With the housing market in an unrelenting national depression, the Obama Administration is seeking solutions and Federal Housing Finance Agency acting director Edward DeMarco is feeling the heat.
One proposal put forth by President Barack Obama will make it easier for homeowners to refinance, and since the FHFA controls Fannie Mae and Freddie Mac, the burden falls on its shoulders to implement a plan.
In an article in the Wall Street Journal, DeMarco said his mission is to conserve assets of the two agencies (which guarantee about half of the nation's $11 trillion in mortgages) and not spend on expensive new initiatives that may or may not jumpstart the housing market. The Administration calls his thinking shortsighted.
In any case, there already are initiatives to refinance: the Home Affordable Refinance Program, or HARP, is probably the best-known, but according to CNBC, that program has refinanced fewer than a million loans. Will another costly program make a difference?
Mortgage rates are at historic lows and home prices have dropped significantly, yet the market remains stalled. The fact is that many homeowners simply are blocked from refinancing because they are underwater and don't have the equity, or the banks are making it too difficult for them to qualify. Many borrowers are walking away. The lack of confidence consumers have in the housing market is threatening to turn into fatalism: Underwater borrowers often can't even get their mortgage servicer on the phone.
The Obama administration is arguing that by refinancing at lower rates, homeowners will have more money to spend, which will, in turn, boost the economy. True enough, but that doesn't take into account the massive cost of implementing another refinance program that could be as unsuccessful as the others.
What are your thoughts on Obama's proposal?
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