that the lender will be required to buy back the loan.

Doing so is a good idea, Mr. Donovan said, because some lenders are charging “very high fees” to participate in HARP. Increased competition could give many homeowners more options for refinancing outside their existing mortgage company. “What we’re trying to do with this legislation is remove those barriers to competition,” Mr. Donovan said.

In addition, later this week, Sen. Dianne Feinstein (D., Calif.) is expected to introduce another piece of Obama’s plan that would let homeowners refinance into mortgages backed by the Federal Housing Administration even if their loans don’t have government backing.

The Obama administration had initially proposed to pay for the cost of this effort though a tax on the nation’s largest banks. But Ms. Feinstein’s bill will instead offsets the cost of doing so by extending for another year an increase in loan-guarantee fees that Fannie and Freddie charge to borrowers, according to a person familiar with the matter. Under Ms. Feinstein’s bill, a 0.10 percentage point increase passed last year to fund a payroll tax cut would now be effective through 2022

Finally, another Democrat, Sen. Jeff Merkley of Oregon plans to introduce legislation that would allow the FHA or Fannie Mae and Freddie Mac to pay homeowners’ closing costs if borrowers refinance into loans of 20 years or less. Mr. Donovan said this would provide “a path for all borrowers to get their heads above water faster.”

-Nick Timiraos contributed to this report.

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